Obama to target rising college tuition costs

President Barack Obama will announce a plan to shift some federal dollars away from colleges and universities that don't control tuition costs and new competitions in higher education to encourage efficiency as part of an effort to contain soaring college costs.

Obama will spell out his plans Friday at the University of Michigan in Ann Arbor. The speech will cap a three-day post-State of the Union trip by the president to promote different components of his economic agenda in politically important states.

On Tuesday night during his State of the Union address, Obama put colleges and universities on notice to control tuition costs or face losing federal dollars. That's had the higher education community nervous that he could set a new precedent in the federal government's role in controlling the rising costs of college.

Obama's education secretary, Arne Duncan, said Friday that schools should get federal dollars based in part on their performance.

"Historically, we've funded universities whether or not they've done a good job of graduating people, whether or not they've done a good job of keeping down tuition," Duncan said on MSNBC's "Morning Joe."

The money Obama is targeting is what's known as "campus based" aid given to colleges to distribute in areas such as Perkins loans or in work study programs. Of the $142 billion in federal grants and loans distributed in the last school year, about $3 billion went to these programs. His plan calls for increasing that type of aid to $10 billion annually.

He wants to create a "Race to the Top" competition in higher education similar to the one his administration used on K-12 to encourage states to better use higher education dollars in exchange for $1 billion in prize dollars. A second competition called "First in the World" would encourage innovation to boost productivity on campuses.

"We have to educate our way to a better economy," Duncan told MSNBC.

Obama's proposal also includes the creation of new tools to allow students to determine which colleges and universities have the best value.

His plan will likely be a tough sell in Congress, which must approve nearly all aspects of it except the creation of the new tools.

The Obama administration already has taken a series of steps to expand the availability of grants and loans and to make loans easier to pay back, and Obama spelled out Tuesday other proposals to make college more affordable, such as extending a tuition tax break and asking Congress to keep loan interest rates from doubling on July.

His administration has also targeted career college programs — primarily at for-profit institutions — with high loan default rates among graduates over multiple years by taking away their ability to participate in such programs.

But until now, it has done little to turn its attention to the rising cost of tuition at traditional colleges and universities.

The average in-state tuition and fees at four-year public colleges last fall rose 8.3 percent and with room and board now exceed $17,000 a year, according to the College Board. Rising tuition costs have been blamed on a variety of factors, including a decline in state dollars, an over-reliance on federal student loan dollars and competition for the best facilities and professors.

Sen. Lamar Alexander, R-Tenn., a former education secretary, said the autonomy of U.S. higher education is what makes it the best in the world, and he's questioned whether Obama can enforce any plan that shifts federal aid away from colleges and universities without hurting students.

"It's hard to do without hurting students, and it's not appropriate to do," Alexander said. "The federal government has no business doing this."