President Obama's Fiscal 2010 Budget

Opening the Doors of College and Opportunity

The President’s 2010 Budget seeks to usher in a new era of responsibility – an era in which we not only do what we must to save and create new jobs and lift our economy out of recession, but in which we also lay a new foundation for long-term growth and prosperity. To do this, the Nation must address some of the deep, systemic problems that have been ignored for too long by making critical investments in: education so that every child can compete in the global economy, health care reform so that we can control costs while boosting coverage and quality, and renewable sources of energy so that we can reduce our dependence on foreign oil and become the world leader in the new clean energy economy.

At the same time, we also must restore fiscal discipline, making sure that we invest in what works and do not waste taxpayer dollars on programs that do not work or are duplicative. Taken together – education, health care, clean energy, and fiscal discipline – are the pillars upon which we can build a new foundation for our economy, a foundation that bring opportunity and growth to all Americans for decades to come. The budget will:

Stabilize the Student Loan Program for students and save billions of dollars for taxpayers. Right now, the subsidies in the government-guaranteed student loan program are set by the Congress through the political process. That program has not only needlessly cost taxpayers billions of dollars, but has also subjected students to uncertainty because of turmoil in the financial markets. The President’s budget asks Congress to end the entitlements for financial institutions that lend to students, and instead to take advantage of low-cost and stable sources of capital so students are ensured access to loans – while providing high-quality services for students by using competitive, private providers to service loans. The approach in the budget, originating all new loans in the direct lending program, saves more than $4 billion a year, and reinvests it in aid to students. The budget also makes campus-based, low-interest loans more widely available through a new modernized Perkins Loan program, overhauling the inefficient and inequitable current Perkins program.

Increase funding and transparency of Pell Grants.  In addition to increasing the maximum Pell award to $5,550 for the 2010-11 school year, the President’s budget makes the program’s funding more transparent by converting the program from a discretionary to a mandatory program. This would end the unreliable practice of "backfilling" billions of dollars in Pell shortfalls each year and provide certainty to families about the level of Pell Grant funding available each year.

Make permanent the new American Opportunity Tax Credit. If we do not make college more affordable, we run the risk of losing a whole generation of potential and productivity. To help students pay for college, the Administration created a new $2,500 American Opportunity Tax Credit in the Recovery Act. The credit makes college more affordable for millions of middle-class families and for the first time makes college tax incentives partially refundable. The budget proposes to make this tax cut permanent.

Keep tuition under control. While the federal government intends to substantially increase the aid available to needy students and families, colleges and universities have a responsibility to control their own costs. Under the current distribution formula for Perkins Loans and other campus-based aid, the more that a college increases tuition, the more money the college stands to receive from the federal government.  This sends precisely the wrong message to institutions.  Under the reformed Perkins program, the formula for distributing loan funds to institutions would reward institutions for providing more need-based aid and more reasonable costs relative to comparable institutions. 

Make it easier to apply for student aid. To apply for student aid, students must complete a complicated form. The President’s proposal would considerably simplify the process through such measures as streamlining the form itself.  Another approach would enable families to apply for assistance by simply by checking a box on their tax form, authorizing their tax information to be used in calculating their eligibility for aid.  This is not merely a question of saving time, but also encouraging more eligible students to participate in the program. 

Partner with states to improve college completion.  State and local governments provide the bulk of the operating funds for the public colleges attended by 76 percent of undergraduate students, but there is little national focus on increasing college completion.  The budget would include a five-year $2.5 billion fund aimed at improving college success and completion, particularly for students from disadvantaged backgrounds. States would have considerable flexibility in the types of programs that can be funded, but new programs must include a rigorous research component.  This effort will expand the knowledge base about what works in increasing college enrollment and graduation and disseminate these best practices. States would be able to use a portion of the funds to continue college outreach and information activities now supported through subsidies in the guaranteed (FFEL) loan program.

Support comprehensive and cooperative workforce training. To compete in today’s economy, American workers will have to continue to be able to update their skills. The budget provides funding for several programs to support lifelong learning. The budget provides $135 million for the Career Pathways Innovation Fund, which will support community college-led partnerships that are developing or expanding career pathway programs. A new Adult Workforce Transition initiative will make $5 million of competitive grants to partnerships of adult education providers and community colleges to help adults move into new careers in the changing economy.