Obama plan helps Iowa collegians

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Obama plan helps Iowa collegians
BY ERIN JORDAN • EJORDAN@DMREG.COM • MARCH 27, 2009

President Barack Obama's budget proposal that includes plans to give college loans directly to students, bypassing banks, would allow 4,200 more Iowans to receive Pell Grants and increase the average Pell Grant award in Iowa by $114, a coalition of higher education advocacy groups reported Thursday.

The coalition that includes the liberal think tank Campaign for America's Future held a conference call talking about Obama's proposal, which would increase and expand Pell Grants, make education tax credits permanent and broaden the U.S. Department of Education Direct Loan program, they said.

"The nation's social and economic health relies on the number of students who can attain a college degree," said Christine Lindstrom, director of the U.S. Public Interest Research Group Higher Education Program.

In the United States, the average cost of tuition at a four-year public college increased $1,729, or 29 percent, between 2000 and 2007, the research group reported. The average tuition cost for Iowa's public universities went up $2,417, or 39 percent, over that same period, the study found.

Obama's budget proposal eliminates the Federal Family Education Loan Program that distributes financial aid through banks. Instead, the money would be distributed through the Direct Loan program - a change that would save $47 billion over five years, the coalition reported. The $5 billion in subsidies that would be cut from banks and lenders in 2010-11 would be reinvested into student financial aid, the group said.

The maximum Pell Grant would increase from $5,350 to $5,550, with the estimated national average Pell Grant award increasing $121, the coalition said. Increasing the award would also bring in more students, estimated at 130,000 more per $100 increase in the maximum award, the coalition said.

Lenders argue that they enhance student loan programs by reaching out to college-bound students and operating more efficiently. However, a 2005 Office of Management and Budget study found that private-sector loans cost taxpayers 10 times more than direct federal loans.

Steve McCullough, chief executive officer of the Iowa Student Loan Liquidity Corp., a private, nonprofit group that is the dominant holder of college loans in Iowa, issued a statement on Obama's plan earlier this month.

"We support President Obama's goals to increase federal student financial aid and achieve savings in federal student loan programs. However, there are various methods of reaching these goals and some may be better than others for Iowa students and families," McCullough wrote.

Tara Deering-Hansen, spokeswoman for Iowa Student Loan, said Thursday it is too early to tell how Obama's proposed budget might affect the organization. "Right now, it's just a proposal," she said.