Democrats Unveil Affordability Plan

State block grants, restructured tax credit centerpieces of a proposal aimed at increasing access to college.
July 20, 2006

A pair of U.S. senators and several Democratic governors pledged support for a federal funding plan introduced Wednesday by the Democratic Leadership Council that would give $150 billion in block grants to states over a 10-year period in an effort to help them keep college costs down.

The American Dream Grant, as the federal funding program would be called, is one of the centerpieces of the DLC's American Dream Initiative, unveiled at a press conference sponsored by the Democratic Governors Association.

The grant would award states money each year based on two variables: the number of students who attend two- and four-year colleges and the number of students who graduate. According to the proposal, states would agree to maintain current higher education spending and hold tuition increases to the overall inflation rate.

"The idea is to give as much flexibility to states as possible," said Sen. Hillary Rodham Clinton (D-N.Y.), chair of the American Dream Initiative.

According to the proposal, the performance-based grants would provide states with an average of $2,000 per student. The plan also would give families with a college student a $3,000 college tuition tax credit that would wipe out the existing HOPE tax credit, the Lifetime Learning Tax Credit and the higher education expense deduction. The credit is intended to cover up to four years of college, graduate school or professional training and is estimated to cost $70 billion to $80 billion over 10 years.

More details of the plan will be announced this weekend at the DLC's convention in Denver. Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, said that based on the limited information provided, the proposal would represent a "big change in policy."

Specifically, Hartle said that this plan calls for federal money going to institutions, rather than following individual students, as is the case with the Pell Grants and most other federal aid. The proposal, he said, brings up a longstanding policy debate about where the funding should go.

Hartle said that while he welcomes ideas about how to expand access to college and moderate tuition increases, he sees potential problems with the plan.

"This looks like it would be institutional aid that would help public colleges and universities," Hartle said. "In that case, the gap between tuition at private and public colleges will grow, which can be dangerous. There's a delicate equilibrium in higher education."

The blueprint of the plan doesn't explicitly mention if or how private colleges would benefit from the program.

Hartle also said he found it "interesting" that Hillary Clinton would back a plan proposing to replace the HOPE tax credit, which was a signature policy of her husband's second presidential term.

The American Dream Initiative calls for colleges to promise increased accountability in response to receiving federal money. The proposal says institutions should be more vigilant in publishing data on their graduation rates, and it vaguely states that colleges should do what it takes to ensure improved rates -- although no specific financial tie-ins are outlined.

"We are making progress sending students to college, but we are lagging behind on graduation rates," Clinton said. "This plan provides opportunities but demands more in return."

Clinton echoed a line in the proposal that advocates a "truth in tuition" promise from colleges. That would essentially mean requiring colleges to set a multiyear tuition and fees promise for incoming students.

"We are providing incentives for states to hold themselves accountable," said Bruce Reed, president of the Democratic Leadership Council. "We'd be hoping that in a system where state block grants depend on how many students graduate, reporting up front on how much students would be paying would be helpful."

Travis Reindl, director of state policy analysis and assistant to the president at the American Association of State Colleges and Universities, said the reality is that public colleges can promise rates, but so much is tied to the state's budget that ensuring the outcome is difficult.

Reindl said he supports the general concept behind the proposal but is concerned about the financial implications. "Our highest priority is that federal programs that already work are still funded," he said. "My first question is where is this money going to come from?"

Clinton said she is confident that the Democrats, with control of Congress, could find money to pay for the initiative -- and that the plan would eventually pay dividends. Her logic: College graduates make more than non-graduates, so they will bring in more income tax revenue to states. Gov. Tom Vilsack of Iowa, chair of the Democratic Leadership Council, plugged Clinton’s Non-Traditional Student Success Act, which intends to help "nontraditional" students by making Pell Grants available year-round and providing financial aid to students who attend college part time.

Vilsack, Sen. Tom Carper (D-Del.) and North Carolina's governor, Mike Easley, said the current administration and the Republican-led Congress have not done enough to help students afford a college education.

Lindsey Mask, press secretary for the U.S. House Committee on Education and the Workforce, said in a statement that the Democrats' proposal is an example of "political posturing."

"When it comes to expanding college access for low- and middle-income students, Democrats offer a lot of rhetoric, but Republicans offer real, meaningful action," she said. "This year alone, House Republicans have voted for higher loan limits, year-round Pell Grants, and more aid for needy students studying math and science -- just to name a few.  Democrats almost universally opposed these efforts to expand college access."


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