Obama Cites Key Education Priorities—But Also Fiscal Restraints

President Barack Obama last night called for new initiatives on college affordability—many of them aimed at low-income students—while also seeking a spending freeze that could affect the long-term outlook of other established programs.

In his first State of the Union address, the president said America’s economic recovery depends in large part on a quality, educated workforce. With a high school diploma no longer promising a ticket to success, Obama called for action on legislation to fund new higher education programs.

“In the 21st century, the best anti-poverty program is a world-class education,” the president told the joint session of Congress. He urged lawmakers to pass legislation that would increase Pell Grants for needy students and provide new funding for community colleges, calling them “the career pathway for so many children of working families.”

Many of these provisions are part of the Student Aid and Fiscal Responsibility Act (SAFRA), which has passed the House of Representatives but not the Senate. Obama said this bill would fund new investments by eliminating federal tax breaks for banks.

“To make college more affordable, this bill will finally end the unwarranted taxpayer subsidies that go to banks for student loans,” the president said. The savings would fund new investments, including a $10,000 tax credit for four years of college, he said.

Obama also presented a new plan to encourage income-based repayment of educational loans once students leave school. Under the plan, students would have to pay no more than 10 percent of their discretionary income to pay off a student loan. Any remaining loan principal would be forgiven after 20 years—or 10 years for those choosing public service jobs.

“No one should go broke because they chose to go to college,” he said.

But Obama also called for a freeze in domestic discretionary spending, the area of the federal budget that funds the vast majority of education programs. To reduce the federal deficit, the president said he would freeze federal spending for three years, exempting Social Security, Medicare, Medicaid, and defense.

“Families are tightening their belts while making tough decisions, and government should do the same,” Obama said, pledging to veto some legislation if necessary.

With such exemptions, however, other programs—including some in K-12 and higher education—could be at risk. In his address, Obama said his administration already had identified $20 billion in wasteful, ineffective spending, and he announced plans to eliminate some tax cuts for the wealthy. The White House is likely to outline more of these budget reductions Feb. 1 when it presents its federal budget plan for 2011.

As part of a campaign against ineffective spending, the president also called on colleges and universities to re-examine their costs as well in an effort to promote post-secondary affordability.

“It’s time for colleges and universities to get serious about cutting their own costs,” he said, in part to “help solve” the problem of affordability.

Citing the nation’s slow economic recovery, Obama said that his top priority for 2010 is jobs. Noting that the nation has lost 7 million jobs during the last two years, he urged the Senate to join the House in quickly approving a new employment bill.