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Obama pitches plan to tie federal student aid to college ratings

U.S. President Barack Obama waves from Air Force One at Andrews Air Force Base near Washington, August 22, 2013. REUTERS/Jason Reed
U.S. President Barack Obama waves from Air Force One at Andrews Air Force Base near Washington, August 22, 2013. REUTERS/Jason Reed

By Jeff Mason and Elvina Nawaguna

SYRACUSE, N.Y./WASHINGTON (Reuters) - President Barack Obama on Thursday proposed a plan to tackle soaring U.S. education costs with a new system that judges colleges and universities on their financial value and ties those ratings to disbursement of federal aid.

The Democratic president, who has spent much of the summer promoting new ideas to rev up the economy, unveiled his proposals at the start of a campaign-like bus tour through New York and Pennsylvania.

The plan calls on the Education Department to institute a ratings system before the 2015 school year that would allow students and parents to select schools based on the best value for the money.

Obama would then push Congress to tie federal student aid to these ratings by 2018, creating an incentive for schools to keep their costs in check.

The plan also aims to ease the pain of federal student loan debt by limiting payments on the loans to 10 percent of borrowers' monthly income.

Major parts of the plan require congressional approval, which may prove difficult. Universities, many of which are already facing a cash crunch, are expected to push back against a ratings system that may be more difficult to influence than private-sector rankings.

"I want to look out for the students who these institutions exist to serve," Obama said during a speech to high school students in Syracuse, New York.

After first landing in the state and greeting Governor Andrew Cuomo - a potential Democratic candidate for president in 2016 - Obama boarded a big black bus that appeared to be the same one that took him through political swing states last year during his re-election battle against Republican Mitt Romney.

The campaign atmosphere is part of a White House strategy to generate attention for the president's proposals and gear up for a fall fight with congressional Republicans over the budget, debt ceiling and implementation of the president's signature healthcare reform, known as Obamacare.

Obama began his first set of remarks at The State University of New York at Buffalo with an attack on Republicans for continuing their quest to repeal the health law. Republican lawmakers are considering using an forthcoming showdown over the U.S. borrowing limit as leverage to delay the law's implementation.

But his main focus was education. Obama wants to bring down tuition costs at U.S. colleges and universities, which have skyrocketed, forcing students and families to take on more debt to afford a college degree.

"At a time when a higher education has never been more important or more expensive, too many students are facing a choice that they should never have to make," he said in Buffalo.

"Either they say no to college, and pay the price for not getting a degree ... or you do what it takes to go to college, but then you run the risk that you won't be able to pay it off because you've got so much debt," Obama said.

REPUBLICAN CONCERNS

The average annual cost of in-state tuition and fees for 2013 at four-year public universities is $8,655, up 4.8 percent from 2012, according to a survey from the College Board released this month.

Private colleges and universities are vastly more expensive.

The federal government provides more than $150 billion in student financial aid each year, and typically that aid has been based on enrollment figures, not the value of the education.

John Kline, the Republican chairman of the House of Representatives Committee on Education and the Workforce, expressed reservations about Obama's plan.

"I remain concerned that imposing an arbitrary college ranking system could curtail the very innovation we hope to encourage - and even lead to federal price controls," he said in a statement.

Andrew Kelly, director of the Center on Higher Education at the conservative American Enterprise Institute, said the president's proposals could motivate institutions to make some changes. But he said higher education lobbyists and some lawmakers may argue such a system could create a great disparity among colleges.

"The political fight is going to be very interesting," Kelly said.

Secretary of Education Arne Duncan told reporters traveling with Obama on Air Force One earlier on Thursday that the system would still leave aid options open for students who chose pricier institutions.

"Folks will still have choice, but we want to make sure that good actors are being rewarded," he said.

CAMPAIGN FEEL

Much like his 2012 campaign events, Bruce Springsteen music blasted through loudspeakers when Obama finished his speeches. During the long bus ride between Buffalo and Syracuse, the president made unannounced stops, including a visit to a women's rights center.

He told familiar stories, tied to education, about how long it took him and his wife, Michelle, to pay down their own student loans.

Americans owe about $1.2 trillion in student loan debt, the Consumer Financial Protection Bureau estimates. Obama said that debt was crippling to the U.S. economy.

According to the National Center for Education Statistics, the total cost of higher education - including tuition, room and board - for undergraduates at four-year public institutions ballooned 73 percent to an average of $15,900 per year in 2011 compared with 2001.

Obama this month signed legislation that reversed a big increase in student loan interest rates and will tie future rates to fluctuations in the 10-year Treasury note. The bill was hammered out in intensive negotiations with lawmakers.

Over the last five years, the president has rolled out a number of college affordability initiatives, including increasing Pell Grant aid to low-income students, steps to encourage colleges to be more transparent about costs, and awarding grants to states and institutions that work to bring costs down.

(Additional reporting by Roberta Rampton; Editing by Karey Van Hall and Mohammad Zargham)

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