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The proposal by the Obama administration to tie colleges’ eligibility to get federal aids with their ability to reduce costs and boost efficiency has raised the eyebrows of educators and administrators.

The administrators expressed their views about President’s suggestion in the University of Maine system. They agreed that the president has a worthy goal, but his plans may lead universities to increase costs that could be passed on to students.

The proposal revealed after Obama’s State of the Union address last month (January 2012). His proposal seems to be aiming at filling down federal college loan debt. A report released by the College Board recently shows that the federal college loan debt has increased from $41 billion to $103 billion over the last ten years.

Administrators have not defied the advantages of President’s proposal fully. However, they have many doubts regarding the proposal and they said that they are waiting for further details from the White House. It is expected that the White House will announce the finer points of the plan by 20th February 2012.

Obama is planning to reduce the burden of students and shifting it to the shoulders of the public colleges and universities all over the nation, which educate around 70% of the students in the country.  In this attempt, President suggests that the schools that do not take steps to curb tuition will be punished by denying some federal financial aid. Those funds will be distributed to schools that succeed in increasing college affordability.

These reform plans will need $1 billion subsidize to give grants to states that increase the number of students completing graduation every year and reduce higher education costs. Under President’s proposal, federal aid for Perkins loans with a 5% fixed interest rate and longer grace period could increase from $1 billion to $8 billion.

Obama has also called for a significant increase in campus based aid, like loans and work study programs. Most of these aids will be available to schools that follow the reform standards properly.
This proposal would need congressional approach and additional study. However, its early effect has pushed many colleges and universities all over the country to look at their limited budgets. The colleges and universities are already constricted by reducing state aids and a stern financial climate.

Keith Dubois, the financial aid director, University of Southern Maine stated that this may not be the right time for this. He stressed that he can understand what President is trying to do. He is attempting to send an alerting message to colleges and universities by telling them they need to keep costs under control.

The University of Maine System is considering to tie the way it funds its campuses to the performance rates of departments and programs. Everything, ranging from graduation rates to the academic performance is taken into consideration for this. However, the way the University system and the federal government will analyze the performance and the way to tie funds to performance remains to be a question.