Today the White House hosted “Open for Questions” webcast during which President Obama answered questions that citizens had submitted online and voted as the most popular. Read what he said about student loans and grants, direct loans, and national service.
“Hi, Mr. President. My name is Alex. My name is Kristin (ph). And I’m Mallory (ph). We are all sophomores at Kent State University in Ohio. We really like the emphasis you’ve put on education so far in your administration, but we’re concerned about higher education. Our question is: What proposals do you have to make college more affordable and to make student loans easier to get? And when will your national service program be available so we can take advantage of the scholarship? Thank you, Mr. President!”
THE PRESIDENT: That was pretty well done. (Laughter and applause.) Well, I am very excited about the possibility that we may be able to get national service done in the next few weeks. National service was a priority for me during the campaign, partly because of my own biography. I found my calling when I became a community organizer working in low-income neighborhoods when I was 22, 23 years old. And it gave me a sense of direction, a sense of service, it helped me grow, it helped me give back. And I think there are young people all across America who are eager for that opportunity.
And so what we’ve said during the campaign was, let’s set up a situation where every young person who is so inspired can take advantage of service, and in exchange they will help be able to finance their educations.
And I’m confident that we’re about to get legislation passed. And once that legislation is passed, I think that before the end of the year potentially we can get something implemented on that front.
In addition, what we are also doing is to try to make the student loan and student grant programs that are already in place work better. So just to give you one example, right now a lot of the student loan programs run through banks, but a lot of them go directly to students from the government — so-called direct loans. The banks make several billion dollars’ worth of profits off managing these student loans, which would be okay except for the fact that these loans are guaranteed by the federal government.
So, the reason banks are able to make money lending you is because — that there’s some risk that you might not pay it back, plus you’re giving up the use of your money for — they’re giving up the use of their money for a while. If, on the other hand, this is the government’s money and they’re just a pass-through, it doesn’t seem very sensible that banks should be making money that way.
So what we’ve said is let’s make all these direct loans, as opposed to having bank intermediaries or — and not just banks — financial services organizations. They can make profits on other things, but let’s not have them make profits on this. Let’s take those billions of dollars, and that then allows us to either lower student loan rates or expand grants.
And one of the things that we want to do is on the Pell grant program, for example. We want to increase the amount of the Pell grant so that it catches up with inflation and we want to — we want more young people to be eligible for the Pell grant program. And that’s particularly important because anybody who’s financed their educations understands that grants are a lot better than loans. And when I was going to college, about — and this was typical for I think college students — the average student who needed financial assistance, about 70 percent of it came in grants and about 30 percent of it came in loans.
Today, it’s reversed: 30 percent come in grants; 70 percent come in loans. And so students are loaded up with $20,000, $30,000, $40,000 worth of debt — and this is just for their undergraduate education; that doesn’t even start counting their higher ed.
And if you come out of college with $50,000 worth of debt, it’s hard for you to then start making a decision about wanting to be a teacher, or wanting to go into social work, or wanting to be a scientist and research to find the next innovation. You may decide, well, the only thing I can do is to work on Wall Street or work in a big corporation that’s not doing cutting-edge research.
And we want people — all that’s fine, I mean, those are good career choices — but we want our young people to have more flexibility, not to mention we want them to be able to — if they choose to get married, to be able to buy a home and start a family without already having essentially a mortgage that they’re carrying with them out of college, before they even buy a house.
So we’re going to spend — this is another area where we devote a considerable amount of money in our budget. And I just want to remind you of this, because we’re having this budget debate in Washington right now. And again, everybody says — a lot of the critics out there are saying, how is it that you’re going to be spending all this money? We’ve got to worry about the deficit, et cetera.
I just want to remind you that the money that we are spending on education, on health care, and on energy — if you added up all that increased money that we’re spending, it still is not what’s driving our long-term deficits. What’s driving it is Medicare, Medicaid, a structural gap that we have because of the Bush tax cuts over the last several years that left us spending a lot more than we were saving.
And it’s going to take us a while to dig our way out of that problem. But the way to dig our way out of that problem is not to shortchange investments in our people. A lot of — I’ll bet there are a bunch of families here who are making some tough choices right now, and who are scrimping a little bit and saving.
Now, somebody could make the same argument to you that folks are making to us with respect to the budget, which is, you can’t afford to be sending your kids to college right now. That’s fiscally irresponsible. You’re taking out debt for your kids to get an education. It’s better for you to just put them to work right now at a fast-food place, and they’ll be bringing in a little bit of income. And maybe later they can go to college.
Well, most of us don’t make that decision, because we understand that making the investment now will lead to greater opportunity, greater economic advancement later. Well, the same thing is true in our economy. We can’t shortchange the investments that will allow us to grow in the future.
We’re going to have to impose discipline and eliminate programs that don’t work, and we’re doing that. We’re cutting this budget by $2 trillion. And we’re cutting the deficit in half by the end of my first term.
But what we can’t shortchange are those things that are going to allow us to grow long term. I don’t want us to constrict and reduce our ambitions, and set our sights lower for our kids and the next generation, because we weren’t willing to make those investments now. That’s not how America works. (Applause.)