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President Barack Obama’s long-awaited plan to rein in the escalating cost of college would leverage financial aid to reward colleges and universities that graduate the most students with the least debt—and punish those that don’t.

Obama education plan
President Barack Obama delivers the address during The Ohio State University commencement at Ohio Stadium in Columbus, Ohio, May 5, 2013. (Official White House Photo by Pete Souza)

The president also proposes to raise the maximum Pell grant, the principal federal financial-aid program, by more than $900, to $6,450 per year, and expand tax credits for families paying tuition, ideas that face challenging legislative prospects in an era of austerity.

Students who take out loans to pay for their higher educations would be allowed to cap their repayments at an amount equal to no more than 10 percent of their income, an option now available to only a small number of borrowers.

The most dramatic provisions of Obama’s plan—and the ones that do not require congressional approval—call for ranking universities and colleges, by 2015, based on such things as their average tuition, loan debt, graduation rates, and graduates’ earnings.

Ultimately, the president proposes, Congress will be asked to change the federal financial-aid program so as to reward higher-performing colleges by giving students at those institutions larger Pell grants and lower-cost loans.

A previous similar proposal, to punish universities with the highest annual increases in tuition, hit snags and has been stalled.

Obama says he will also ask for $1 billion to be distributed to states for public universities and colleges that meet certain performance goals; and for an unspecified amount to be given to colleges and universities that graduate the largest numbers of low-income students.

The Obama plan also would make students responsible for making satisfactory academic progress to continue receiving federal financial aid, something an increasing number of states are beginning to do.

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