Obama outlines plan to cut college costs. Could it backfire on students? (+video)

President Obama Friday made a set of bold proposals to tie federal aid to efforts by states and colleges to keep tuition under control and provide a good value to students.

Obama called for a $1 billion Race to the Top competition to reward states that do more to make college affordable and help students earn degrees on time – echoing his competitions among states for K-12 grants tied to education reform.

The president would also restructure how $10 billion of federal financial aid is annually distributed to campuses, to give incentives to colleges and universities to keep down their net price – what students pay after aid is taken into account.

“Higher education is not a luxury, it’s an economic imperative that every family in America should be able to afford,” Obama said before an enthusiastic crowd at the University of Michigan in Ann Arbor Friday morning, one of a series of speeches he’s giving in swing states this week.

“We are putting colleges on notice: You can’t assume that you’ll just jack up tuition every single year. If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down,” he said. “States also have to do their part … by making higher education a higher priority in their budgets.”

Most of Obama’s ideas would require approval from Congress, which would be difficult given the polarized environment in Washington.

In principle, some of the proposals make good sense while others may have unintended consequences, says Sandy Baum, a higher education analyst and senior fellow at George Washington University School of Education.

“It’s a good idea for the federal government to provide incentives for states and public institutions in particular to find innovative ways to provide quality education at lower costs,” Ms. Baum says of the Race to the Top proposal.

She also agrees that the current formula for distributing campus-based financial aid is out of date and needs to be revised.

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