President Barack Obama today called for an overhaul of the higher education financial aid system, warning that colleges and universities that fail to control spiraling tuition costs could lose federal funds. Speaking to students at the University of Michigan, Obama said he was "putting colleges on notice" that the era of unabated tuition hikes is over. "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," Obama said on the final stop of a three-day post-State of the Union trip to promote components of his economic agenda.
The president first announced the outlines of the financial aid proposal during Tuesday's State of the Union address. His plan targets what is known as "campus based" aid given to colleges to distribute in areas such as Perkins loans or in work study programs. Of the $142 billion in federal grants and loans distributed in the last school year, about $3 billion went to these programs. His plan calls for increasing that type of aid to $10 billion annually. But the initiative faces long odds in Congress, which must approve nearly all aspects of the president's plan. (Read more college tuition stories.)