With poll: President Barack Obama's higher education agenda: Good for America or government takeover?

Big changes to the student loan system are in the works as part of his agenda to have the highest proportion of college graduates in the world by 2020.

"And let's tell another 1 million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years - and forgiven after 10 years if they choose a career in public service," Obama said. "Because in the United States of America, no one should go broke because they chose to go to college.

"To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans," he said. "Instead, let's take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants."

But what does it all mean?

According to officials from the Education Sector, an independent, non-partisan think tank based in Washington D.C., the $10,000 tax credit referenced by Obama came into being with the American Investment and Recovery Act of 2009. The American Opportunity Tax Credit provides recipients up to $2,500 a year over the course of four years for college. It's set to end after 2011, but Obama's announcement would likely entail making it permanent, the think tank reported.

In September, the U.S. House of Representatives passed the student aid bill, which would eliminate all lending from the bank-based Family Federal Education Loan program and re-direct all new federal student loans through the government-run Direct Loan program. The measure now awaits Senate approval.

Critics characterize the Student Aid and Fiscal Responsibility Act as a government takeover that would eliminate jobs, as well as choice, competition and innovation from student lending by eliminating the FFEL program, a public-private partnership in place since 1965.

Democratic proponents from the House Committee on Education and Labor said in a September 2009 press release that $90 billion could be saved by lending more cheaply via the government-run Direct Loan program. That savings could be allocated for a wide array of purposes, including the federal Pell Grant program, which Obama referenced Wednesday.

The savings would also be directed to non-higher education initiatives, including billions of dollars to schools for construction and modernization, and early learning programs.

Republicans from the same committee called the projected savings "fuzzy math." In their September press release, they warned of cost overruns and said taxpayers would pay $50 billion over the next decade for the program.

Among other things, student aid legislation would:

• Provide $40 billion to increase annual Pell Grant scholarships to $5,500 in 2010 and $6,900 by 2019.
• Provide $3 billion to be used for completion-support and college-access programs.
  
• Simplify the Free Application For Student Aid (FAFSA) form.
• Expand and change the Perkins Loan program, which provides low-cost federal loans to students.
• Provide loan forgiveness for military members called to duty in the middle of the academic year.
• Provide $2.55 billion to colleges and institutions that primarily serve minorities to invest in retention efforts.
• Provide $10 billion to improve community college systems for job training and adult education programs.
• Make interest rates variable beginning in 2012.
• Eliminate restrictions that prevent individuals convicted of drug possession from receiving taxpayer-funded financial aid.

What do you think? Should the government manage all student loans? What would having more citizens with college degrees or certificates do for America? Take our poll and comment below.

Juliana Keeping covers higher education for AnnArbor.com. Reach her at julianakeeping@annarbor.com or 734-623-2528. Follow Juliana Keeping on Twitter