As Obama takes office, the economic crisis will undoubtedly land at the top of the Democrat’s agenda. But as those priorities push education out of the public eye, higher education is becoming increasingly unaffordable, federal financial aid is weakening in proportion to the cost of college and still-frozen credit markets are limiting loan options for students.

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Education leaders agree: the nation’s financial aid system has become too fractured and convoluted to effectively serve students.

The approval of the Higher Education Opportunity Act in August paved the way for several reforms in financial aid. But experts and advocacy groups want more from the Department of Education, arguing that higher education is a key ingredient to fixing the souring economy.

“If we don’t put substantial investments in the education of our students, then we are likely going to face problems of a greater magnitude than we are currently seeing,” said Michelle Cooper, president of the Institute for Higher Education Policy, a Washington-based think tank focused on post-secondary education policies.

As President-elect Barack Obama takes office in January, the economic crisis will undoubtedly land at the top of the Democrat’s agenda. But as those priorities push education out of the public eye, higher education is becoming increasingly unaffordable, federal financial aid is weakening in proportion to the cost of college and still-frozen credit markets are limiting loan options for students.

The National Center for Public Policy and Higher Education said in its biennial assessment of the country’s higher-education system that college tuition and fees have risen 439 percent since 1982. In comparison, the median family income has only increased 147 percent in that time.

Meanwhile, higher-education institutions are being hit with their own financial storms.

Hiring was halted at Cornell University, which has also delayed construction on its Ithaca, N.Y., campus. At the University of Virginia, the school will lose about $10.6 million in state funds this year, and the value of its endowment shrunk 20 percent in four months.

“Institutions are being hurt just as companies are across the country,” said Mollie Benz Flounlacker, the assistant vice president for federal relations for the Association of American Universities.

At the same time, debt continues to pile on students.

The Project on Student Debt said in its annual report released in October that the average debt of students graduating with loans in the Class of 2007 was slightly more than $20,000. That is a 6 percent hike from the previous year, when average debt totaled slightly below $19,000.

The amount of debt is also ballooning more quickly than starting salaries for new graduates, according to the report, which included data from more than 1,300 institutions.

And that’s just for students who step foot on college campuses.

The Advisory Committee on Student Financial Assistance estimates that between 1.4 million and 2.4 million students in the current decade who were academically qualified for college will not pursue postsecondary education.

Experts cite finances as the main obstacle.

“Education is one of the bigger opportunities to close that income gap between lower-income folks and higher-income folks,” said John Laughner, the legislative manager for the Committee for Education Funding, which lobbies on behalf of nearly 100 education associations nationwide.

Obama has said he would boost federal discretionary spending on education by a third of its current number. The president-elect’s proposals for higher education include granting a $4,000 tax credit to students who finish 100 hours of community service and simplifying the financial-aid system.

He put an $18 billion price tag on his education proposals during the campaign trail and said he would pay for the hike by auctioning surplus federal properties and delaying NASA programs, among other cost-cutting moves. The Department of Education's current discretionary budget totals $59 billion.

“It’s encouraging that despite the economic and budget problems we’re facing now, Obama seems to want to stick with those agendas,” said James Kvaal, a senior fellow at the liberal think tank Center for American Progress who has worked on education policy in the White House and Congress.

Experts across the board applaud current efforts to simplify the current financial aid system, such as shortening Free Application for Federal Student Aid form, which students who request federal financial aid are required to complete.

“There are 102 questions [on the form]; that’s just ridiculous,” Benz Flounlacker said. “Data clearly shows that this is a real barrier for students to apply for and receive financial aid.”

Financial-aid expert Mark Kantrowitz also cited the complexity of the student aid system, pointing out in an e-mail interview that there are three overlapping education tax benefits, five loan programs and a non-transparent formula that calculates each student’s financial need.

“The maximum Pell Grant should be set at a level sufficient to eliminate loans from the financial aid packages of low income students,” said Kantrowitz, who runs FinAid, an online guide to financial aid. “This means doubling the funding.”

The amount of the Pell Grant given to each eligible student varies, but in the current school year, the maximum that a student can get is $4,731 annually. President George W. Bush’s fiscal 2009 budget calls for nearly $17 billion of federal dollars to be spent on Pell Grant programs -- about a $2.7 billion total increase from the current year.

But the Institute for College Access & Success pointed out that the maximum Pell Grant covers just one-fourth of the average in-state cost of attendance at a four-year school.

A federal commission impaneled under current Education Secretary Margaret Spellings to investigate higher education in the United States calls for the average Pell Grant to cover 70 percent of average in-state tuition, while pushing for better access to information about financial aid.

The Higher Education Opportunity Act aims to do that by creating Web sites and online calculators that allow students and their families to better calculate college funds and learn about the cost of attending school.

But in addition to improving access to higher education, Obama will also have to deal with higher-education institutions that are being increasingly scrutinized to ensure lawmakers and the public that the schools are fiscally responsible.

Sen. Charles Grassley, R-Iowa, has pushed for universities to complete certain federal tax forms for better disclosure of the finances of the tax-exempt institutions.

And according to the American Enterprise Institute for Public Policy Research, the higher-education system in the United States eats up a bigger chunk of the nation’s gross domestic product than other countries. Yet the proportion of college graduates was relatively lower.

The Spellings commission, which produced a report of its findings two years ago, recommended an overhaul of the nation’s financial-aid system that includes incentives for better financial measurement and management from schools.

The commission also recommended that schools develop performance benchmarks to track their fiscal prudence. An example of a benchmark is ensuring that tuition hikes don’t exceed the growth in medium family income over five years, according to the report.

The Higher Education Opportunity Act also includes several reporting requirements. But that drew opposition from the American Association of Universities, which favored less regulation to avoid a top-heavy system.

“The bill is hundreds and hundreds of pages long, and it contains about 60 new programs,” Benz Flounlacker said. “Right now, we are struggling how to implement all the provisions.”