As the 2009-1010 school year gets underway, President Barack Obama and Education Secretary Arne Duncan have been making strong moves to ensure that American higher education remains competitive in the 21st century economy. Commentary has focused on Obama and Duncan’s plans to extend the school year to match the time foreign counterparts spend educating their children—after all, in the last decade, the US has fallen from first to 10th among nations in its percentage of college graduates.

Speaking at the Hudson Valley Community College in Troy, New York early last week, the president summed up these concerns:

We know that the nation that out-educates us today will out-compete us tomorrow. The ability of new industries to thrive depends on workers with the knowledge and know-how to contribute in those fields. Yet, today, our primary and secondary schools continue to trail many of our competitors, especially in key areas like math and science. Hundreds of thousands of high school graduates who are prepared for college do not go to four-year or two-year schools because of the high cost of doing so. And roughly 40 percent of students who start college don’t complete college. All along that education pipeline, too many slip through the cracks. It’s not only heartbreaking for those students; it’s a loss for our economy and our country.

One silver lining amid this news is the House of Representatives’ recent passage of the direct student loan program. According to Congress Matters, Obama’s new plan begins by:

* Investing $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019;

* Investing $3 billion to bolster college access and completion support programs for students;

* Strengthening the Perkins Loan program, a campus-based program that provides low-cost federal loans to students;

* Keeping interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012;

* Making it easier for families to apply for financial aid by simplifying the FAFSA form;

* Providing loan forgiveness for members of the military who are called up to duty in the middle of the academic year.

* Investing $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate.

Obama’s plans were lauded by education watchers from Bill Clinton to Randi Weingartner. But funding aside, the higher education delivery system itself may need reform. Much has been written about whether American students are being well-served by expensive, private four-year colleges. In this climate of decline, students are increasingly voting with their feet, attending less expensive state schools and vocational schools with quality teaching that might not leave them with crippling debt.

The Washington Monthly has recently released a new type of college ranking—to counter the standard U.S. News and World Report metrics—that emphasizes the money spent on Pell Grants per student, number of students performing national service, and other less traditional measures. Under their system, the top three universities in America are the University of California at Berkeley, San Diego, and Los Angeles—all state schools.

The new tuition-for-service paradigm, paired with skyrocketing costs for private colleges, may completely change the type of education that young students of tomorrow seek. But today, even public schools can be expensive for families struggling through recessionary times. The asset-building program at the New America Foundation has some useful analyses for families that have been hammered by market fluctuations:

One good place to start improving 529 college savings plans is to ensure that all states offer some truly conservative investment options. These investments could take the form of capital preservation investment options, such as a money market mutual fund, and age-based funds that start out more aggressive but automatically and seriously become more preservation focused as the child approaches college age.

Another necessary first step is improved disclosure. Families should be better informed about what they are investing in and what the real risks are. This means disclosures that are straightforward and brief, written in plain English. Similar reforms have recently been proposed for credit cards and mortgages.

The student loan reforms may soon be undergirded by a proposed Consumer Financial Protection Agency, a type of catchall financial literacy and watchdog agency that was recently endorsed by former Federal Reserve chairman Alan Greenspan. The vote of confidence (even from a man whose economic policies have been sorely discounted since September 2008) could help the agency get off the ground—but in the meantime, Obama's strong intervention into both markets and into education are welcome.

—DAYO OLOPADE

Covers the White House and Washington for The Root. Follow her on Twitter.