On the Money

UPenn leader backs call for affordable college ahead of Obama plan

Schoolhouse rock
Schoolhouse rock

President Obama's free community college proposal has at least one big supporter, in the form of an Ivy League college president who believes the initiative is necessary.

"Making college more accessible to more people is absolutely critical," says Dr. Amy Gutmann, who has led the University of Pennsylvania since 2004.

In an interview with CNBC's "On the Money," Gutmann called higher education "the engine of opportunity for our population since the mid-20th Century." Degrees beyond high school have "only gotten more and more essential to what makes for having the opportunity that has really defined the American dream for millions of people," she added.

President Obama is expected to unveil "America's College Promise" in his State of the Union address on Tuesday. According to the White House, the proposal would make two years of community college free for an estimated 9 million students, if all states participate.

Yet the plan, though free for participants, will come at a cost to taxpayers. Early estimates project the federal government's tab for the program will cost tens of billions of dollars, and critics have derided the program as yet another offering by a government that is already suffering from mission creep.

Calling higher education an "engine that needs to be stoked," Gutmann says a proposal like the President's is "one of many proposals that are needed to get this engine more vital than it has been in recent years."

Read MoreHow to ease the burden of student debt

Pricey degrees

Amy Gutmann, University of Pennsylvania
Daniel Acker | Bloomberg | Getty Images

While tuition increases have been slowing, paying for a college education is still a high cost challenge for many Americans.

According to The College Board, the average cost of community college is $3, 347 this academic year 2014-2015. The public four-year college tuition average is $9,139. Meanwhile, the average cost of private four-year college tuition is $31,231.

While University of Pennsylvania's 2014-2015 tuition is $42,176 this year, the Ivy League school has an all- grant, no-loan financial aid policy for its undergraduates. This year the school says 47 percent of its undergrads receive need-based grants.

Gutmann says Penn is the largest university in the U.S to be all-grant for any undergraduate students with demonstrated financial need. For its part, the university maintains an endowment of nearly $10 billion, of which 17.7 percent goes toward student aid, according to the school's annual report.

While she acknowledges Penn and other Ivy League schools are in a fortunate situation, she says Penn has "made it a priority" to have all-grant financial aid. "We have the resources and have raised the resources from generous donors to do it," she said.

Gutmann tells CNBC that "most state universities and most community colleges have been starved for resources and simply can't afford to" provide more financial aid.

"We have to find a way to allow them to do it," she said, "not only for the lowest income families, but for the middle income in this country."

Read MoreObama proposes idea of two free years of community college

For her own life story, Gutmann credits financial aid for making her career possible. "I believe we as a society have an obligation to 'pay it forward'," the academic said.

"My father was a scrap metal dealer. We had no savings. We had no money for college," she added

Tragically, Gutmann's father died when she was a junior in high school, but was able to earn a free ride to one of the "Seven Sisters" colleges affiliated with the Ivy Leagues.

The university president says "I owe it all to a full scholarship based on need at Radcliffe College."

"It's not only my story. It's the story of millions of successful Americans," she added. "So many people in all walks of life, who are not guaranteed success, but are aided in it, by the affordability of higher education?"

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