Free College Tuition? Not So Quick, Mr. President

by Dr. Watson Scott Swail, President & CEO, Educational Policy Institute

Last week, President Obama announced his Administration’s plans for the America’s College Promise plan. Interesting that the Administration released something of good news on Friday, the day where politicians announce programs in order to have them buried for the following news week. Not sure why they would do that on what they say is a high-level, “game changer” program. But they did.

To many, the idea of free tuition for two-year, community college degrees is all good. There is a huge affordability challenge in this nation that impacts low-income students more than any other group. So any news about reducing the burden is welcomed. However, there are several caveats and realities that must be considered in a policy to offer free tuition fees for students.

First to note is that this isn’t the first kick at the proverbial “free tuition” cat. A little over 15 years ago, Congress passed the Taxpayer Relieve Act (TRA) of 1997, which provided higher education tax credits that were essentially designed to make the community college free. These were operationalized through the Hope Scholarship Tax Credit, which provides a maximum credit of $1,500 for each eligible student, plus the Lifetime Learning Tax Credit, which provides $1,000 of the first $5,000 paid. While most people applauded the TRA, most analysts were quick to point out that these programs were regressive and did not serve low-income students who did not have federal tax liability. In order to benefit, the tax credits would have had to be refundable (that is, if the student/family had negative tax, then the federal government would pay them that amount). But Congress did not want the tax credit to become a grant program.

Second, the idea of free fees does little to help with the higher costs of community college, including books, meals, occupancy. More community college students than at any time in our history are living on or close to campuses. They are still largely commuter schools, but they are rising to another tier closer to four-year institutions, for those who can’t afford a four-year degree. The idea of free fees on its own is good; but the challenge for many students is the tangential cost of going to school, including living expenses and opportunity costs (e.g., time not working).

Third, there is the issue of how to pay for it now and tomorrow. The Republican-controlled Congress will not be very friendly to a program that does not have a net neutral cost to taxpayers. At this time we are unsure of the President’s plan to pay for the program. The devil is always in the details, so will need to await more information. But the legislation, if entered, will likely die in Congress and await a new Administration in 2017.

Fourth, data from the Bureau of Labor Statistics (BLS) does not indicate that we need more college degrees. However, if we were/are to increase college access, the best place to do it is at the two-year level, where actual costs and opportunity costs are lower for students, families, and taxpayers. But the nexus between two- and four-year programs and the needs of today’s and tomorrow’s workforce is limited at best. While ACE president Molly Corbett Broad is on record as saying that the President’s plan is “a potential game changer that could encourage millions more students to consider, apply, and enroll in postsecondary education,” there still has to be more consideration for the employment of these students after they receive their diploma. Just sending more students to college is reckless. More focus has to be on targeted educational opportunities that match the needs of the workforce. The goal of US higher education policy should not be to have the highest percentage of college-educated workers in the workforce; it should be to have the best “educated and trained” workforce, regardless of where they get that education. Thus, we need to look at non-diploma/degree-based solutions and workforce-based educational and training programs. We can’t focus on the same programs that got us through the 20th century. The world has changed and the change in the next 50 years will be lightening fast.

Fifth, if the federal government is going to pay for three-quarters of the “price” of two-year tuition for students, then there is going to be a tug of war between the states—who pay for the underlying subsidy (e.g., the higher cost) of a postsecondary education—and the federal government over cost controls. The states currently have difficulty keeping up with higher education financing to institutions, forcing institutions to raise tuition fees. Without clearcut regulations from the federal government, there will be interest on behalf of states to increase the price of a two-year degree while stagnating state-funded subsidies. This is what happened with the TRA 1997; without proper regulations, this will happen again. But what regulatory pressures can the federal government put on states? The federal levers are limited and states will not accept cost controls from the federal government.

Sixth, tuition and fee charges, as well as room and board and books and supplies, are ever-changing items that increase at rates which far outstrip inflation. This will never change without a new model of postsecondary education. The current model is heavily HR-based, which is the most expensive business model on the planet. Until there can be more effort on mass-producing higher education through technology, the costs will not be controlled. So, the thought of the federal government paying for three-quarters of the price may work in theory today, but will not work in actually tomorrow when the costs significantly escalate. Either one of two things will happen: (1) the federal and state government won’t be able to keep up, resulting in pushing some of the cost, at some time, back to students and families; or (2) the federal and state governments will keep the program in place, but to pay for the escalated “cost” of college they will be forced to reduce services and quality.

Finally, I agree with having an academic requirement to maintain free tuition in the program. But Congress will have to be very acute to the issue of grade inflation, which has happened naturally in higher education, but the pressure of knocking someone out of college with a C+ average may encourage professors to ensure that students meet that minimum academic threshold.

The issues I raise are for consideration as the program details emerge. I am always encouraged when the President, an Administration, or Congress focuses on supporting high-quality educational opportunities for our youth and working populations, especially those who are historically underrepresented in college. But we also must be mindful of spending more taxpayer funds to send more students through a partially-flawed and outmoded system of higher education that is simply too costly and disconnected from the needs of both workforce and society. We have always sent our children to college because that is the pathway to a better career and standard of living, but that reality is dissipating because the new economy is less dependent on credentials and more dependent on skills. The former does not ensure the latter.

In the end, we need to have more of discussions on what we want our higher education system to do before simply dumping more money into a system that isn’t working very well.

Related Analysis by Dr. Swail:

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