The False Promise of “Free College”

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In his unexpectedly strong campaign for the Democratic presidential nomination, Bernie Sanders won the loyalty of millions of young voters with a promise of “free college for all.” Hillary Clinton campaigned on a more modest proposal to achieve “debt-free” college. But earlier this summer, to win Sanders’s support after all but clinching the nomination, Clinton announced her own, similar plan for free in-state tuition at public colleges for families making up to $125,000 a year.

There is no denying the appeal of “free college,” especially to Millennial voters facing sky-high tuition and crushing college debt burdens. As Sanders and other advocates for the idea note, when the country recognized a century ago that all Americans ought to have the opportunity to earn a high school degree in order to succeed in an industrializing economy, it created a system of free public high schools. Today, we are at a similar point regarding college: some post–high school credential—a bachelor’s degree, or a two-year associate’s degree, or even a one-year vocational certificate-is virtually a must-have for anyone aspiring to a middle-class life.

But sometimes, the simplest and most historically resonant idea isn’t actually the best idea. Hillary’s free college plan is, at least, a plan; so far, Donald Trump’s higher education proposals haven’t gone much beyond putting banks back in charge of student loans and defending fraud at Trump University. Unfortunately, the Clinton free college plan, like the Sanders plan it was built on, simply won’t work in a federal system of government where states have made widely different investments in higher learning. And—counterintuitively for a multibillion-dollar nationwide reform plan—it isn’t radical enough. What we need instead is to rebuild the state-federal higher education partnership from the ground up. Rather than making college free for some students, we need to make it affordable for all.

The first problem with Clinton’s new plan is that states spend widely different amounts of money subsidizing college tuition. Higher education funding has also declined in many states, even as college spending has increased, causing schools to hike tuition to fill the gap. Clinton’s plan would start by giving each state enough money to bring tuition down to zero for some. But that means the plan would actually reward states that have cut funding the most, and that have historically spent less on their higher education systems, by giving them larger amounts of money to fill the hole.

In Wyoming, where higher education funding is a bigger priority, the state spends an average of $15,135 per student to subsidize tuition, enabling it to charge only $4,891 in tuition and fees. New Hampshire, on the other hand, spends far less of its own money—$2,904 per student—and puts more of the burden on students to pay for their education. That’s why in-state tuition in New Hampshire costs $15,160. Under Clinton’s plan, New Hampshire would receive a lot more money per student to make tuition free, because students pay more tuition.

To make tuition free, Washington will have to give the largest amounts of money to states that have cut their higher ed funding the most. Members of Congress from states that have spent more on their colleges will immediately cry foul.

It’s easy to anticipate the fallout—members of Congress from states like Wyoming will immediately cry foul. Over time, the Clinton plan would aim to even out funding per student among states, but then states like New Hampshire would be up in arms about having their grants reduced unless they raise taxes to make up the difference. Some might opt out entirely, much as some states have refused to expand Medicaid under Obamacare.

Moreover, the plan only promises “free tuition.” Much of the cost of college for low-income students doesn’t come from tuition but from paying for food, housing, and books. While Clinton’s plan would allow Pell Grants to be applied to these cost-of-living expenses, the grants would only fill part of the gap, leaving low-income students to fill the rest with long working hours, or debt.

Indeed, many community colleges already offer free or very low tuition, even as elite public research universities have been aggressively increasing tuition. The University of Michigan, for example, charges in-state students $14,402 in tuition and fees. At Macomb Community College in Detroit, in-state students taking a full sixteen-credit course load pay only $6,040. The Clinton plan would provide more than double the benefit to students who already have the academic advantages of enrolling in the more well-funded flagship university.

There is also a huge loophole in the Clinton plan’s insistence that free college will apply only to “public” schools. There are no federal standards for what it means to be “public.” That status is defined by states and states alone. Some, like Pennsylvania, have created a class of “state-related” universities, which include Penn State, the University of Pittsburgh, and Temple, that have wide latitude in how they operate. Were the Clinton plan to go into effect, state legislatures would be under immense pressure to grant “state-related” status to private colleges suddenly struggling to compete with “free.” They would undoubtedly assent, greatly increasing the cost of the Clinton plan.

The Clinton plan also fails to take on a key aspect of the federal financial aid system that makes the system so dysfunctional: that it is delivered as “vouchers” to individual students, in the form of Pell Grants, tax credits, and federally subsidized loans. Billions of dollars in largely unregulated vouchers have been snatched up by shady colleges that market to unsuspecting students, while financing an epic expansion of national student loan debt.

These vouchers also reward schools that charge more for tuition. A school that charges more than the maximum Pell Grant award ($5,815 for the 2016–17 academic year) can keep the entire grant for itself, while a school that charges less would have to make the remaining amount available to the student to cover books, housing, and other expenses. The same is true for student loans—the bigger the tuition, the bigger the loan, and the bigger the benefit to the school. The Clinton plan leaves vouchers and loans in place.

Vouchers also allow colleges to shift scholarships they might have given to needy students to wealthier students, who can do more for the college’s prestige and bottom line. A recent report found that 94 percent of private colleges and almost 50 percent of public colleges now charge low-income students more than $10,000 a year. In 2010–11, only a third of public colleges charged low-income students that much. Colleges can do this because they know the federal government will ride to the rescue, providing extra aid to low-income students.

Voucher money comes with few strings attached, one reason that nearly half of students who start college fail to graduate on time, and that student loan defaults have reached record highs. And while Clinton’s campaign language includes vague promises to hold colleges accountable for “improving completion rates and learning outcomes,” it offers no details about how this will be done.

Sticking a poorly designed free college guarantee on top of the existing dysfunctional voucher system is a bad idea. Instead, we should replace the entire existing system with something that will actually work.

A better way would be to take the money currently being spent on federal vouchers, loan subsidies, and tax credits, and use it to create a new, formula-driven federal grant program for states to subsidize higher education. Under this plan (recently proposed by New America, where I work), states would receive money based on the number and income level of low-income college students enrolled in their states. State agencies would then be responsible for giving that money to eligible colleges—but only if colleges agreed to charge students no more than their official Expected Family Contribution, or EFC. Millions of students receive this estimate every year when they fill out the Free Application for Federal Student Aid (FAFSA). The EFC is a kind of official judgment of shared responsibility, a statement of how much families can afford to contribute toward the education their children need.

Hillary Clinton was right to resist, for most of the campaign, the urge to jump on Sanders’s free college bandwagon. Let’s hope she can find a way to jump off, and get on board a plan that can actually deliver results for students.

The plan would make college affordable for every student at public, private, and for-profit colleges that opt in, which would mean a large net increase in federal funds to higher education. After replacing Pell Grants, loans, and tax credits with the new block grant, it would cost an additional $38.6 billion a year (because more students would receive aid)—in the neighborhood of the Clinton plan.

To be eligible for these funds, states would have to maintain their current funding and match 25 percent of the new federal money, which would add an additional $17.9 billion a year to higher education. States would also be expected to hold colleges accountable for student outcomes related to learning, graduation, and employment, and they would be responsible for deciding which colleges could participate in the program. This would weed out the bad actors who currently profit from the voucher system.

The plan would lower college costs for most students. Currently, almost 90 percent of families earning less than $30,000 per year are charged more for college than their EFC, compared with only 37 percent of families making more than $110,000. Colleges would also be required to enroll at least 25 percent low-income students, a bar 89 percent of colleges currently meet. Those that don’t are mostly elite, wealthy schools that least need government support.

States could, as with Clinton’s plan, choose to opt out by not taking the new federal money. But they’d be less likely to do so because, unlike the Clinton plan, this plan eliminates Pell Grants and federal student loans. States that opt out would leave their students and colleges without vital funding. The plan would empower states to customize their higher education systems. It would give governors more control over the millions of federal dollars that flow to higher education. And, unlike the Clinton plan, it wouldn’t discriminate against private not-for-profit and for-profit colleges. These elements should appeal to conservatives worried about leaving room in the market for innovation and maintaining the federal-state balance of power.

The plan also simplifies the federal investment in higher education. Instead of a multitude of federal programs to help pay for college—a system the Clinton plan would make even more complex—it would create a single program flowing through states. The plan would communicate a simple message that should please progressives: no student will be expected to pay more for college than he or she can afford. At the same time, it will bring more accountability to the federal investment in higher education, ensuring that taxpayer dollars are spent responsibly.

The plan is also progressive because it focuses the greatest resources on low-income students. In fact, nearly 80 percent of the funding would go to families earning under $48,000.

The current financial aid system is complex and broken. Students are sold on a future they can’t afford. The country deserves a complete rethinking to make colleges more affordable and accountable. What it doesn’t deserve is for Washington to spend the next few years fruitlessly fighting over pragmatically challenged “free college” proposals. Hillary Clinton was right to resist, for most of the campaign, the urge to jump on Sanders’s free college bandwagon. Let’s hope she can find a way to jump off, and get on board a plan that can actually deliver results for
students.

Iris Palmer

Iris Palmer is a senior policy analyst with the Education Policy Program at New America.