The Free-College Fantasy

This spring, Sen. Elizabeth Warren unveiled an ambitious policy proposal: a $1.25-trillion plan to make college more affordable. It includes canceling up to $50,000 in student-loan debt for 95 percent of borrowers, and putting billions of dollars into historically black colleges and $100 billion in new money toward the federal Pell Grant program.

Almost as an afterthought, the plan also includes a proposal to make tuition free at every public college and university in America. While light on details, Warren’s version of free college seems to be modeled after Sen. Bernie Sanders’s. Sanders, of course, built his improbable 2016 primary campaign in part by igniting millennial student debtors who were outraged by the broken promise of affordable higher education. Now every serious Democratic contender has had to propose some version of free college — or, as Sen. Amy Klobuchar and Mayor Pete Buttigieg have done, explain why not.

The broad case for free college is strong. Many states have slashed public funding for higher learning, shifting the burden to students and parents. Private colleges, in pursuit of status and fame, have hiked prices into the stratosphere. As real tuition at public universities has tripled over the past three decades while middle-income wages have stagnated, the federal government’s main response was to lend students ever-larger sums of money to make up the difference, with no control over how much colleges charged or whether the degrees were any good. It was a policy mistake of epic proportions, leaving the path to economic mobility badly narrowed and a generation of collegians saddled with unaffordable loans.

Fixing this blunder makes a lot of sense as a matter of both politics and policy. There’s just one problem: The Warren and Sanders free-college plans are badly designed. The Sanders proposal would give states federal grants equal to two-thirds of the cost of bringing tuition at all public colleges and universities in the state down to zero, contingent on states’ matching with one-third of the necessary money. Warren’s plan is vague but similar: The federal government would partner with states to “split the costs of tuition and fees.”

Both, in other words, would force the federal government to make up the difference between the funding that states already provide and the funding necessary to make tuition free. This approach takes the vast disparities and injustices of the existing higher-education funding system and bakes them in place, punishing the states already doing the most to support students and rewarding the ones doing the least.

If this version of free college becomes the Democratic consensus, the party could be headed for disaster: a 2020 victory followed by a policy-making collapse akin to the 1993 health-care fiasco, hobbling the victor’s presidency and setting back reform for a generation. Fortunately, there is a better way. To understand why the Warren and Sanders plans don’t work, and how to improve them, we need look no further than the flagship public university in Sanders’s home state.

The University of Vermont was founded in 1791 and sits on a lovely red-brick campus a short walk uphill from Lake Champlain. The surrounding city of Burlington, where Sanders began his career in government as mayor in 1981, has a low-key vibe, with restaurants and boutique clothing stores. Lately the region has become a hub of small craft-brewing companies. The fall foliage is beautiful, and skiing opportunities in the nearby Green Mountains abound.

All of this makes UVM an attractive destination for out-of-state students, who make up more than 70 percent of undergraduates. They pay well to attend. List-price tuition and fees for non-Vermonters start at almost $44,000 per year, more than many private colleges charge. On average, factoring in financial aid and in-state students, the university takes in nearly $25,000 per student in tuition, more than any other flagship public university in the nation.

This is one of the reasons why the state of Vermont spends relatively little of its own money on its public colleges. In 2017 the state allocated only $2,700 per student to higher education, less than half the national average of $7,640, and less than a third of neighboring New York’s.

Less than two miles away, in neighboring Winooski, the Community College of Vermont takes in only $5,340 per student in tuition revenue — barely one-fifth of what flows to UVM. State budget policy makes the disparity even worse. The community college’s annual allotment of $1,500 per student is less than half what the university receives.

In these two disparities — first, between Vermont’s stingy higher-education funding and what other states provide, and second, between the bounty that four-year universities receive and the pittance that goes to community colleges — we can see the fatal flaws of the Warren and Sanders free-college plans. They take these huge inequities as a given, providing far more money to middle- and upper-income students who attend wealthier public universities.

This approach benefits cheapskate states like Vermont and Pennsylvania, which spends about $4,300 per student from the public treasury and leaves undergraduates to pay an average of $11,400 a year in tuition. North Carolina, by contrast, spends $10,400 per student, more than double what Pennsylvania does, while taking in about $5,500 in tuition per student, on average. Total spending in both states is fairly similar, but one sticks students with most of their college bill; the other does not.

For that reason, the Warren and Sanders plans would give Pennsylvania much more money than North Carolina to pay down tuition, since tuition in Pennsylvania is higher to begin with. That’s grossly unfair and a political nonstarter; members of Congress in states that more generously subsidize higher learning would rebel. The obvious alternative is to force Pennsylvania and other low spenders to come up with billions of dollars in additional matching funds right away — but that’s a choice those states would almost certainly decline, since the Sanders plan would allow them to opt out entirely — and a mandatory plan would be unlikely to survive a constitutional challenge.

In addition to rewarding miserly states and penalizing generous ones, the Warren and Sanders plans would give much more money to four-year students than to two-year students, because four-year tuition is much more expensive. That is, frankly, the opposite of how good liberals and democratic socialists should think. Community-college students are more likely to be immigrants, working parents, and first-generation collegians from low-income backgrounds. Why spend $25,000 on tuition for a UVM freshman with well-off parents and only $5,000 for a single mom working on her associate degree at night so she can get a better job?

Those disparities also explain why another popular, more modest free-college plan — free community college only — isn’t close to enough to solve the problem of affordable higher education.

To be clear, $0 tuition community college is, on its own, a good idea. Community college should be free. States including Tennessee already have similar initiatives underway. But many of those programs aren’t especially generous, because most community colleges are already inexpensive for everyone and “free,” or close to it, for low-income students who qualify for the maximum Pell Grant of $6,095. Meanwhile, “free tuition” still leaves those students with hefty bills for books and living expenses. (Warren’s plan, to her credit, includes $100 billion in new funding for the Pell Grant program for exactly that reason.)

Additionally, some states rely much more on community colleges than others do. In Illinois, 62 percent of students who are enrolled in public institutions attend community college. In Michigan and Wisconsin, the proportion is only 32 percent. The latter states use relatively open-access four-year institutions to provide affordable higher education to students with diverse academic backgrounds. A policy that makes only community college free would put these states at an enormous disadvantage — and would anger their elected representatives.

Both the parsimonious free-community-college approach and the much more ambitious and expensive Warren and Sanders strategies have other design flaws. They do little to make sure that college is not just free but also good. Neither has strong accountability measures to ensure that colleges give students a high-quality learning experience and help them graduate on time.

The politics would also be tricky. Republicans oppose free college on general principles, but that’s true of any legislation that involves spending more federal money to help people in need. The real political problem is that colleges will fight against free college — specifically, private colleges that are already struggling for financial survival and would get nothing from Sanders- and Warren-style plans.

Those institutions have the ear of hundreds of members of Congress. Meanwhile, the elite universities whose graduates disproportionately populate the Washington staffer and lobbying class don’t want more government money to keep prices low. They like being wealthy institutions that sell expensive services to rich people, and will oppose any plan with mandatory price controls and regulatory strings attached.

Any new federal free-college plan should be guided by four principles. First, help students who need help the most. Second, reward states that invest their own money in higher education. Third, create incentives for colleges to cooperate with one another. Fourth, make sure that college is good as well as free. At the same time, such a plan needs to avoid the pitfalls of the Warren and Sanders approaches, which would reward the stingiest states and devote more money to four-year students, who are, on average, less needy.

There’s a way to achieve all of these goals. It’s smarter, more politically viable, and, while still representing an enormous new federal investment in college affordability, less expensive. Here’s how it would work.

It starts with cutting out the middleman. Instead of grants to states, the federal government should give grants directly to any public college — or private nonprofit college — that agrees to join a national network of institutions dedicated to providing free, high-quality higher education. In exchange for charging zero tuition and fees for all students, in-state and out-of-state, participating colleges would receive a direct annual subsidy of $5,000 per full-time-equivalent undergraduate. This funding would be in addition to the Pell Grant program. Pell-eligible students could use their grants tax-free to defray the costs of books and living expenses.

Five thousand dollars may not seem like much, given news headlines about $70,000 tuition and six-figure student-loan burdens. But it’s actually enough money to make college tuition-free for millions of students nationwide, because most public universities and community colleges aren’t nearly that expensive, and many students get scholarships.

Because colleges would receive a standard amount in exchange for setting tuition at zero, generous states like North Carolina would be rewarded. Public colleges there charge only $7,000 in tuition per student now, on average; many receive less. Elizabeth City State University, a public historically black institution in North Carolina, takes in $3,500 per student in tuition. A grant of $5,000 per student would be enough not only to set tuition at $0 but also to invest another $1,500 per student in more professors and facilities. States that are less generous, by contrast, would have a powerful new incentive to invest in higher learning in order to bring colleges’ costs down to the point at which $5,000 would cover their tuition needs. And because colleges and universities could join the network on an institution-by-institution basis, there would be no state-level opt-out problem.

Unlike the Warren and Sanders plans, this approach wouldn’t just make open-access colleges free. It would also make them better, by providing billions of dollars in new funding. But it shouldn’t stop there. To make sure college isn’t just free but is also good for the country, colleges that join the network should have to agree to certain conditions:

• Enroll a student body that is broadly economically representative of their state and region (as recently proposed by the economists Caroline Hoxby, of Stanford University, and Sarah Turner, of the University of Virginia).
• Graduate a reasonable percentage of students, as compared with peer institutions with similar missions and student profiles.
• Accept credits earned at other colleges in the network, to facilitate transferring, which in turn promotes graduation and saves students money.
• Publish annual reports on how they assure the quality of their work to prepare students to succeed in further education, citizenship, and careers.

No college would be forced to accept this bargain, and many would decline to do so. Most selective private colleges, being in the business of providing a very expensive service to mostly rich students, would have neither the means nor the inclination to forgo that income and open their doors to a demographically representative undergraduate body.

But many colleges would jump at the opportunity. By my calculations, using publicly available federal data, if every institution that currently takes in less than $5,000 per full-time student in tuition and fees chose to join the network, the cost to the federal government would be $25 billion per year. That would be an enormous new investment in affordable higher education, but at only one-third the cost of the Sanders plan. (Warren’s plan would average $125 billion annually, about half of which would finance debt cancellation.)

At that level, the network would start with nearly 1,100 colleges and universities that currently charge less than $5,000, on average. They enroll the full-time equivalent of 4.9 million students and include 821 community colleges, 208 public four-year universities, and 48 private nonprofit colleges. An additional 176 colleges, educating nearly a million more students, charge more than $5,000 but less than $6,000, creating a powerful incentive to raise additional state and private money in order to drop their tuition to zero and become eligible for new federal funds. Forty-one historically black colleges and universities would qualify.

Not all students would have access to free-tuition colleges at first. But that problem could be partly offset through online education. To be sure, fully online education is not, by itself, the solution to America’s college-access problem. Research suggests it’s unwise to put academically at-risk low-income students in cheap, fully online courses. But online learning is undeniably a valuable option for many people, especially nontraditional, working, and adult students who may want to combine in-person and online courses.

A smart free-college plan would expand the reach and quality of online higher education by allowing colleges in the network to create online programs that could be taken, for credit and free of charge, by students at any other college in the network, regardless of where they live. These students would count for enrollment when calculating the federal subsidy, creating incentives for colleges to develop high-quality programs that appeal to many students. Students, meanwhile, would have access to a wide array of online course offerings, organized in a common portal by the Department of Education, rather than relying on the online curriculum of any one institution.

Overall, because many community colleges and open-access four-year universities get less than $5,000 per student in tuition revenue, the plan would focus federal resources on public institutions that have long suffered from underfunding and would help students who are most in need. The accountability provisions would ensure a baseline level of consumer protection, while giving colleges the freedom to develop different approaches to learning and maintain their unique identity.

This approach to free college would give states an incentive to invest enough money in their higher-education institutions to keep tuition free. It would restore the promise of affordable college. It would halt and reverse the spiral of undergraduate borrowing that is undermining economic opportunity and public trust in higher education. It would be a signature achievement for the next president — if she gets the policies right.

This essay originally appeared in Washington Monthly.