A middle class American seeking a degree to improve her job prospects is faced with:
- College tuition having risen four times the rate of inflation over the past 30 years;
- Median family asset value having dropped by 1/3 in the last ten years;
- More job postings than ever now require a degree; and
- Aggregate student debt has surged past $1.2 trillion (yes, trillion with a “t”)
In short, a degree is more necessary, more expensive and students have less ability to pay. Clearly, this is a major national problem, and it’s why I started StraighterLine. So, kudos to the Obama administration for proposing free community college for full-time students maintaining a 2.5 GPA. Unfortunately, the proposed cure is worse than the disease.
Who Benefits if Free Community College Becomes Law
If the free community college proposal becomes law (which is unlikely), it would apply to full-time students from households earning less than $200,000 and that maintain a 2.5 GPA. However, 40% of all students and most students over the age of 24 attend college part-time. Also, 33% of low-income students have GPA’s below 2.5. Further, most students who qualify for Pell grants already get free tuition courtesy of the federal government. So, the population to whom free community college would apply is small and mostly between 18-24 years old.
Free Community College For Some, Higher Tuition for Everyone
While these students get free community college, the others would likely see tuition rise even faster. How is it that free community college for some can lead to higher tuition for everyone else? The Obama administration proposes to pay 75% of tuition with the states contributing the rest. Since states already fund more than half of a college’s operating expenses, the President is hoping that states will contribute more than they would otherwise.
However, given other state obligations to health care, pensions, K-12 education and other priorities, states are going to be hard-pressed to find the money. Instead, to receive more federal money and keep their contribution constant, they could raise tuition for everyone. Those who don’t get free tuition would pay a higher tuition. Here’s an example:
A three-credit class at a community college is usually about $350 in tuition. A ten course academic year costs the student $3,500. States provide about 60% of a community college’s budget. Therefore, the total cost – state plus student contribution -- of a year of community college is about $8,500. Under Obama’s plan, the federal government would contribute 75% of tuition ($2,625) and the state would kick-in the rest ($875). However, if you assume that states can’t easily increase their contributions, they are likely to, over time, find ways maximize the federal contribution.
Those who don’t get free tuition would pay a higher tuition.
To maximize the federal contribution and keep the state contribution constant, the state will increase tuition for everyone. Those that are eligible for free community college receive free tuition. Those that aren’t must pay a higher amount.
This tuition increase is not likely to be immediate, but will occur over time as community colleges and states deal with year-to-year operating requirements for their community colleges.
Another problem is that only 20% of community college students successfully complete their two-year degree within three years. This plan puts a lot more federal money into a system with very low success rates.
What's a Better Solution?
If free community college isn’t a good solution, what is? In other industries, the best way to bring about price reductions and quality improvement is to give customers alternatives. With the growth of online options that aren’t colleges, but act like them – StraighterLine, MOOCs and more – there are a variety of free and low-priced options that don’t get taxpayer funding and that are at least equal to the online offerings from existing colleges.
The good news is that lower-priced alternatives are emerging for students that are willing to take control of their own education.
After all, online, you don’t need to be a college to offer a college-level course. Federal and state governments should strongly encourage colleges to award credit for equivalent, but lower cost, solutions. Students should inquire of prospective colleges whether they will allow such credit transfer. After all, an admissions officer or enrollment counselor wants you to choose their college!
So, the bad news is that college is more expensive than ever and policy proposals that direct more money to a certain class of students at a certain type of college isn’t likely to fix the problem. The good news is that lower-priced alternatives are emerging for students that are willing to take control of their own education.
Burck Smith (@burck) is the CEO and founder of StraighterLine.