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Is Free Public College a Good Idea?

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Free Public CollegeBernie Sanders, a Democratic candidate for the President of the United States, plans to make public colleges free for every American who wants to attend. When I first heard this, I thought it was a great idea. The cost of higher education has been increasing much faster than inflation and new college students are borrowing a lot of money to fund their tuition and other associated fees. The average “class of 2015” graduate with student-loan debt will have to pay back around $35,000. It’s tough to start off in a hole. Wouldn’t it be much better if public colleges were free?

We need a better educated workforce for the future. Making college tuition free would encourage more people to go to college and increase the education level of our workforce. A high school diploma isn’t enough to compete even now. In 15 years, a college diploma will be required to get any decent paying job. I want my kid to go to college and I’m sure most parents want the same. We are saving diligently in his 529 to help pay for higher education. If college tuition were free, we could reallocate that saving toward our retirement instead.

The cost to make public college tuition free will be $75 billion per year. Bernie Sanders plans to pay for this by imposing a small tax on Wall Street transactions. It’s even got a nifty name – the Robin Hood tax. Stock transactions would incur a 0.5% tax. Bonds and derivatives would have a smaller tax. Make Wall Street pay for higher education. Sounds good to me!

Is Free Public College a bad idea?

Imagine my surprise when I heard that many economists think free college is a bad idea. (NPR’s Planet Money: If Elected President) What’s their problem? Let’s take a closer look.

  • Will we really have more college grads? The number of schools will be the same so the number of college grads will be roughly the same even if college is free. I don’t see how we will generate more college grads unless we build more colleges. I guess we could increase class sizes, but the quality of the higher education will suffer.
  • Quality will suffer. We all know private schools are better than public school. Students and parents care more about the quality of the education when they are paying a lot of money for it. When it’s free, they are ambivalent about the quality. If public colleges are fully funded by the government, there will be pressure to lower costs. I guess the professors and staff will make less money. The best professors will go to private colleges where they will get compensated better. The government will dictate how colleges spend money and this will probably cause a lot of unforeseen problems.
  • Demand will explode. If college is free, the applications will sky rocket. The current system won’t be able to accommodate everyone. If you don’t get in, then you will have to go to a private college or not attend college at all. Flagship public colleges will be more selective and only students with the best test scores will get in. This is advantageous for kids who can afford to take SAT/ACT prep lessons. Admission will be even more difficult for lower income students.
  • Free college tuition will disproportionately help families who can already afford it. Currently, 81% of college grads come from families with above average income. Only 11% of college grads are from the lower income quartile. Making college tuition free may increase the number of students from the lower income families, but most of the benefit will still go to the middle and upper income families. Economists argue if you want to help poor students, then it is better to fund programs that directly target those families.
  • Attending college will still be expensive. College tuition accounts for around a third of the cost to attend most colleges. Student will still need to pay for room and board, books, transportation, and other fees. Bernie’s plan includes a full ride for poor students. Middle class students will still need to borrow to pay for everything else and the student loan debt problem won’t be solved. Sweden has free college tuition, but many students still have a lot of debt upon graduation. The cost of room and board has ballooned to generate much needed revenue for the colleges.
  • Free college will stifle innovation in higher education. Online courses are already starting to provide quality education at a much more affordable cost to students. Khan Academy is already bringing free K-12 education to kids all over the world. Free public college could smother the innovation in online education.
  • Further devaluation of a bachelor’s degree. Our kids would need a college degree to make a latte. Oh wait, that’s already true. You don’t really need a degree in a lot of jobs. Going through an apprenticeship program or learning on the job makes more sense in many fields. Making kids get a degree to do those jobs will just delay their start in life. When a bachelor degree is as valuable as a GED, kids would need a graduate degree to stand out. Many young people will just spend more time in school and accumulate more debt instead of getting out and becoming more productive.
  • The Robin Hood tax might not work out. Some economists argue that the new tax would drive down total tax revenue and would not generate any money. Wall Street wouldn’t be the only one paying for this because the tax would inevitably makes its way down to us, the individual investors. Every time you contribute to your 401k, you will pay this tax. Pensions will be hard hit as well. Whenever you get a payment from your pension fund, you will be paying this tax.

Free college tuition sounded good when I first heard it, but not so much after I did some research. I don’t know if all of these problems will really come true, but free tuition doesn’t look very attractive anymore.

It’s not good to accumulate a lot of student-loan debt, but the benefit of a college education still outweighs the cost. If you bust your butt and work hard, you should be able to pay off those debts relatively quickly. Melanie, our former staff writer, just paid off $81,000 in student loan debt by working like mad and eventually starting her own business. Do we really need another entitlement program? It might be better to focus on lowering the cost of higher education instead of opening a new can of worms by making college tuition free.

What do you think about free college tuition? Will you vote for Bernie?

Image Credit: by Oregon State University

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{ 72 comments… add one }

  • hermann March 11, 2016, 1:41 am

    Maybe. But I guess I’d offer some possible counterpoints.

    First… most first world countries have free higher education… especially Europe… and they seem to manage the problems OK. But haven’t looked in detail.

    Second… if we apply that logic than why not make primary school also cost money? If the argument is that people with means will disproportionately benefit anyway and the lower # of people to same number of institutions drives quality then it seems like the general quality would increase. If not… then how do we draw the line and say all people just be educated to level X but not level Y.

    Although I agree there’s a lot of barriers I’m not sure that the rationale that because making school free won’t on its own even the playing field doesn’t mean it’s not a good step or worth doing.

    I separate that from how to pay for it. I agree that trying to tax stock transactions sounds easy (punish the greedy day traders) in reality financial institutions will make sure the general public bears those costs. One of my major problems with Bernie is he seems to want to use taxes as a mechanism of revenge and populism under the guise of creating more equitable society. While the mechanisms may be similar the intent is different and I think it sets up a nasty situation.

    For example I think things like 15$/he minimum wage, universal healthcare and infrastructure investment are better tools than tax hikes… although I do like removing the social security ceiling.

    • retirebyforty March 11, 2016, 10:38 am

      Europe seems to be doing okay, but they are paying a lot of tax. Life is good there, but I don’t want to pay more tax…
      I like universal healthcare, though. I would be willing to pay tax so healthcare is available to everyone.

  • Pennypincher March 11, 2016, 3:44 am

    Wouldn’t it be great if we had a more educated country? Of course! Then maybe it would help eliminate a lot of the deviant behavior you see all over this country on the news. A free education (I think Obama was also talking of the first two years tuition-free) would help so many smart, young, deserving, lower income students achieve and become better tax-givers (just what the govt. wants) instead of unemployed tax-takers, or worse.
    I wonder what all the higher education institutions are thinking of all this? They have serious bills to pay themselves. Besides salaries, it is very, very expensive to run these campuses with libraries, maintenance, liability, etc.
    Ultimately, we the tax payers would foot the bill, for sure. Everyone deserves a great education. But students cannot sit back and take a hand-out. Work like the rest of us did! Work and save for college, work before and after school, work at school. Pay those loans off asap if necessary. Then you can start your life.
    Parents, the free money is out there. Have your kid do the best they can while in school, involved in a passionate activity or two, let them help the school, community or your region out-volunteer-in some way. Get some test prep help for the college entrance exams, they can’t tackle that test alone. You should see some offers from schools if you do your research. Everyone pitches in, does their share, helps out and the student should get through college.
    Completely free college w/o the effort? No, I don’t think so!

    • retirebyforty March 11, 2016, 10:41 am

      I like the free community college idea. It’s much more realistic to me. The kids can live at home and go to community college. The problem with that is the graduation rate is very low. It should help motivated student from low income family, though.
      We’ll try our best to guide the kid to free money. I didn’t have any guidance when I was young and missed that opportunity.

  • Mr. Tako @ Mr. Tako Escapes March 11, 2016, 4:02 am

    Hi Joe – If a college education was free, I would base it on performance, not the income profile of the student’s parents. I went to many years of college and know exactly how little educations happens there.
    I can imagine a bunch of slackers getting into college to ‘goof-off’ and party for four years without attending a single class. If ‘free tuition’ was based on GPA, or test scores this would help sort the diamonds from the coal. This could help alleviate some of the problems you mentioned.
    We should educate the smartest and those who work the hardest, not the dumb and the lazy.

    • retirebyforty March 11, 2016, 10:43 am

      The problem is a lot of low income kids don’t have good scores. They have a lot of problems at home and it’s hard to elevate their test scores. The smartest and most determined should be able to do it, though. Life is tough when you’re poor.

  • RAnn March 11, 2016, 5:41 am

    Louisiana has free college tuition for all residents who complete a college-prep curriculum (courses are specified) with a 2.5 GPA and who score I think it is 21 (state average) on the ACT. Students with better GPA/ACT combos can get stipends of $400 or $800/year in addition. To keep basic TOPS students have to take at least 12 hrs a semester and maintain a 2.5 GPA; to keep the stipends, a 3.0 is required. The result? A program that was touted as a way for the poor to get a college education has become a boon the the middle and upper middle classes. While TOPS is do doubt helpful to the poor who manage to get it, if you are going to make college “free” you are going to have to decide if college is for everyone (with no admissions requirements) or for the top students (and so your program will give aid to those less likely to need it). The cost of TOPS has skyrocketed but it has become a sacred cow. Louisiana’s middle and upper class students are very likely to have attended private high schools and a lot of parents have the “now it is our turn to have the public pay our expenses” attitude since they have shelled out tuition payments for 12+ years already. You can read about TOPS here http://www.laicu.org/uploads/files/board_of_regents_tops_report_december,_2014.pdf

    • retirebyforty March 11, 2016, 10:47 am

      Thanks for the link. I didn’t know about the LA’s TOPS program. It sounds like the program will exacerbate inequality instead of helping. That’s unfortunate.

  • JP March 11, 2016, 5:52 am

    Just like healthcare, it seems to work just fine in every other industrialized country. By the way, it is NOT free, we would be all paying for it. And that is OK; god knows Americans desperately need more education, foreign languages, etc.

    • retirebyforty March 11, 2016, 10:48 am

      Healthcare here is a huge mess. Ridiculous…

  • Christine @ The (mostly) Simple Life March 11, 2016, 5:54 am

    No government program is ever actually free. Our taxes already pay for benefits for so many other people and this would be a huge addition. I feel like the desire for free everything come from an entitlement attitude. There are already programs in place to give assistance to lower income students. Maybe some of those programs should be tweaked to help a bit more, but free is too much.
    If everyone can go to college for free, then a bachelors degree won’t mean much and good paying jobs might start to require a masters degree.

    • Rich v March 14, 2016, 3:21 pm

      Another unintended consequence of “free” college is that there would be even less scrutiny by people enrolling in degree programs as to which majors would be worthwhile. Coming from a blue-collar family myself and not having a lot of family money, I chose a degree similar to RB40 that tended to provide a lot of job opportunities and a pretty good starting salary. Additionally, I worked my butt off *before* I got to college taking advantage of PSEO and earning merit-based scholarships to defray the costs of college. If you take the cost part of the equation out of the college experience, I think it will lead many young people to may make foolish decisions with their time. IMO, students needs some skin in the game, whether it’s time or money invested (or both), in order for them to take it more seriously.

    • Carly March 14, 2016, 4:38 pm

      “If everyone can go to college for free, then a bachelors degree won’t mean much and good paying jobs might start to require a masters degree.”

      I agree with this statement to a degree. I think that more people should be employed to help students choose a degree to pursue and which industries they can flourish in post grad. I work in the marketing department for 3 national mortgage companies and we are always struggling to find people who have marketing experience in the finance industry. Not many people think to get a finance background when graduating with a marketing degree and therefore have a small selection of people to hire. I’m sure there are other industries that have a hard time finding suitable candidates when there are overcrowded child development fields and other common degrees students choose.

      It really is up to the individual to choose a field that they not only would enjoy working in, but can find work post grad. That was specifically why I decided to not pursue journalism and go for a communications degree which offered a more varied range of opportunities.

  • PhysicianOnFIRE March 11, 2016, 6:16 am

    When I first caught wind of the plan, via a “SHARE IF YOU AGREE that college should be free” facebook meme, I thought 2 things. 1. It wouldn’t be free, and 2. It wouldn’t be wise (for some of the reasons listed above).

    I made the mistake of commenting to that effect, which led to some unfriendly dialog. My point was that if you are smart enough to go to college, you’ve already got that advantage over those who are not. Giving a bigger advantage to the smarter kids with “free” tuition would tip the scales further in their favor.

  • aB March 11, 2016, 6:28 am

    “the benefit of a college education still outweighs the cost”
    College education is already essentially free. The piece of paper at the end, with your name on it, that is not free.
    edX, coursera, the courses are literally run by elite universities.

  • Justin March 11, 2016, 6:42 am

    For the reasons you highlight, I think some form of the current pay as you go system would work better. State universities still provide a very solid education in most states. Tuition often isn’t that great. Why not spend the billions of federal tax dollars expanding the financial aid to those least available to afford college (more Pell grants, more subsidized student loans, better work-study funding, etc) instead of giving away free tuition to solidly middle class and wealthy people that really don’t need the help.

    As far as the $35,000 average student loan debt, is it really that bad? If college doesn’t increase your income prospects by enough to pay that debt over the first 5-10 years after college, then I would suggest college is a waste of time, money, and resources for that student. Stick with community college and/or trade schools for better bang for the buck.

    Be a 21 year old plumber or electrician earning $50k instead of a 21 year old semi-employed aspiring artist/writer/actor with $35k in debt earning $20k/yr.

    • retirebyforty March 11, 2016, 10:52 am

      Tuition really is not that expensive for public university. It’s the cost of living that blows up the bill. If student can live at home and go to a public college, that would make it much more affordable.
      I don’t think $35k student-loan debt is not that bad. A degree should increase your lifetime earning by much more than that. The right degree is still a good investment. I agree about taking up a trade as well. If you don’t know what to do, pick up a trade. After a while, you can start your own plumbing company and earn big bucks then.

    • Joe March 14, 2016, 10:57 am

      Are Pell grants based on income? If so, wouldn’t you qualify? Yet, you have over a million dollars invested. Doesn’t seem fair to me. I have the same issue with Obamacare subsidizing early retirees. And the same issue with people using Food Stamps to eat at McDonalds. The government needs to stop giving things away.

  • ChrisCD March 11, 2016, 6:46 am

    When you have to work hard for something and work hard to maintain it, it has value. Giving something away for “free” with no stipulations would decrease its value.

    I had my school paid for by family, but squandered the opportunity. By the time, I learned the lesson it was too late.

    We don’t need another entitlement program. I don’t believe we all need to pay more taxes to make education “free”. There are numerous programs and opportunities out there for those that work hard to have their college expenses decreased. And if you really want a free college education, join the military. They offer quite substantial benefits.

    chris :O)

    • retirebyforty March 11, 2016, 10:53 am

      I agree. Everyone love free, but we don’t value it as much as something we had to work hard for.
      My parents help paid for school, but I knew they worked really hard and had to make a lot of sacrifice. I valued their contribution and gave back when I can.
      I like your idea of joining the military.

  • Mike Drak March 11, 2016, 6:56 am

    Education, a way to improve yourself should be made available to all. I believe the focus should be on reducing the cost of delivery. Students are still forced to buy expensive textbooks in Canada when an ebook would be a much cheaper alternative and really the ebook should be free. Do we really need to go to a campus anymore? Do we even need to visit a library anymore? Things need to change and free information should be made available to all. Now what they do with it is another question!

  • Financial Slacker March 11, 2016, 7:34 am

    I recently wrote an article about the increasing cost of a college degree. Growing at nearly 5% per year, the cost is well outpacing household income growth.

    That said, the greater earnings potential afforded to those with a college degree still makes up for the cost, but that gap is shrinking.

    Beyond the cost to taxpayers, there are two factors that should be considered –

    Will the people who want to attend college willingly make the sacrifices needed? The model in place today requires not just the time commitment, but also a financial sacrifice. Most often those things which we must pay for tend to be valued more highly than those that are provided free of charge.

    The second factor which is related to the first is motivation.

    My recommendation is that rather than making college free, which will drive a devaluation, why not supplement those that graduate on a sliding scale based on performance. The better the grades and the quicker you finish, the more supplement you will receive.

    If you don’t graduate, you don’t get any help paying back your loans.

    The funds could also be used not just for public colleges, but also private schools.

  • Nathan @ Investment Hunting March 11, 2016, 7:56 am

    Most colleges are already impacted. At California UCs for example the average time to graduate with a 4-year degree is 6-years. Imagine if a flood of new students not paying tuition showed up. Free tuition would lead to a new type of cream rising to the top. Schools would have to operate more like sports teams. Cutting poor performers would be the only way to reduce student size to manageable levels.

    As for the government costs (who am I kidding, taxpayer cost) to pay for free tuition it would still hit the people who cannot afford it, the middle class. Look at Obama Care. They gave free healthcare to anyone who couldn’t afford it. How did they pay for it, by raising health care costs for the middle class exponentially. Bottom line free is free for some, but others are paying for it.

    Lastly on a personal note, I know college is expensive and difficult to pay for. There are already programs for under-advantaged students. Stanford University announced last year that any student accepted gets free tuition if their parents make less than $120k a year. All colleges offer tuition assistance and grants. Free money is out there; you just have to be driven enough to find it. Trust me I know. I was raised in a family well below the poverty line. I took advantage of free money and supplemented the rest of my tuition the old fashioned way; working 2-jobs and taking on massive student loan debt. I know plenty of people at the poverty line who are in college now and not paying for it. Regardless of the programs available, if a student wants it bad enough they will figure it out.

    Ok, I’ll get off my soapbox now 🙂

    • retirebyforty March 11, 2016, 10:59 am

      I suspect the time to complete a degree would increase too. I didn’t know the average time is 6 years now for the UCs. That’s ridiculous. I wonder if it’s because they couldn’t schedule the classes. What’s the problem? I got a BS and MS in 5 years back then.
      Yeap, a kid has to be motivated to improve her/his situation.

      • Nathan @ Investment Hunting March 11, 2016, 11:49 am

        Schools are too full and resources are limited. So yes, there are not enough classes with open seats. So students take a long time to graduate. I just went through this with my daughter. She is a freshman in college. After getting accepted to a bunch of schools we then investigated time to graduate averages. In the end she picked a school out of California with a very high 4-year graduation rate. She wants to be a doctor, so getting her undergrad out of the way quickly is important.

    • jim March 11, 2016, 12:34 pm

      The 6 year average graduation rate isn’t specific to UC and its nothing new.

      Nationally for students starting in 1996 only 55% of students at 4 year universities had graduated in 6 years. The numbers actually went UP to 59% for students starting in 2007 (and graduating in 2013).

      It was a problem for students when I was in school ~20 years ago. Very few people graduated in 4 years and most took 4-5 average. Theres a variety of reasons. I think a big factor was students changing majors 1-2 times and general indecision and lack of direction on course of study. Plus: college isn’t easy.

      • jim March 11, 2016, 12:35 pm

        Also, keep in mind that those statistics do also account for everyone who drops out of college for whatever reason. Everyone who quits doesn’t graduate clearly.

      • Rob March 21, 2016, 2:12 pm

        Maybe if they fix the average years students have to pay for college, the big debt problem goes away?

        Remember those Scandinavian countries often quoted are highly homogenous with similar history, background and large agreement on the policies and government of their country, that is not the story of America except during extreme crisis like WWII. When they allow immigration, there is low toleration of not integrating into the society at large. It is a given that you are born, have the advantages of your elders paying high taxes, and then you in turn become the elder, work and pay the high taxes for the next generation.

        That is not America. The Democrats are bound and determined to have open borders with the mantra that this is somehow ‘who we are’. History shows that as soon as we started the welfare state, we limited immigration, which is only logical. You can’t offer free everything and have more takers than providers.

  • Sam @ Financial Samurai March 11, 2016, 8:20 am

    Free is always good until someone has to pay for it.

    But we ALREADY have a free college that’s way better than anything. It’s called the internet where people with hustle can find experts in their respective fields and learn from them instead of learn from professors who teach and not do.

    Sam

    • Matt March 11, 2016, 10:58 am

      I am not for free college, although I think Community College that is essentially free here in CA is a good idea and I would support a year of free college for a year of national service of some sort. A more educated country is a better thing and the rising cost of college shutting out poorer people is a big concern.

    • jim March 11, 2016, 12:37 pm

      Educating yourself independtly is great and I certainly encourage it. THe Internet does have a wealth of information, not to mention the good old public library.

      BUT… If I had put “learned stuff on the internet” rather than the completion of a bachelors degree on my resume then theres 0% chance I’d have my job

      • Sam @ Financial Samurai March 11, 2016, 4:13 pm

        Ah, but if you chose the entrepreneur route, it’s all about eat what you kill and put what you know to good use! Whoo hoo!

        Isn’t making a living from nothing the ultimate test?

        Sam

  • freebird March 11, 2016, 8:30 am

    I think you’re right, it’ll never work here in the US.
    http://www.bbc.com/news/magazine-32821678
    Germany, yes, but here? Not a chance.

    FWIW while I like the idea of a financial transactions tax, I think 0.5% is too high. I’d rather see the beneficiaries of the free university education be subjected to a more steeply progressive income tax rate schedule– no change below the median income ramping to a few percent higher at the top end.

    • retirebyforty March 11, 2016, 11:03 am

      Wow, thanks for the link. That’s a great program. I will forward it to the missus. I wouldn’t mind sending the kid to Germany. It will be a great to experience the world.
      I think 0.5% is too high as well. It doesn’t seem like a lot at first, but you lose a big chunk every time you trade.

  • Mike H. March 11, 2016, 8:34 am

    Economist here. I absolutely agree that college education should NOT be free. There are real structural issues with our higher education system, and merely transferring the cost will not fix what people want to fix. As for the “European model,” you can forget about it. Societal differences, tax differences, etc., all combine for a very different mentality. What we’re talking about here is simply taking something that costs money, and making it appear free (hint: it isn’t free). Without a structural change, this could end very poorly.

    I don’t necessarily agree with all the points above (especially the “quality will suffer” and “stifle innovation”), but there are a couple of additional thoughts:

    1) A free education doesn’t automatically make people smarter. There are plenty of people in this world who are not smart enough to qualify for a higher education. The solution to that problem lies in the K-12 world.

    2) As many people have mentioned, a free education isn’t free. Without a change in how public colleges operate, or a serious societal change which re-values education and educational employees, this is just a question of who pays for the degrees of young people. And what’s the societal cost when a kid parties his/her way out of school, or drops out to start the next big rock band? That’s potentially huge deadweight loss right there.

    3) Taxes are behavior modifiers just like subsidies. A Robin Hood tax is a good example of this, but really a lot of taxes can work this way. Higher tax rates generally lead to higher relative valuation of leisure, with higher corresponding workforce impacts. Stripped of all the jargon, this means that the more you “punish” (tax) a person’s income, the higher the chance that they say, “F*** it, I’m out.”

    3a) Business taxes, on the other hand, simply get passed down to the price of the product being sold. It’s extremely easy to propose a business tax, but really that means that you’re looking at (for instance) an $8 trade fee at your brokerage instead of a $6 trade fee. If $8 isn’t competitive in the market, you’d be pushing some businesses out of their markets, leaving only those companies which can afford to operate that line of their business at a loss, while making up the deficit from their other product lines.

    No, no, no. I value education as much as anyone, and I certainly couldn’t have afforded my education at the best public university in the country without loans, a job, and an educational trust started by my grandfather. But if you want a smarter workforce, that starts earlier than college for sure. And don’t forget, the world needs janitors.

    • David Michael March 11, 2016, 2:55 pm

      Mike…I suggest you research the direct relationship of free education up through community college in California during the 60-70-80’s. This was the foundation of what has made the California economy one of the top seven in the world, then and today. Note that free community college covered both academic and vocational course work, meaning one could be an electrician after two years and get a job or continue in higher education to eventually become a physician. The biggest waste in our system IMHO is to let young people slip through the cracks and not live to their full potential. Sooner or later it destroys the entire system, as we are witnessing today with overcrowded jails and teens dying from drug overdose. It’s a lot less expensive to send our young people to school than to pay for them in correctional institutions. In Oregon, it costs about $10,000 a year per student for public school as
      compared to $30,000 for incarceration. In the long run, free education is a bargain!

      • Joe March 14, 2016, 11:07 am

        The national average yearly tuition for Community College is less than $4,000. With the American Opportunity Tax Credit of $4.000, Community College is already free.

        • Rambo March 14, 2016, 11:22 am

          The AOTC credit is $2500, but I see your point – Community College is already subsidized and affordable to all.

  • kyle March 11, 2016, 8:44 am

    We had the same debate before k-12 became free. We had the same arguments. There were growing pains at first, and then we got into the groove and became the most competitive country in the world. Other countries played catch-up with us. Now we are making the same arguments, but we are now the ones playing catch-up. Wait too long and we’ll be left behind.

    My wife and I are on track to be FI in about 3 years, so we will have the luxury of bringing our kids to a country that has free education when the time comes.

  • nicoleandmaggie March 11, 2016, 8:45 am

    Another economist here– just wanted to say that things are more complicated than Mike H. makes it sound. For example, taxes aren’t always passed through. The amount that is passed depends on various elasticities and costs and how competitive the market is.

    There are also general equilibrium (public goods) reasons for college to cost less at least for some people. The GI Bill is generally thought to have partially jump started the economy after WWII. Large states like TX, CA, or NY have more of an incentive to make high quality public schools inexpensive because their students are more likely to stay in the state than are students of smaller states (VT, CT, NH etc. students may just move to Boston, wasting all that state investment).

    It’s a complicated issue. And even if public schools are free, private schools will still allow for large class differences. (Also, right now there are a lot of private schools that really are crappier than public schools. Private isn’t always better.)

    • Mike H. March 11, 2016, 8:59 am

      Thanks 🙂 You’re right of course, this is a complicated issue. For the reasons you posted, as well as some others, local economies will react differently to stimuli. I’m all for lower-cost college, but lower-cost college via a new tax seems like a very bad idea if you keep all the inefficiencies of the current system. There’s definitely a Pareto efficient solution that we haven’t achieved yet.

      • nicoleandmaggie March 11, 2016, 11:18 am

        Not necessarily. If you believe that there’s been a lot of skill biased technical change and you believe that inequality of opportunity spills over to the next generation, then there’s market failure the fixing of which could be greater in benefit than labor market distortions are in cost. Top economists disagree which distortion is larger.

        They do agree, however, that rising inequality is why Donald Trump is so popular.

  • Jim @ Route To Retire March 11, 2016, 8:54 am

    You and I both have children around the same age and I’m banking on something completely different. My prediction is that by the time our kids go to college, I think a lot more of it will be done online through a lot more schools and even startups. The technology is finally there and we’re already seeing a lot of this already in the classes done through New Horizons, Global Knowledge, etc. It makes sense economically and for scalability – they can do more with less.

    With that said, the number of schools wouldn’t be as critical as they could help ensure much fuller classrooms with kids all over the country (or even internationally). Costs would most likely go down and with it, competition would probably increase.

    So this is my long-shot off-the-wall prediction, but if it starts to come to fruition, I would imagine that tuition prices will drop pretty significantly. There’s no way the costs can continue to go up the way they are or it won’t make sense for kids to go to college as they won’t be able to pay the costs back in a reasonable amount of time.

    If I’m right, boy, I’ll point back to this comment and tell people how smart I am. 😉 And if I’m wrong, we’ll pretend this comment never existed and I’ll have that 529 plan rocking out just in case!

    — Jim

  • Lisa March 11, 2016, 9:45 am

    “We all know private schools are better than public school. Students and parents care more about the quality of the education when they are paying a lot of money for it.”

    I think this comment is unfounded and that public schools offer a lot of advantages that private ones don’t. I don’t think the quality goes up with the price tag. Seems like poor logic to me.

    • PhysicianOnFIRE March 11, 2016, 1:32 pm

      That statement caught my attention as well. 21 years of public schooling served me well.

      My older son started in a parochial kindergarten, but we moved him to public school for first grade, where they seem better able to accommodate the gifted and talented students compared to the local private schools. YMMV, of course. Some states and cities do public school better than others.

    • David Michael March 11, 2016, 2:35 pm

      I went to private schools for most of my primary and secondary education. That helped me get a scholarship for college and fellowships for graduate schools. However, numerous studies have found that students who attended public school did just as well or even better in college if they survived the first year of college. Now…many years later, it hasn’t made a bit of difference among my friends (age 70-80’s) whether they went to public or private schools. It was ultimately individual drive, vision, and focus, much of what Joe Udo writes about in this
      blog. And…a bit of luck!

  • David Michael March 11, 2016, 10:00 am

    Another great topic that is timely.

    My first career was as a community college teacher in the Bay area of California during the 1960-70’s next door to Stanford U. Tuition in California for the community colleges was free. As a result, companies like Oracle, Cisco, and Apple had a ready supply of educated students to join their work force plus a group of innovative young people who changed our world of technology. As I taught chemistry and oceanography, many of my own students went on to Stanford and Berkeley. It was the golden age of California where opportunities were unlimited. One only had to keep a B average and work hard in school to get at least an AA degree. My students were highly motivated and had no problem getting jobs upon graduation.

    A few years ago, during my early retirement years from a successful small business of teaching worldwide, I had the opportunity of teaching in a community college in Oregon. The experience opened my eyes as to how much had changed over a span of 20-30 years. My new students in chemistry lacked the attention span of my earlier students, thanks in good part to television and tablets, but mostly from the number of hours they were forced to work to pay for their college expenses. The majority worked 20-30 hours a week plus taking a full load of college classes. They were just plain tired and wanted only to get their degree and move on.

    So, in answer to your question about free education, in my opinion free education is one of the pillars of a democracy. Of course, it is not free, as we all contribute with our tax support.
    But the choices are smacking us in the face today as we witness another presidential election like no other. An uneducated populace invites the breakdown of society as we are now experiencing in this day and age. For those of us who remember the Brown Shirts and Storm Troopers of another era, a free education is more important than ever. It’s time to take notice what is happening to the greatest military power the world has ever known.

  • Tawcan March 11, 2016, 10:08 am

    I think free post secondary education (university, college, trade school) is a great idea. Where my wife comes from, Denmark, post secondary education is free and the government gives you monthly allowance too. Yes Danish ppl pay more taxes compared to Americans and Canadians but the social benefits they have are way better than us. I can’t say I’ve been following the US politics that much lately so I don’t know the full details of this “free college” proposal.

    The disadvantages you listed above are valid. However I don’t think “college” is the right choice for everyone. Higher education is always good but if your interest is in trades, trade school is better for you, rather than getting a useless degree at a college. If college indeed become free for Americans, I can’t see that would apply to international students. Furthermore, colleges would need to take a very close look at entrance requirements to make sure people that get in are really qualified.

    • Stevie Wonders March 14, 2016, 6:37 pm

      But how hard is it to get in? Although college in Europe may be free, I’ve always understood gaining admittance is not easy.

  • Tissue King March 11, 2016, 11:05 am

    Free education will do little to educate our peeps in this nation. We have so much opportunity in our “free” society but if wedon’t have the will power to go get it, then we are wasting your time.

    There is so much financial advise out there to assist us with getting to financial independence yet some of us still don’t bite. This is the same with education. Kahn Academy is a great resource and I use it, my kids use it but yet a lot of people have never heard of it. We’ve turned into a society of lazy bums and that is what is our problem is.

    If we offer free education, we will end up paying for it somewhere. I think we should leave the college education the way it is, pay for what you use. What we need to do is put the smack down on the institutions that are raping our pocketbooks. Maybe the government needs to regulate our education system? It kept cable prices down until deregulation, same with phone service (landline) back in the day.

    Maybe take away scholarships for sports? I love sports so this one is hard but it would sure put the pressure on the schools to get good students and not just the one’s coming for the free ride and then just pushing them off to the pro’s. The sporting facilities in some colleges is what is driving up the price of schools. They build the gym’s, arenas and stadiums and that’s why they drive up the cost of attending college. Doesn’t seem fair to the kid trying to get by with a part-time job struggling to pay for school meanwhile some kids go for free because they can catch a ball or swing a bat.

  • Casey W March 11, 2016, 11:20 am

    Man what a lively debate! My only thought is on the ‘Wall Street Tax’. It seems like every mutual fund will just pass the tax down to shareholders similar to capital gains and dividend taxes. Not really robbing the rich, we would be robbing most American’s retirement accounts!

  • Robert March 11, 2016, 1:17 pm

    There’s no such thing as a free education. Someone will have to pay for it. As a follower of RB40, and someone who is well on my way to retiring by 40, I think this plan is a horrible idea.
    To be in my position, I have restrained myself from making unnecessary purchases. I have saved and invested a large percentage of my income, as I have had the disciple to “do without,” and live well beneath my means. The “invested” part of my savings has been a combination of stock market investments and real estate. Sometimes I have made trades within a short amount of time, although I’ve never been a “trader.” But if I had to pay an extra 0.50% for every trade, my investment returns would be crushed. I’d be losing money so that I could pay for “free” college for today’s youth.
    Like all Socialist ideas, the money has to come from somewhere. Nothing is free.

    • Ken Bugaj March 12, 2016, 8:49 pm

      There is also no such thing as free money. My favorite quote of yours was this “Like all Socialist ideas, the money has to come from somewhere. Nothing is free.” Investing in the US stock market is essentially free money the way I see it. You put your money into this magical box that returns ~7.0% interest over the long haul. But where is your money coming from? It’s coming from the people that aren’t educated enough to know that consume, consume, consume, isn’t the answer. The US stock market isn’t being driven by the people reading this blog, its being driven by the people who don’t know any better. You might need to take a hard look at the bigger picture, when you say education shouldn’t be made available to everyone.

      • Rich v March 14, 2016, 4:27 pm

        I know you meant to write capital gains and dividends and not interest, because calling it interest would make you sound foolish. Anyway, the stock market is not “free money”. It’s taking a significant risk with your own hard-earned money. As an example of that risk, investors in the stock market in 1929 watched their investments lose over 90% of their value over the next three years.
        BTW, if you want to trash the stock market, why are you on this blog? Investing is a major factor in the life of anyone who wants to retire early. It’s available to anyone, and actually benefits the lower income in ways the rich can’t take advantage of (see RB40’s post on zero federal taxes in the 10% and 15% brackets).

  • Jo March 11, 2016, 3:29 pm

    When I look at Europe it’s very clear that free education is paid by high taxes. Do I want it? Not sure. I pay for my education in the same way I pay for my house and my car but why should I pay for other people? Should I also pay for other people’s house? Or car? Or healthcare? Or food? Or clothes? One for all and all for one sounds too socialistic to my ears…
    What I really want is to to keep government away from my wallet!

  • Brian March 11, 2016, 4:12 pm

    I recall being offered a lot more money in loans than I really needed. As I remember it, the student loan form was an opt-out type that required me to cross out the loans I didn’t want to accept, with little in the way of guidance. If I’d been in more of a hurry I might have borrowed a lot more money than I really needed and possibly finished school with a lot more debt. Luckily I realized that I could get a roommate, cook my own meals, buy used books etc. and that I didn’t need to get such big loans. I wonder whether a little more education on selecting the right loans and making economical choices might not be helpful before students get on the high debt, high spending bandwagon.

    As for the transaction tax, a retiree selling stocks to fund their retirement would essentially have their WR increased by .5%, enough to add years to the time it takes to become FI. I vote no to that, if that is how it would work.

    • Brian March 11, 2016, 4:17 pm

      I see that I made a mistake. The tax would not raise the WR by. 5%. Although it would increase the amount you need to save by a factor of .5.

  • Linda March 11, 2016, 8:36 pm

    I don’t agree with “free college” at all. I went to school full time, lived at home, and worked a part-time job to make it through. Did I graduate with student loans? Yes. Did I buckle down and pay them off as fast as I could? Yes. Why should I have to pay for other people to get a college education? And it will be the middle class that pays because there is no way that Wall Street would not pass that extra cost onto us.
    And like so many other people have commented, there are ways to get free college, you just have to want it and work your butt off to get it. And that’s the way it should be.

  • David Michael March 12, 2016, 10:27 am

    OK…I’m hooked on the subject of higher education since I spent 40 years of my life in the middle of it.

    Here’s another scenario that is the opposite of a free college education in the USA. In three weeks my wife and I will travel to Venice, Italy to visit our granddaughter who is completing her degree in Madarin Chinese at the University of Venice in three years. Her minors are in business and Japanese. Last summer she had an internship with a company in Shanghai.

    Even though she is from Boulder, CO where she could attend the University of Colorado, she found that it was less expensive to attend school in Italy than in Boulder, even living at home and including the cost of airfare to Venice. As a result she is getting a worldclass education by living it and exploring different parts of Europe and Asia. At age 21, she is fluent in Spanish, Italian, French, Chinese, and Japanese. By the way…no college debt.

    So…free or not, there are an infinite number of ways to get a college degree. I suggest everyone watch the latest movie by Michael Moore, “Where to Invade Next”. It’s funny, timely, and spot on as to what’s happening in Europe as compared to the USA. And…Slovenia, which is a lovely country, has free higher education, where more than 10,000 visiting students are taking advantage of it. Donald Trump or not, life will go on and there will always be many opportunities to get a college degree.

  • Ramona March 12, 2016, 12:33 pm

    In my country (Romania) we still have a mix of free admission and paid tuition (more paid than free in the past years) and it’s getting out of control.

    Years ago (about 15) you could only get into the desired college if you took a very serious exam. It was very difficult and it wasn’t uncommon for up to 20-30 students to complete for the same “spot”. As you can guess, those who were admitted were the cream of the crop, which also meant very well prepared graduates.

    As soon as more people were able to go to college and pay for it, the education quality crumbled. Any idiot today can become a college graduate, if he/she can afford tuition. The problem is that, after getting generations of crappy students, the teachers have also ‘diluted’ their teaching and expectations to accommodate these badly prepared students and college education here is almost a joke.

    There are still few specialties that haven’t ditched admission exams, but the Uni officials are greedy and allowed too many students to enroll.

    So, getting back to the ‘basics’, when college was ONLY for those who studied hard isn’t such a bad idea IMO. This will mean that only the best prepared will pass and the others will find something else to do (which is better than get in 20 years of student loans and graduate a useless college, never to find a decent job afterwards)

  • MoneySheep March 12, 2016, 8:20 pm

    The government can’t give to anybody anything that the government does not first take from somebody. And when half of the people get the idea they don’t have to work for it because the other half’s going to take care of them, and when the other half get the idea it does no good to work because somebody’s going to get what I work for. That, dear friend, is about the end of any nation.

    Is it right that if you want something for free, you just vote for it?

    The best way in democracy is to vote with registered name attached. If you vote for free college, no problem, you will pay double education tax, those who vote no pay regular education tax.

    • Ken Bugaj March 12, 2016, 8:32 pm

      The end of any nation is when a nation starts spending over half of its money on unneeded military operations. I will gladly pitch in so those who are less well off then me can learn, if they are willing, and able. Sign me up for the double education tax. At least I know its going somewhere of use.

      • Rich v March 14, 2016, 3:58 pm

        Ken,
        I think you’re looking at the wrong chart. The military budget is about 50% of *discretionary* spending. But the discretionary part of the budget is only 30% of the overall budget. So the military uses roughly 15% of the total budget.

        Entitlement spending dwarfs military spending. Medicare, Health and Social Security are about $1.9 Trillion compared to the military budget of $600 Billion.

        Let’s please stop talking about increasing entitlements when we are borrowing money every day to cover things we’ve already promised.

        *** reference: https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

      • Joe March 15, 2016, 6:11 am

        Ken,
        Thanks for offering to pay double education taxes, the football and basketball coaches of your State University thank you. In Maryland the highest paid public official is the men’s basketball coach. His 2014 salary was over $2.2 million.

  • Ken Bugaj March 12, 2016, 8:27 pm

    https://media.nationalpriorities.org/uploads/discretionary_spending_pie%2C_2015_enacted.png

    Scratch the extra taxes, and pull it from the almost 600 billion in unneeded military spending. There can be an easy stop-gate for abuse. If you don’t make the grades in high-school, you have to pay. If you don’t keep the grades up in college, you have to pay. This keeps out the party kids (me, hence the military experience). You could consider placing income caps on free college, but this seems to be against the whole point of it. Anyone willing to put in the work should have the same advantages as anyone else, regardless of who your parents are.

    • No Nonsense Landlord March 14, 2016, 5:17 am

      We should be able to make other countries pay the $600B anyway. After all, we protect them.

  • Brian - Rental Mindset March 13, 2016, 12:09 pm

    They would need a way to keep costs down. That is the problem right now – student loans are guaranteed and it becomes a competition to attract students with little incentive to cut costs. They invest in new dorms, extremely nice facilities, and stadiums to get kids to go there. Colleges are like resorts these days. This would only get worse if the government directly paid the tuition!

  • yamamoto March 13, 2016, 5:02 pm

    The college tuition has doubled in 10 years. It will continue to double, because schools “invest” in fancy facilities such as gyms, pools, football stadium etc. Good luck with paying “part” of the tuition for him!
    Higher education is a good way to suck you up, just like healthcare. They will drain your retirement account …

  • No Nonsense Landlord March 13, 2016, 6:33 pm

    College is already mostly free. If you are poor there are grants. Smart or athletic, there are scholarships. The military is also there for free college.

    Better yet, have people that attend college pay 10% of their income for 10 years after they no longer attend college. Even if they pay more than they borrowed.

    The student should borrow money from the college, not a bank. After 10 years, the college forgives any remaining loan debt.

    That would eliminate over-priced colleges and put more responsibility on the college.

  • No Nonsense Landlord March 14, 2016, 5:18 am

    You can even sign yourself up. Just donate to any college of your choice.

  • Rich v March 14, 2016, 3:45 pm

    I definitely value education. I can say it’s made a big difference in how much I have earned in my 20+ years of working as a professional. A quick comment, though: people wouldn’t be talking about free education if education were reasonably priced to begin with. Back when I went to a state university tuition was reasonable. I could work (very hard, and live frugally with my parents) all summer and mostly cover the cost of school and living for 9 months. That’s not so easy today. Why have the costs been going up so drastically? A big part of it is easy access to money. It’s exactly the same thing that happened with the housing bubble. We now have an education bubble. The easy access to money is the government’s first solution to the problem. Only it isn’t exactly working. It’s driven the cost of college up and heaped a lot of debt on recent graduates. Sallie Mae is the equivalent of Fannie Mae and Freddie Mac and the latter two nearly collapsed our economy. They had noble intentions: get people into their own homes. The problem is they did it at the expense of common sense. Anyone remember the story of the strawberry picker in CA earning $14k and buying a $720K house with no money down?

    Call me what you will, but I am more fearful of government solutions to problems than hopeful.

  • middle class revolution March 15, 2016, 12:41 pm

    A lot of good points. I have to say that I’m undecided on this issue and it would depend a lot on the details of making tuition free.

    Will it be only for students who achieve a certain GPA or Test score? I think there should still be higher standards for admission to college if it’s free.

    What is the purpose of college? I personally believe we need to study history, humanities, arts, languages so that a person is a well-educated member of society. However, if it’s mainly preparation for the work world, then “useless” majors should be eliminated (or reduced).

    Should sports even play a major role in college? In Europe, I believe major sports (like soccer) are not affiliated with a college. If you’re good, you go directly to the leagues. If public education is to be free for all, I don’t think paying for sports — i.e. sports scholarships, stadium upkeep, staff, etc.. — should be part of college.

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