Bernie 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