The Economics of Free College

by Samira Salwan

The concept of free college has gained traction after it’s an endorsement from top progressive presidential candidates like Senator Elizabeth Warren and Senator Bernie Sanders.


Now that the current democratic frontrunner, Vice President Joe Biden, has also adopted the policy, it is worth analyzing the policy’s merits and shortcomings.


Is the adoption of this policy viable or is it nothing more than a pipe dream?


A college education is often seen as a necessity to succeed in an increasingly competitive labor market but for many Americans, the price of college is far beyond their means.


The average annual price of a 4-year university (private and public) is $23,091, which brings the average cost of an American university education to $92,364.



These prices are partially caused by the rapid increase in the price of tertiary education. In fact, the price of undergraduate university education has increased by 15% over the last 10 years.


For many, the price tag associated with college is far beyond their means and in these circumstances, the adoption of a ‘free college’ policy makes complete sense.


A lot of countries have already adopted free or highly subsidized university education.


In a number of European Union countries (such as France and Malta) university education is free for all European students. Besides Europe, in 2017, the Philippines also enacted a free public tertiary education policy.


But this talk of ‘free university education’ begs the obvious question, who will pay for it?


The United States government would have to foot the bill for this highly expensive program.


In order to eliminate the cost of tuition at all American universities and colleges, the government would have to pay close to $79 billion, and the burden of such a program would fall on taxpayers.


However, it should serve as a wise investment. Very few undergraduate students are able to attend university without the help of their families or loans.


This problem has festered so much so that almost 70% of university students graduate with student debt and, in total, Americans owe $1.6 trillion in student loans.


Subsidizing college education will significantly cut down on the number of students who are required to take out large loans and will reign in the prevalence of student debt.


The more compelling argument for a free public university program, however, is that $91 billion from the federal budget is already used to subsidize college attendance.


With the old policy being $12 billion dollars more than the proposed policy, it makes sense to shift some money into a tuition-free college program.


Much of the $91 billion is used for tax exemption for university fees or aid for low-income students. With the implementation of this policy, a large portion of these subsidies will not be needed anymore.


These policies can make a huge difference by providing tertiary education to the masses. A number of low-income students, who previously did not have the opportunity to go to college, will now be able to dream of a better life for themselves. A university degree has shown to increase lifetime earnings.


However, many worry about the decreased quality of education if universities become completely government subsidized. In order to reduce costs, state governments can mandate the cutting of funds at public universities.


Spending cuts have proven to be correlated to lower graduation rates, so there is a chance that the implementation of this policy may not even increase the number of college graduates.


All in all, I believe that the positive aspects of the free university far outweigh the negatives.


Fully subsidizing public tertiary schools will not only increase efficiency within the education system but will also give millions of young individuals a shot at receiving a university education.


This policy will likely be fiercely contested by politicians on the other side of the aisle. If the proposal of tuition-free public college is brought to the floor of the Congress, we can expect to see vigorous debate and a tumultuous ratification process.



References:

1) https://www.nytimes.com/2019/07/19/business/tuition-free-college.html

2) https://econfip.org/policy-brief/the-economics-of-free-college/

3) https://nces.ed.gov/fastfacts/display.asp?id=76



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Created by Yashvardhan Sharma and Amogh Narain Agarwal.