Free college on the presidential agenda
Recently pegged at around US$1.2 trillion, the burden of student debt is exacerbated by high underemployment and unemployment rates. An increasing number of graduates are said to be defaulting on their college debts.
Fired by a sympathetic press, the debt problem presents an almost irresistible populist issue for a number of announced presidential candidates. With an aura of one-upmanship each new proposal has added new perks. Space limitations constrain discussion to a very brief review of the proposals that have been offered to date.
Although not a candidate, President Barack Obama was the first, in a January address, to propose a federally sponsored programme to assure that costs at public community colleges no longer discourage the pursuit of an associate degree. His America’s College Promise would fund two years’ teaching at a community college.
In order to qualify, students would have to be enrolled at least half-time and maintain a 2.5 GPA (Grade Point Average). Further, qualifying students would need to make steady progress in their chosen majors. Eligibility would be limited to students with family-adjusted gross incomes below US$200,000. The projected 10-year US$30 billion price tag would be shared, with states responsible for a quarter of the cost and the federal government responsible for the remainder.
Following the President’s proposal, Democrat Senator Bernie Sanders, an announced candidate, proposed a more expansive legislative remedy, the “College for All Act”. It would make attendance at four-year public colleges and universities free to students. The proposed legislation would also lower interest rates on federal student loans and permit refinancing of existing debt.
A tax on Wall Street transactions, which some have called a Robin Hood Tax, would yield the needed US$300 billion dollars in funding. Federal support would cover roughly two-thirds of the cost. In return states would be required to maintain their spending levels for academic instruction and, refreshingly, “reduce ballooning costs”. Institutions would be expected to reduce their dependence on low-cost contingent faculty.
College Promise Act
More recently, a coalition of House of Representative and Senate Democrats put forward legislation to enable the Obama scheme, the America’s College Promise Act of 2015. At an initial cost of US$90 billion, it involves a bill that would underwrite community college tuition for two years.
It includes a provision that provides grants to historically black and other minority-serving institutions, both public and private, and aims to eliminate or reduce tuition for low-income students pursuing a bachelor degree. The grants would cover two years of an institution’s tuition and fees, capped at the average public four-year college in-state tuition fee.
Democrat candidate Martin O’Malley’s recent iteration takes a different approach. His stated goal is to lower tuition costs to no more than 10% of a state’s median income at four-year public universities and no more than 5% of median income at two-year public institutions.
The proposal would restore federal funding levels to states, refinance existing student loans and tie minimum repayment to the state’s average income. Finally, O’Malley would cap public institution tuition rates, increase Pell Grants and expand Work Study programmes.
Jim Webb, who recently announced that he would be joining the race for the Democratic nomination for president, took a different path. He says he would address the student loan debt issue and emphasise adult education. As president he would explore public service as a means to writing off a student loan.
Only after the bulk of the other aspiring Democratic candidates had offered their tuition relief schemes did the frontrunner, Hillary Clinton, offer her proposal entitled the New College Compact. The projected cost of US$350 billion over 10 years will be funded by a tax code change. It would enable students to earn their degrees at public institutions without the need to draw loans to pay for their tuition. One appealing requirement is that institutions would have to control their expenses.
While not a candidate, Senator Elizabeth Warren suggested an alternative remedy in a recent address to a national labour group. Rather than focusing primarily on what students must pay, she also aimed at institutional accountability in exchange for restoring and increasing federal institutional funding. Warren wants a new federal programme that would provide funds to states that make some public higher education options so inexpensive that borrowing would not be required.
In spite of their populist appeal, the differences among the proposals may well prevent consensus after the long election cycle. These campaign proposals should have already attracted quite a bit of opposition from key stakeholders. With no or at least much lower tuition fees at public institutions, the student loan industry will stand to lose a major segment of its market.
Private and non-minority servicing institutions are likely to lobby for access to any evolving programme in the name of fairness. As more exceptions are included, the cost to taxpayers will draw at least expressions of opposition.
The prospect of these promised funds carries the prospect of additional government regulation. Many state and academic leaders may be wary of any funding programme that goes beyond the traditional constraints and influence tied to federal support. I suspect that there are many of these stakeholders who will not be too sad when the election campaigns and the populist ideas fade from memory.
Finally, Republican 2016 candidates and the current majority party have been largely silent on relief for college costs. Their silence should be no surprise with the party’s core distaste for giveaway programmes, budget growth and government expansion.
In spite of its populist appeal, free tuition has a long and uncertain path ahead. In the interval US institutions should pay more attention to planning for their financial sustainability without continued overdependence on student fees.
William Patrick Leonard is a professor at SolBridge International School of Business, Daejeon, Republic of Korea.