Going to College (Part 2): Free College for All

Today I’d like to discuss two topics as we continue our discussion on Going to College. Previously, we examined the level of degree and identified how to evaluate its effectiveness using income as a unit of measure. However, there is more information needed to determine the value of a degree, we also need to use a more granular approach to evaluating costs. Additionally, we are going to look at recent college tuition policy proposals with a bird’s eye view.

First, once you have chosen a degree path it is important to understand the real wages. I remember a couple years back on an NPR report where someone graduated with a journalism degree from USC and was explaining how overwhelmed they were with their $100,000+ in unpaid student loans. The report was at least a year after graduation, and they had been working as a journalist ever since.

To begin with, this situation alone could have been solved with an economist’s perspective, so let’s dive in. Being that this person went to school at USC, let’s assume they continue working in California as a journalist. According to the Bureau of Labor Statistics (BLS) the average income is $67,820 [1]. This is above the federal average income of $55,530 for the same position. So far this looks good, it’s a descent income, and California is above the national average.

However, when choosing a field of study, it is important to understand you don’t start out making the average income on year one, it could be five years or more to make these wages. As such, it is important to ask yourself, “what are my goals in 5 years, and is this wage going to be enough at that time?” For example, if you plan on having children and being a sole bread winner, this might not be the level of income needed for a California resident, at least not near USC.

Second, we need to choose our school wisely. Choosing USC and paying over $50,000 a year in tuition is fine if your intentional career will likely net you $200k+ a year relatively quickly after graduation. However, with journalism topping out below $100k on average amongst all states, it isn’t likely the best option [1]. I guess what I am saying here is, if you are going to go to an upper level school, make sure you are going to earn upper level wages. If you still insist on this school knowing you won’t likely earn a high income, you must be accepting of your debts.

This again comes to opportunity costs. USC is a great school, but is it worth this amount of debt when compared to the likely income? What was the next alternative choice? Perhaps the second-best choice could have helped this person balance their need to graduate from a prestigious school while still majoring in journalism.

https://www.bls.gov/oes/current/oes273022.html

This report came at a pretty pivotal point in the congressional push for free college tuition. Many presidential candidates began influencing voters with statements that encourage less college debt, or at least a manageable debt. However, to understand these policy proposals we need to dive into their costs and effects.

First, let’s look at some facts at what some presidential candidates have/are pushing towards this program.

  • Some advocate it won’t raise federal income tax as it will be funded by Wall Street investments [2].
  • The fed will be responsible for 67% of the tuition, while states cover the remaining 33%. [2]
  • Paid for by limiting certain tax expenditures for high-income taxpayers [3]
  • Possibly free community college [3]
  • Interest rates being cut in half, and ensured they never increase above 8.25% [2]
  • Simplified student aid process that removes the yearly application process [2]
  • Increased opportunities in the student work study programs [2]
  • Increased current loan forgiveness for entrepreneurs [3]

These are all positive requests and it hits most key sticking points for the average person in the middle class. Basically, we apparently don’t have to pay the tuition rates due to a rise in taxes, we also benefit from reduced student loans, or possibly no tuition costs at all.

However, let’s look at the economics side of free education using a standard supply and demand model; Will free tuition flood our country with degree seeking students to the level that we cannot supply from a public/state university? Also, what is the recovery strategy if the intentional plan doesn’t actually cover the costs of tuition? Meaning, if the demand for college increases then the costs (tuition) will surely increase. However, to keep tuition costs down the states could supply more education, but if they decide to “supply” more college, then operating costs increase. As such, so how will the fed and/or states cover these increased expenses beyond their current plan? This is to say, the plan to cover college tuition is based upon current levels of attendance, but if the demand for college rises there will be an added level of expense for buildings, maintenance, faculty, and administration. Currently, we don’t know if any of the proposed plans have taken these expenses into consideration, nor do we know if their statistical estimates have calculated for an increased demand for college. Thus, the reality might be that the government does eventually tax other income brackets to help fund these tuition costs.

In the end, if we agree to vote for “free college” we are saying we trust the plan to cover all costs from tuition to building maintenance. We are also believing that this is the best approach given our alternatives to relieving college debts.

To aide in this topic, I’d like to throw out some personal ideas to think about. In my last post we found that a Bachelor’s degree accounts for 40% of a wage increase, whereas an Associate’s degree is only 8% over a high school graduate. As such, why would we offer free college for all 4 years? Wouldn’t it make sense to push the students to have some skin in the game? We could do this by letting them pay for their first two years of college and earn an Associate’s degree first, then offer free college as they transfer to a university for their Bachelor’s.

This would mean focusing the student loan ideas on the first two years of education, and influence students to go to their local Jr. College. Doing so would allow them to explore different subjects at much lower costs, while pushing them to make a decision quicker to reduce their loan debt. Basically, we can’t just “give them everything at once,” people should take responsibility for their future before the government/society invests in it.

[1] Bls.gov. (2019). Reporters and Correspondents. [online] Available at: https://www.bls.gov/oes/current/oes273022.htm [Accessed 28 May 2019].

[2]“College for All Act Introduced.” Sen. Bernie Sanders, 3 Apr. 2017, www.sanders.senate.gov/newsroom/press-releases/college-for-all-act-introduced.

[3] The Office of Hillary Rodham Clinton. (2019). Making college debt-free and taking on student debt – The Office of Hillary Rodham Clinton. Available at: https://www.hillaryclinton.com/issues/college/ [Accessed 28 May 2019].

2 thoughts on “Going to College (Part 2): Free College for All

Add yours

  1. It may be worthwhile to consider that in California, Community College tuition is already heavily subsidized. For CA residents, tuition is $46/unit, plus fees (total) of $19. Non-residents pay a surcharge in excess of $250/unit! By contrast, Community Colleges in Nevada charge as much as $168 per credit (plus fees) for residents, and nearly 3x that amount for non-residents. Is it worthwhile to discount tuition in order to build career and technical skills in a state’s workforce?
    https://www.csn.edu/tuition-fees

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    1. I remember when I went back to school to a California Community College and I received a grant for tuition, all I had to pay for was books. True, I did have 2 children and so perhaps I fell into a specific age/income bracket that allowed this to happen. However, I do believe that more students should start with Community College, then transfer to a 4 year Public/State University. This route would be the cheapest option, and there is no shame in getting an AA first. In my opinion, someone with an AA from IVC, then a BA from UCLA is just as hireable as someone who went straight to UCLA.

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