Is Free Community College Tuition Affordable for the U.S.?

the amateur economist
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The President, in his State of the Union Address on January 20th, 2015, is expected to announce a proposal to offer free community college tuition for students.

The proposal would cover half-time and full-time students who keep up a 2.5 grade point average, (a C-plus) as well as those who will “make steady progress toward completing a program.”  Community Colleges included in the plan will include those that offer credits toward a four-year degree (at that college or another college or university) or occupational-training programs that go on and award degrees – sometimes called Associates Degrees. The U.S. Federal Government would cover 75% of the cost of community college with the states that choose to take part, covering the remaining 25%.  If all the states joined the program, it’s estimated that the program would cover as many as nine million students.

Almost 8 million Americans now attend community colleges, of which more than 3 million attend full-time. With more funding for students from the program, the number of students could rise to the over 9 million estimated by the Administration. the amateur economist

Though the cost of the program has not been officially released, and depends on the number of participants, the states that agree to join and other factors, estimates for cost are around $34 Billion per year (for full participation by all states.) The obligation of the federal government would be about $25 Billion per year, with the states contributing the remaining $9 Billion. For each individual state, based on current student populations, state contributions could range from over $1 Billion from California to over $15 million from Wyoming. Roughly, the cost (both federal and state portions) would average to about $120 for every man, woman and child in the United States.

The question a good amateur economist should ask is, can the U.S. afford to offer free community college tuition?

Federal and State Budget Considerations

As most economists are aware – though maybe not so much the common citizens of the U.S., the U.S. government is currently running a deficit. In simple terms, the government is paying out more than it brings in and is borrowing the difference. The budget deficit for the fiscal year ended in 2014 was $483 Billion dollars, less than it was a year earlier. However, most economists, this one included, know that decreasing deficits are short-lived as entitlement programs such as social Security and Medicare/Medicaid will start rising very quickly over the next few years, increasing the deficit if all things stay as they are today (no tax increase/decrease, etc.)

Since state governments would be obligated for 25% of the cost, their fiscal health should also be considered. But since states have not been able to print their own money for some time, they must balance their budgets with tax revenues equaling spending. As to future state spending, many states are once again facing budget shortfalls for the coming year. Some states, such as Washington State, are obligated to increase spending on existing public education, either through court order or public vote.

Given the fiscal stains the federal government and state governments are currently addressing with existing obligations, it would seem that there does not appear to be adequate fiscal resources (using existing tax dollars) for the Community College proposal. However, existing priorities could be shifted, taxes could be increased and/or the federal government could increase the budget deficit by the cost of the program, should the public and legislators believe it to be worthwhile and valuable.

Education Considerations

As most Americans are aware, the state of public education in American could stand some improvement. And depending on your fiscal and social feelings and ideals, there are several ways of improving that educational system.

One of the ways of improving that system would, as the current Administration would suggest, is the proposal for free Community College education. Many students who graduate from High School do not, for various reasons, have the scholastic skills to attend a four-year college, so they need more remedial training – usually in math, reading and writing. This program would aid more students to be able to move on into four-year colleges. Additionally, the program would also aid training in more “blue-collar” type positions, where the student learns a trade for life instead of attending a four-year university. 

Though it should be noted, that these opportunities now exist under the current system. the only change would be that the cost would be lowered and/or eliminated for some students that don’t already attend Community Colleges.

So a more important question, not being widely asked is this; How many students do not attend Community Colleges that would do so under this program?  If the administrations numbers are used, then the number is somewhere around one million students, since eight million now attend, and estimates are that the program will top out at over 9 million students. 

Therefore, the government will spend $34 Billion more per year to have one million more students attend community colleges that would have otherwise not been able to attend. Is this a good use of funds? Could this goal be obtained in some other, less costly way? Or is any amount of money spent necessary if it concerns the education and future for younger generations?

So many economic questions – which will need to wait until the future!