The Real Cost of Free College Tuition

With election season kicking into high gear, the cost of college tuition has become a hot button issue in American politics. Plans for heavily subsidized college tuition have been presented by multiple candidates, making this issue an ever increasing part of the mainstream conversation. At his State of the Union address earlier this year, President Obama advocated for free community college, while more recently Hillary Clinton presented her “no loan” student debt plan.

The increase in dialogue surrounding tuition costs is unsurprising, considering the seemingly interminable rise in college tuition since the mid 1980s. To put the numbers in perspective, a tuition of $10,000 in 1986, adjusted for inflation, would now cost the same student around $21,500. Instead, private education today costs an average of $59,800, or over 2.5 times the inflation rate. These tuition increases are not only obscene, but also unsustainable. How much more debt can a graduating senior reasonably incur?

The most extreme of the subsidy plans is Bernie Sanders’ free public college tuition plan. Unlike most progressives who have only recently started supporting the concept, Sanders has unwaveringly advocated for free college since his days in the House of Representatives. Considering Sanders has gained substantial traction in the polls, and is slowly emerging as a realistic contender in the Democratic Party, it’s time his plan is put under the same scrutiny reserved for “serious candidates.” Free college tuition not only sounds nice, but also resonates well with the general population. What individual can’t sympathize with a struggling graduate, working long hours to make ends meet, while simultaneously paying off thousands in student loans? Further, increasing the education level of the average citizen certainly does sound like a worthwhile endeavor. Unfortunately, the idealized concept of “free tuition” is not only taxing on society, but also decisively not free.

To quote a popular adage, “there ain’t no such thing as a free lunch.” Anytime the government offers something for “free,” taxpayers ultimately pay for it. This is an important concept that is oftentimes lost in the mix of progressive rhetoric. That’s not to say that taxation can’t ever be justified to ease economic burden. Rather, we must remember that federal funds come from working Americans and, therefore, will have an effect on the lives of those taxed, as well as society as a whole.

Yet taxation alone isn’t the core issue with the concept of “free education.” Rather, it’s the societal impact that comes as a result of students losing their own financial stake in their education. Students who pay for colleges certainly have a stake in their education. Due to the price of higher education, students would be remiss to float through college and slack off, lest they not receive a return on their investments. Even families who pay for their children’s education are incentivized to monitor their children’s performance and hold them accountable. Making students and families less sensitive to costs in turn makes parents less invested in their child’s education, and less likely to hold him or her accountable for poor performance. Free tuition essentially breeds indifference to a service families aren’t paying for. Without some modicum of a financial stake in one’s education, there is less incentive to be invested in one’s studies and work hard.

What about those who drop out of college? With no personal funds invested in education, students become significantly more likely to drop out after a few semesters. While there may be some tangible societal benefits to having a more educated workforce, few would argue that a student who dropped out after consuming several years’ worth of federally subsidized education aids society in any meaningful way. With regards to employment prospects, dropouts leave college as they entered: degreeless. However, under Sanders’ plan, they would leave society with an added burden of increased debt. Considering the low graduation rates at many four-year universities, free college tuition could serve to heavily tax society while showing little benefit. Shockingly, according to a study by The Education Trust, a non-profit based in D.C., just less than 40 percent of college students complete four-year degrees on time. The news is even worse for public colleges. Complete College America, another nonprofit group based in Indianapolis, finds that just 19 percent of full-time students at public universities earn a bachelor’s degree in four years. Worst of all, a mere 50 of more than 580 public four-year institutions graduate a majority of their full-time students on time— that’s only 8.6 percent. As a result of these low graduation rates, a free college tuition initiative could leave the U.S. with billions in wasted taxpayer dollars.

Another crucial issue with Sanders’ tuition plan is the potential overcrowding of colleges. College education, like commerce in general, is based on the allocation of scarce resources. However, without the price of tuition as a means to regulate college education, students would flood the system. Not everyone is qualified for, or should attend, college. Free tuition would encourage many more students to attend college, irrespective of their aspirations or interests. For one, the policy would certainly lead to overcrowding of public universities, and by extension the degradation of the quality of education offered. Paying students, who are deeply invested in their studies, may be placed into overcrowded classes—or worse, get locked out of them. Whatever the result, free tuition would lead to limited capacity at public universities, and in turn, lower-quality public education.

Finally, free or subsidized college tuition could lead to the paradoxical problem of a potentially overeducated yet under-qualified workforce. In accordance with the basic principles of supply and demand, a system in which almost everyone has a degree would certainly cheapen the value of one. Just as society today puts little value on high school diplomas due to their abundance in the workforce, the same is destined to happen to a society that gives out college degrees for free. Ultimately, this will only serve to drive more students to grad school, an education level unattainable without the means to pay for it. This leaves the vast majority of the middle class with a degree worth a lot less than it was prior to the implementation of the policy.

Sanders often holds up Germany as having the ideal free college tuition program. However. Germany faces many of the issues outlined above. According to the OECD, or the Organization for Economic Co-operation and Development, only 31 percent of Germans who attend college actually graduate. Moreover, very few of those who graduate do so on time. As a result of free education, many students take up to six years to graduate from a three-year program. The situation is so dire that colleges in Germany have become known for their “dauerstudenten,” or “eternal students.” Even if Sander’s plan removed the four-year graduation requirement in an effort to combat low four-year graduation rates, it seems that a system where students overstay their welcome by multiple years would be inevitable. Moreover, as referenced above, nothing free is actually free, and no place is this more apparent than the German tax system. While education may come at no immediate cost to the student, society as a whole pays the costs through the increased tax burden. In part due to its education system, Germany has the second highest income tax burden of all of the OECD’s 34 countries. Though Sanders puts Germany’s education system on a pedestal, it’s clear that these subsidies have come with an assortment of drawbacks.

If further subsidizing education is not the solution, what is? Surprisingly, the answer given in a recent report issued by the Federal Reserve Bank of New York is to end government backed student loans, which have risen over 160 percent in the last decade. According to this report, private colleges raise their tuition 65 cents for every dollar increase in federal subsidized loans. As a result, the Fed’s report concluded that federal loans have resulted in little increase in enrollment. The federal loans program effectively has a pass-through effect, whereby the money comes from taxpayers, passes through the student, and ends up in the pockets of universities. Colleges can continue to raise tuition without the consequence of lower enrollment. Recent increases in federal loans have effectively created an “arms race” among universities to attract potential students. Universities continue to invest in new infrastructure, not because schools need it, but rather because it attracts students. Essentially, the federal government is facilitating universities competing against each other to offer the best amenities. Without federally backed loans, colleges would quickly realize that they are unable to attract many students at exorbitant prices hovering around $60,000. As a result, colleges would be forced to substantially lower tuition to attract middle class students.

While Sanders’ plan has a variety of holes, he has been successful at bringing the issue of ever-increasing college tuition to the national stage. As universities continue to add tuition increases of over a thousand dollars each year, something has to be done to ease the burden of education costs. Unfortunately, when there is an issue to be fixed, society immediately jumps at the word “free” without thinking of the consequences. We must, however, realize that when we patch a hole on one side, it inevitably leads to another hole opening elsewhere. As such, the root cause of rising tuition costs must be addressed, since a patchwork solution of merely throwing more money at students will not cure the problem.