Why Bernie Sanders’s Free College Plan Doesn’t Make Sense

We weigh in on the contentious issue of free in-state tuition in the Washington Post’s higher education blog:

https://www.washingtonpost.com/news/grade-point/wp/2016/04/22/why-bernie-sanderss-free-college-plan-doesnt-make-sense/

 

 

 

Tuition-free public education is music to the ears of families who see state university sticker prices continually rising more rapidly than their income. Presidential candidate Sen. Bernie Sanders (Vt.) has tapped that sentiment with his proposal to use federal funds to make public college education free for in-state students.

His Senate bill 1373 makes for great sound bites on the campaign trail, but there are good reasons why none of his Senate colleagues have offered any support.

The political obstacles to rewriting the federal role in funding state-supported universities are formidable, and the social case for preferring public institutions to private nonprofit schools is not at all clear.

Sanders proposes using federal tax revenues to pay two-thirds of the current in-state tuition if the state will contribute the other third from increased state appropriations. A quick look at current in-state tuition across the United States shows why this part of the revolution is unlikely to win congressional approval.

In 2013-14, the average level of in-state tuition at the nation’s four-year public universities was $8,312. Some states have much higher average tuition because their higher education appropriation per student is low. Families in these high-tuition states stand to receive a benefit that is much larger than average while families in other states will see a much smaller benefit. In Vermont, the average tuition payer would get a $14,000 break. By contrast, a family in North Carolina only gets a $6,500 benefit.

Vermont is a net winner since the per-student benefit far exceeds Vermont’s per-student share of the national tax base needed to fund the program. North Carolina, by contrast, gets a benefit that is less than its per-student share of the cost.

To see which states are net winners per student and which are net losers, we subtract the average in-state tuition for the United States as a whole from each state’s average in-state tuition.

Vermont is indeed one of the big winners. The tuition break for in-state students is $5,640 larger than average, and two-thirds of that number ($3,760) is a net gain in federal revenue per in-state student enrolled in Vermont.

In North Carolina, by contrast, the difference is – $1,734.

On a per-student basis, states like Wyoming, New York and North Carolina would see part of their share of the national tax base go to pay the tuition for students in Vermont, Massachusetts and California.

Members of Congress from the losing states will not be amused.

The states that are big net winners at the start of the program are, in many cases, those that currently underfund higher education. The net losers are often states that currently do invest in higher education. In a sense, the Sanders policy rewards bad behavior at the state level.

Since states must contribute one-third of the revenue needed to make tuition disappear, all will have to prioritize higher education more than they currently do. This will require tax increases, or it will force states to move existing resources into higher education and away from other state priorities like health care, prisons, roads and K-12 education. Many states may be unwilling to do either of these, so a higher education makeover along the lines of what Sanders proposes will die a quick death in many state capitols.

The states that are the biggest net winners are the ones that will have to dig deepest into their own tax base to pump up higher education spending. Yet they are also the states that have historically chosen not to do this. Sanders’s proposal is an attempt to change state budget priorities, but the magnitude of the budget adjustment may induce many of these “winner” states to oppose the idea as well.
Net Winners and Losers

Net Winners and Losers

 
No state is required to participate, but that is unlikely to mute opposition to the idea in Congress. A state that opts out still sees its share of the federal revenue base redirected toward other states.

Existing federal aid like the Pell grant and Stafford loan programs are directed at individual students who are free to choose their path through the higher education system. The money follows them to large universities or small colleges, to public institutions or to private ones, to historically black colleges and universities or to colleges with a religious tradition.

The Sanders proposal leaves out roughly half of the nation’s colleges and universities while adding a complex new set of federal rules for micromanaging the affairs of states and universities alike.

There are simpler and less costly ways to improve affordability while preserving the virtues of the current student-centered system. Expanding the need-based Pell program would put more resources directly into the hands of students who need it the most. By contrast, cutting list-price tuition at public universities is an untargeted policy that benefits the well-to-do and the poor alike.

Some fear that putting more resources in the hands of students will encourage growth in the for-profit sector that siphons off a disproportionate fraction of federal student aid while offering little educational benefit in return. This is indeed a problem, but it’s one that can be handled by changing a single rule. At present, to participate in federal aid programs an institution must generate at least 10 percent of its revenues from students. At most 90 percent of a school’s revenues can come from government subsidy. This 90/10 rule could be tightened to eliminate the bulk of the worst offenders.

There is no compelling case for massively rewriting the way the federal government subsidizes higher education, and the political chances of a Sanders-style proposal moving through even a Democratic-controlled Congress are very low.