What’s Wrong with Free College?

Indulging their talent for wishcasting, Democrats are caught up in a Fever of Free Stuff: free health care, free universal day care, and free college for starters. Somehow they have convinced themselves that these are political winners despite the cost, complexity, and avalanche of unintended consequences they would trigger.

But reality has a way of intruding. Already, there are warnings that “free” health care for all would be a shambolic mess. A new report from the Congressional Budget Office warns that “[t]he transition toward a single-payer system could be complicated, challenging, and potentially disruptive.” Well, who knew?

Which brings us to the other big giveaway: free college. Elizabeth Warren calls her plan for universal free public college and the cancellation of student debt “truly transformational.”  And it certainly would be, but perhaps not in the ways that Massachusetts senator wants to believe.

Warren proposes wiping out up to $50,000 of student debt for anyone in a household making less than $100,000. Her debt relief would phase out above that income limit, disappearing altogether for families making more than $250,000. If that’s not enough free stuff for you, she also proposes free college tuition at public universities.

What’s not to like?

Let’s start with the cost, the problems of equity, its lack of progressiveness, and the fact that her plan would probably worsen the underlying problems of cost and quality that Warren thinks she is addressing.

Warren’s debt/tuition giveaway would (1) shift trillions of dollars of costs onto taxpayers, many of whom have not had the benefit of a college education themselves, (2) encourage more students to make poor educational choices, (3) inevitably drive higher education spending and tuition even higher, since colleges will have even less incentive to restrain their appetite for ever-higher spending and (4) protect the higher education industry from having to reform itself.

Warren says that the free tuition alone would cost $1.25 trillion over the next decade, but that probably low-balls the real cost. Her debt gift could also cost nearly $1 trillion. She proposes to pay for all of this with her “wealth tax,” but she’s also promised to use that to pay for universal child care and lots of other stuff she is also proposing. (We’ll leave alone for the moment the fact that the wealth tax may be unconstitutional and would certainly be almost impossible to implement.)

There is also the problem of progressivity.

As the Washington Post’s Catherine Rampell notes, free tuition and debt forgiveness “give bigger benefits to higher-income families than to lower-income ones that actually need the help. Which raises questions not only about fairness but also about wasted dollars.” The proposal to offer free tuition, she notes “would be a big giveaway to high-income families who plan to send their kids to college anyway and don’t need to be comped. Free college means it’s free for Bill Gates’s kids, too, after all.”

A Brookings Institution study confirms that Warren’s idea is “regressive, expensive, and full of uncertainties.” Their analysis found that the “bottom 20 percent of borrowers by income get only 4 percent of the savings. Borrowers with advanced degrees represent 27 percent of borrowers, but would claim 37 percent of the annual benefit.”

Unfortunately, this is not the worst of it. Warren’s plan would also make a mess of attempts to get a handle on the real problems in higher education.  I’ve written about this before, but perhaps it is time to revisit the whole problem of the Higher-Educational-Industrial Complex.*

Here’s the reality:

Despite the political rhetoric about “college for all,” or proposals for “free college,” the reality is that too many students are already going to college.

• Too many students spent too much time there.
• Too many spend too much money there.
• Too many go to the wrong college to study the wrong things.
• Too many are graduating with costly, but worthless degrees.
• Too many drop out without ever getting a degree.
• The result is that far too many pay too much for too little.
• “Free college” doesn’t fix that.  And if history is any guide, the bailout will actually make things even worse.

More than a quarter century ago, then Secretary of Education William Bennett promulgated what became known as the “Bennett Hypothesis.”

In a 1987 op-ed piece provocatively headlined, “Our Greedy Colleges,” Bennett noted that colleges “are at it again.” Schools were once again planning to raise tuition three to four times faster than the rate of inflation. And, as they did so, some of the luminaries of the academy blamed it on “continuing cutbacks of government support for student aid.” This claim, Bennett wrote bluntly, “flies in the face of the facts.” He noted that since 1980 federal spending outlays for student aid had risen 57 percent – even though inflation had risen only 26 percent.

“If anything,” Bennett wrote, laying out his hypothesis, “increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase.’ [Emphasis added.]  Howard Bowen, who served tenures as president of Grinnell College and the University of Iowa, essentially confirmed Bennett’s thesis when he posited what became known as Bowen’s Law:  “Each institution raises all the money it can. Each institution spends all it raises.” Research by economists Stephanie Riegg and Claudia Goldin also suggests that “institutions may indeed raise tuition to capture the maximum grant aid available.”

Where did the money go? Spending on instruction stayed flat, even as spending on administration, buildings, promotions, athletics, and non-instructional student services exploded.  Campuses have vied with one another to add amenities, including fancier dorms, recreational facilities, and student centers, while multiplying the number of administrators. Even as professors became increasingly scarce in the classroom, the number of administrators has metastasized.

It’s far from clear that all of this additional spending has improved the quality of higher education. In their study of collegiate spending, economists Robert Martin and R. Carter Hall noted that given the cumulative investment among research universities from 1987 to 2005 of more than  $500 billion, “There should be evidence of higher quality at these investment levels.” Instead, they wrote, most evidence suggests that the quality of undergraduate education has declined in recent decades: “completion rates declined, grade inflation increased, students spend less time studying, adult numeracy/literacy rates declined, and critical thinking skills did not improve.”

So what would a flood of new free money mean? In Warren’s fantasy world, colleges would be free to go about their business as usual, which would undoubtedly include a return to the Law of More: more building, more spending, and ultimately, more debt. Because none of this is really free.

*Because I feel the need to repeat myself on this subject, some of this is adapted from my book 2016 book, Fail U. The False Promise of Higher Education. I also discussed the issue of bailouts here.