Free tuition - welfare for the upper middle class.
October 30, 2021.
Democrat politicians, as such, like to portray political patronage as progressive policy. A prime example is the ambitious "College for All" plan advocated by Bernie and slightly modified by Hillary in 2016. The headline promise was free tuition for all, not only at community colleges, but at public 4-year institutions as well. Even the richest students would qualify under Bernie's plan. Hillary was slightly less cavalier with taxpayers' money: qualification would end at the 80th percentile of the income distribution.
The problem is that only a tiny aspect of the plan was genuinely progressive. It was was drowned out by huge dollop of expensive political pandering.
1. The Tiny Progressive Dollop That Never Made the News.
The progressive aim of "Collage for All" is to equalize economic opportunity by ensuring that college is affordable to lower income families.
This can be done most efficiently by dispensing Federal aid in proportion to need; which is exactly how the current system of Pell Grants works. Need-based Pell Grants are efficient because taxpayer money is not wasted on students who are wealthy enough to complete a BA degree on their own resources. Therefore, Bernie's plan maintains the Pell Grant program, but with a proviso that the money can be used for non-tuition expenses, such as room and board.
2. The Headline Dollop of Giveaways that Reinforce Economic Inequality.
The Pell Grant upgrade was eclipsed by the blockbuster promise to make tuition free for all students (revised later to exclude the wealthiest 20%). Bernie's problem with Pell Grants was that they didn't reward all the non-poor college students whose enthusiastic support made him a political contender. And Hillary eventually embraced free-tuition because she was desperate to inherit Bernie's base of young voters. In other words, free tuition is nothing more than good old political patronage.
The shame is that these two self proclaimed progressives sponsored a policy that isn't. Unlike Pell Grants, free tuition is a welfare program for the upper middle class, and therefore exacerbates inequality. Here's why.
Grants, both need based and merit based, reduce the net tuition that students actually pay. At 4-year public colleges in 2016, Pell Grants slashed the net tuition paid by the poorest students to just $2400. By contrast, students at the 75th percentile of family income, too wealthy to qualify for any need-based aid, paid close to $10,000. So, by making tuition free, the well-off student gains $10,000, but the poor kid only $2400. That's a 4 to 1 advantage for the well-off.
But wait; it gets worse. Most low income students start out at community colleges which are renown for low sticker prices. Therefore, Pell Grants and other aid reduce their net-tuition to about $200. On the other hand, wealthier students are slightly overrepresented at flagship universities where sticker prices are higher than the average public 4-year college. So free-tuition would enable the wealthy flagship student to save even more than $10,000. This correlation between students' income and where they enroll means that free tuition favors the upper-middle class by a greater than 4 to 1 advantage (10,000/200 = 50)
This advantage can be analyzed from a different angle. As an investment, a BA degree pays-off big time in terms of higher future earnings. The average return on investment (ROI) is about 13%, a figure Warren Buffet would be proud of. Eliminating tuition would significantly increase the ROI for wealthier students, but very little for students who depend on Pell grants. So, the Bernie-Hillary plan actually exacerbates economic inequality. How progressive is that?
Finally, since "College for All" requires matching contributions from the states, free-tuition would be partly financed with highly regressive excise and sales taxes. Furthermore, the median income of the states' taxpayers is below that of the students they would be subsidizing. Adding-in the correlation between students' income and the institutional level in which they enroll leads to this conclusion: at the state level, free tuition could result in a net transfer of income from poor to rich. How progressive is that?
Again, the simplest and most efficient way to equalize economic opportunity is to give low income students more generous Pell grants and extend their use to non-tuition expenses.
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