Acton Institute Powerblog

Making community college free has hidden costs

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The taxpayer-funded, one-size-fits-all approach of tuition-free community college distorts tradeoffs, inflates credentials, is dismissive of individual uniqueness and imposes a dubious pathway to improving lifetime earnings and vocational outcomes. […]

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Education is the great equalizer. And a college education is one of the greatest ways to sharpen our unique gifts and talents before entering the workforce. President Joe Biden has proposed offering two years of free community college for any American, but here’s the problem: Making community college “free” guarantees more associates degrees — but it almost certainly won’t translate to a more equitable, high-achieving society.

If the goal of government-provided college tuition is to simply increase the awarding of community college diplomas, then yes, making it free will surely accomplish that goal. But if the goal is to increase earnings potential, the evidence accumulated is mixed at best. Yes, average lifetime earnings increase the more education one obtains, but providing tuition free college may not yield the same result.

For example, recent research from the Upjohn Institute found that increases in educational attainment arising from the privately funded Kalamazoo Promise, which pays for eligible students to attend public college after graduation, “do not appear to translate into clearly improved employment and earnings.” Indeed, many factors determine employment and lifetime earnings; attaining a community college diploma is no guarantee of enhanced employment and wages.

Tuition-free community college may even harm long-run earnings for some individuals. To see why, consider what taxpayer-subsidization does: It changes relative prices and thereby obscures the underlying tradeoffs people face when making educational choices. Imagine a high school senior who chooses to attend a four-year university over a less expensive (but not tuition free) community college on the rationale that the long-run return is worth the investment.

Now make community college tuition free. This price change may induce the student to choose community college, invest less in her education and harm her long-run earnings. Indeed, a 2019 study found evidence of this very substitution effect as did a more recent analysis published this year. Do we really want to risk steering students into suboptimal choices by making community college tuition free?

What about other apparent goals, such as using tuition-free college as a means of addressing inequality? Well, “tuition free” is certainly more affordable and can increase educational access for low-income individuals. But reducing inequality? Not so fast.

As researchers Wesley Whistle and Tamara Hiler point out, “Contrary to their reputation as ‘progressive,’ free college programs overwhelmingly allocate taxpayer dollars toward upper- and upper-middle-class students, giving them a further head start than they already have in the higher education system.”

Advocates who want to make college more affordable for low-income individuals would do well to reconsider the universal nature of Biden’s proposal. There are more targeted approaches to helping people develop their potential. Each person is unique, with particular circumstances that should be addressed accordingly, not through a taxpayer-funded, generalized blueprint. “Free college for all” may be a catchy slogan, but it doesn’t take individual uniqueness seriously.

The incongruities between socioeconomic goals and the means of achieving them are alone sufficient to raise serious doubts about tuition-free community college. But there is another problem: credential inflation. Completing a college education undoubtedly increases a person’s human capital. But economists have also long acknowledged education’s signaling function: It sends a message to employers about a potential employee’s characteristics and abilities.

Awarding thousands of additional community college diplomas annually would obscure this signaling function, particularly among those not obtaining vocational skills in various trades, and leave them with little competitive advantage to command higher wages in the marketplace. In other words, the program risks diluting the value of a community college diploma.

Finally, it makes no sense to approach community college at the federal level. States already subsidize college education, and several of them provide tuition-free community college. As Third Way’s David Feldman and Christopher Marsicano show, imposing such a program at the federal level will create winners and losers among the states and undoubtedly trigger a substitution effect for state level college investment.

Perhaps more importantly, in an era where the federal government has little compunction about running budget deficits by the trillions of dollars, and recently canceled billions of dollars of student loan debt (evidently recognizing it as a bad investment), it makes no sense to spend an additional $109 billion on tuition-free community college.

Facilitating each person’s ability to make use of their gifts and talents is a good thing, as is investing in human capital. But the form such investment should take is unique to each individual. The taxpayer-funded, one-size-fits-all approach of tuition-free community college distorts tradeoffs, inflates credentials, is dismissive of individual uniqueness and imposes a dubious pathway to improving lifetime earnings and vocational outcomes.

This article originally appeared on The Detroit News on Aug. 4, 2021

Stephen Barrows

Stephen Barrows is Managing Director of Programs at the Acton Institute.