The Price of Free College: How Excelsior Pushes Education Costs Ever Upward

It’s understandable why many people get enthusiastic over the idea of free college. In New York state, college students in 2016 graduated with an average $30,346 of loan debt, so undoubtedly the opportunity to avoid paying tuition out of pocket sounds like an attractive plan. But is “free” college, like the New York Excelsior Scholarship, really what it claims to be?

The Excelsior Scholarship is the state-wide program Governor Cuomo recently established, which offers families who earn up to $125,000 per year free tuition for any CUNY or SUNY two- or four-year program. To be eligible, a student must take 30 credits per year, and then stay in New York state after graduation for as many years as he or she took advantage of the program. The scholarship converts into a student loan if the student fails a class or moves out of New York before the required in-state residency time is up. The scholarship is only for tuition, so it does not cover the cost of books, housing, fees, etc. This program is a bad idea for a number of reasons.

Bribing Students Increases Corruption

As Larry Sharpe explained in an interview on Live It Up with Donna Drake, Cuomo is essentially bribing people to stay in New York after graduation. Indeed, Governor Cuomo himself said the concept of the program “is that you’re going to stay here and be an asset to the state,” but if “you don’t stay here, then go to California and let them pay for your college education.” Cuomo looks at students as sources of tax revenue he needs to bribe into staying in state, not as individual humans with their own dreams and aspirations and families to feed.

The Excelsior Scholarship will trap people in state even if they can’t find a job after graduating. And it will also force people who are offered a great opportunity out of state into either foregoing the opportunity or being suddenly saddled with an incredible amount of debt they didn’t expect to have to pay back when they signed up—all so Cuomo can use them for their tax dollars. Worse, Excelsior incentivizes graduates to lie about living in New York on paper to avoid the pitfalls that are built into the system, adding yet another layer of corruption to a government program.

Free Bad College is Still Bad College

As Larry has said, free bad college is still bad college, if nothing is being done to address quality. The offer of free tuition will increase class sizes, which almost always decreases quality. Spending money to give individuals a poor education that does not prepare them to enter the workforce is a waste of taxpayer money.

Schools need to have skin in the game in order to have incentive to do better. By innovating and building better educational programs, universities can court students and earn the tuition dollars that students choose to spend. Giving colleges a guaranteed income in the form of millions of taxpayer dollars only rewards underperforming schools and makes them complacent. Just like in life, money doesn’t solve all problems. Yes, schools need funds to operate, but throwing money at the problem is never a good solution.

Target Students Aren’t Reaping the Benefits

On the surface, it seems like the Excelsior program benefits the poorest students who would otherwise be unable to attend school. But the scholarship doesn’t really help the people it’s claiming to. It might be a good deal for the middle- and upper middle-class students who can afford the other costs needed for school without also working a lot, but it doesn’t benefit the lower-class students who still need to work full-time (or close to) to afford housing, books, and other fees. Moreover, if a busy poor student juggling work and school slips and gets an F, the student must pay back the scholarship as a loan.

Known as the “last dollar program,” the scholarship only applies after Pell grants and other financial aid options have been exhausted. Most students who qualify for those other programs need the money for books, housing, and other expenses. But because Excelsior only applies after those other grants, the poorest students get the least amount of money.

We see this in other states that offer free 2-year community college. In Oregon, middle-class students are receiving most of the money— about 60% of the total Oregon Promise budget— because they’re ineligible for Pell grants and financial aid. So oftentimes, students who could afford tuition on their own get free college at the taxpayers’ expense. This defeats the purpose of the program—middle- and upper-class students can already go to college regardless of whether it is “free,” and the economically disadvantaged students aren’t getting the help these programs claim to provide.

Excelsior Economics Belie the “Free” Claim

We all know that “free” college isn’t really free. The taxpayers foot the bill, and since we can’t expect current state leaders to cut spending elsewhere, tax increases are inevitable. Not only that, but these free college promises that are being pushed throughout the nation are far from economically sound.

NPR asked 22 economists about Bernie Sanders’ free-college-for-all proposal, and 20 of the 22 called it a bad idea because it is wasteful to spend money on students who can already afford tuition. Sanders’ plan is a bit different than the Excelsior Scholarship, but similarly, the benefits go to people who aren’t truly in need of the funds.

Let’s look at basic economics: if a service is free, the demand for it goes up; when demand goes up, the cost increases. This means that free college programs are creating more demand for higher education, which is driving up the cots of tuition and fees. So those who don’t qualify for the program end up paying more. We already see this pattern of rising educational costs reflected in the enormous number of student loans.

In addition, offering free college also makes the education market imbalanced. It is incredibly difficult for private schools to compete with “free.” Once private schools start losing students, thus losing tuition payments, they will begin to disappear from the market, which hurts the diversity of education and lessens choices for future students. The wide range of different schools is extremely important in a state as diverse as New York.

Free College Devalues Degrees

If tuition is free, it will no doubt attract more students to apply for college. Morley Winograd, an advocate for free college programs like Excelsior, told NPR that these programs have the power to get more students to apply for college, regardless of whether the free college programs are able to deliver on their promises.

But flooding the college system will only devalue the college degree, like we see with high school diplomas. In his 2015 State of the Union address, President Obama said, “I want to spread that idea . . . that two years of college becomes as free and universal in America as high school is today.” We all agree that college should be more affordable, but devaluing the degree the same way free high school devalues the high school diploma won’t necessarily help graduates get into the workforce.

To learn more about innovation in New York education, check out this past blog post and Larry’s video here.

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