Hidden costs of ‘free’ college

During her primary fight with Vermont U.S. Sen. Bernie Sanders, Hillary Clinton argued that his “free college” promise went too far. She merely advocated that students should be able to graduate “free of debt.”

Now, however, Clinton has come out with a plan to make public colleges and universities free for families who earn less than $125,000 annually.

But because the president can’t order states to comply, under her scheme the federal government would pay states for their cooperation if they charge no tuition to students from “poor” families.

Suppose a state decides to adopt Clinton’s free college plan. What would the consequences be?

First, some students who previously concluded that the cost of college (even at the already highly subsidized public institutions) was greater than the expected benefits would now decide differently and enroll. Even though most students and their families don’t attempt a precise cost-benefit analysis on going to college, if tuition suddenly were reduced to zero, that would certainly induce some to say, “Now it’s worth a try.”

That would mean at least a modest increase in enrollment, but it would come mainly from the most academically marginal students. The colleges and universities that gained in those enrollments also would find a need to increase remedial programs.

Even so, luring in more academically weak students will mean an increasing dropout rate, a metric that schools fear because it hurts their rankings. More students would be a mixed blessing.

Another adverse result from making college tuition free would be that many students would devote less effort to their courses. People have a tendency to put more of themselves — to feel more “invested” — when they have to pay for education (or any other good or service) than when they don’t.

In a 2004 study, Federal Reserve Bank of New York economist Aysegul Sahin concluded, “Low-tuition, high-subsidy policies cause an increase in the ratio of less highly-motivated students among the college graduates and that even highly-motivated ones respond to lower tuition by choosing to study less.”

Therefore, while the Clinton plan might “produce” more college graduates, it would probably reduce the overall level of learning. This is another of those cases where government action leads to visible benefits but at the expense of greater but hidden costs.

Another likely effect of the plan would be increased federal control over state university systems.

With a greatly increased inflow of federal dollars into those systems, U.S. Department of Education officials and Congress (particularly if the Democrats have control) would have more leverage than ever to dictate policy and curriculum. The prospect of losing even more control over their university systems could cause some governors to say “no thanks” to the Clinton proposal.

Finally, how would this plan affect private colleges?

Many small schools already find it hard to stay afloat and if some students who might have enrolled in them instead decide that attending a state university free of tuition is a better deal, those schools will be in much greater peril. Then we’d probably get another federal program to help save endangered private colleges.

Clinton also has released a new loan forgiveness idea. She wants to allow budding entrepreneurs to defer payments on their student loans for up to three years, along with any student loans held by “their first 10 or 20 employees.”

This idea obviously is crafted to appeal to tech-savvy young people, but is another instance of misusing educational policy to advance an economic objective.

These new campaign proposals show how much further the Democratic nominee will go to keep the higher education bubble inflated.

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