Obama's Free Community College Plan Will Mostly Help the Affluent

If you’ve followed the news recently, you’ve heard about President Obama’s proposal to make community colleges free for students who would like to attend them. With a now Republican controlled House and Senate, the proposal has little chance of passing, and Obama knows this. But it’ll certainly be a decent political investment.

What better way to paint Republicans in a negative light by pointing out how they shot down a proposal to help students further their education? With headlines about mounting student debt and the unaffordability of college commonplace, there will certainly be the perception that Obama’s proposal would help the lower and middle class -- but the surprising fact is that his proposal, like most entitlements aimed at helping the poor, is mostly an entitlement for the well-to-do. Before fully diving into how such a proposal would benefit only the wealthier stratum, let’s first evaluate some of the other arguments for and against the proposal.

Conservative critics were quick to point out that “free” community college isn’t free, as it’ll cost $60 billion to fund over the next decade, or, roughly $6 billion a year on average. Of all the reasons to oppose the proposal, the $6 billion annual cost is one of the weaker. Six billion dollars certainly is an enormous sum -- it’s about double the net worth of the entire cast of ABC’s Shark Tank. Six billion dollars only becomes miniscule when it’s being compared against what the government already spends. The Federal government alone spent $3.5 trillion in 2014 -- or $9.59 billion a day on average. So the community college proposal only actually costs what the Federal government spends in 15 hours at current levels of spending (though this isn’t meant to defend the current size of our Federal government).

The debate should instead be over whether or not this six billion dollars is justified spending or wasteful. It should be easy to anticipate some of the arguments that the spending is justified -- that it’ll build human capital, create opportunity for the disadvantaged who can’t afford college, and so on. Some might even go as far to say that since it will enable people to earn higher incomes, this program may “pay for itself.” Apparently unnoticed is the fact that there already is a surplus of college students relative to the number of college graduates the economy needs. If we define college as being worth attending based on whether or not a graduate is employed in a job that required a college degree, then roughly half of what we’re already spending on college is waste! And as for the claim that free community college would pay for itself, We Are Capitalists has a great piece showing how the math doesn’t add up. 

We often hear about a shortage of STEM graduates in the US, but such problems are only exacerbated in nations that guarantee free higher education. Some degrees in the liberal arts are often referred to as “luxury degrees,” meaning that they’re obtained because the subjects are enjoyable to the person majoring in them, not because the student expects to be employed in a specific field with a degree. Now, far too many students today graduate in “useless” fields, but since most bear part of or all of the financial cost, it at least reduces the number of students willing to graduate in fields that don’t yield a specific job. In other words, students are more willing to seek a return on investment on college when they have bear some of the cost

There’s also evidence that students are much more attentive to their studies when they have “skin in the game” (i.e., they’re bearing some of the cost). Obama’s proposal does set GPA requirements to be eligible for a free education, but it’s an abysmally low 2.5, or a C+ average. The average GPA in the major with the lowest average GPA, Chemistry, is a 2.78 -- higher than what Obama’s plan requires a student to maintain.

The biggest argument one can make against Obama’s proposal in particular is this: community college already is free, or almost free for most students. For the years 2013-14, the American Association of Community Colleges reports that the average community college had annual tuition of $3,260, and the College Board found the amount of be almost identical.  

So how does a student offset this cost? Let’s first start with students whose parents have income and qualify for tax credits.  The American Opportunity Tax credit gives a $2,500 credit to any college student who earns below $80,000, or is married and has joint-income below $160,000.  The credit is gradually phased out for incomes above $160,000. While the source doesn’t mention this specifically, a student should have no trouble filing for the credit as long as his household income falls below $160,000 a year, as he can have a parent claim that credit and then pass it onto him. 

Now obviously, if a student or his family has no income, or little income, they can’t exactly take advantage of a tax credit when they pay little in income tax to begin with. But those students can take advantage of Pell Grants, which have a maximum value of $5,500 a year. Calculating eligibility for a Pell Grant is a bit more complicated than just defining an amount of income one must earn less than, as the Grant takes into account how much money a family has to spend on their child’s education, the cost of the institution they attend, and other factors. Most students who currently attend community college on a Pell Grant come from lower-middle class and poor backgrounds.

One third of the eight million students receiving a Pell Grant are attending a community college. To put into perspective how much of community college’s costs are already borne by the taxpayer rather than the student, less than thirty cents of every dollar a community college received in revenue from 2013-14 was in the form of tuition and fees. It was difficult to find information on what the value of the Grant is for the average community college student receiving one was nationwide. In the state of Pennsylvania, that value was $3,179 in 2011-12 among their 14 community colleges. According to the College Board, the average value of a Pell Grant received among all institutions during the same time was $3,685.

In fact it seems that the Pell Grant is the poor man’s ticket to a free community college education, while the American Opportunity Tax Credit is the middle class man’s path. So who does this leave falling through the cracks, unable to receive a heavily discounted or free community college education? Those from households earning above $160,000 -- who should be more than able to afford a community college education on their own. It thus seems that free community college can’t be sold as an entitlement to help the lower class, it is in fact yet another entitlement for the affluent among us.

Matt Palumbo is the author of The Conscience of a Young Conservative and In Defense of Classical Liberalism.

If you’ve followed the news recently, you’ve heard about President Obama’s proposal to make community colleges free for students who would like to attend them. With a now Republican controlled House and Senate, the proposal has little chance of passing, and Obama knows this. But it’ll certainly be a decent political investment.

What better way to paint Republicans in a negative light by pointing out how they shot down a proposal to help students further their education? With headlines about mounting student debt and the unaffordability of college commonplace, there will certainly be the perception that Obama’s proposal would help the lower and middle class -- but the surprising fact is that his proposal, like most entitlements aimed at helping the poor, is mostly an entitlement for the well-to-do. Before fully diving into how such a proposal would benefit only the wealthier stratum, let’s first evaluate some of the other arguments for and against the proposal.

Conservative critics were quick to point out that “free” community college isn’t free, as it’ll cost $60 billion to fund over the next decade, or, roughly $6 billion a year on average. Of all the reasons to oppose the proposal, the $6 billion annual cost is one of the weaker. Six billion dollars certainly is an enormous sum -- it’s about double the net worth of the entire cast of ABC’s Shark Tank. Six billion dollars only becomes miniscule when it’s being compared against what the government already spends. The Federal government alone spent $3.5 trillion in 2014 -- or $9.59 billion a day on average. So the community college proposal only actually costs what the Federal government spends in 15 hours at current levels of spending (though this isn’t meant to defend the current size of our Federal government).

The debate should instead be over whether or not this six billion dollars is justified spending or wasteful. It should be easy to anticipate some of the arguments that the spending is justified -- that it’ll build human capital, create opportunity for the disadvantaged who can’t afford college, and so on. Some might even go as far to say that since it will enable people to earn higher incomes, this program may “pay for itself.” Apparently unnoticed is the fact that there already is a surplus of college students relative to the number of college graduates the economy needs. If we define college as being worth attending based on whether or not a graduate is employed in a job that required a college degree, then roughly half of what we’re already spending on college is waste! And as for the claim that free community college would pay for itself, We Are Capitalists has a great piece showing how the math doesn’t add up. 

We often hear about a shortage of STEM graduates in the US, but such problems are only exacerbated in nations that guarantee free higher education. Some degrees in the liberal arts are often referred to as “luxury degrees,” meaning that they’re obtained because the subjects are enjoyable to the person majoring in them, not because the student expects to be employed in a specific field with a degree. Now, far too many students today graduate in “useless” fields, but since most bear part of or all of the financial cost, it at least reduces the number of students willing to graduate in fields that don’t yield a specific job. In other words, students are more willing to seek a return on investment on college when they have bear some of the cost

There’s also evidence that students are much more attentive to their studies when they have “skin in the game” (i.e., they’re bearing some of the cost). Obama’s proposal does set GPA requirements to be eligible for a free education, but it’s an abysmally low 2.5, or a C+ average. The average GPA in the major with the lowest average GPA, Chemistry, is a 2.78 -- higher than what Obama’s plan requires a student to maintain.

The biggest argument one can make against Obama’s proposal in particular is this: community college already is free, or almost free for most students. For the years 2013-14, the American Association of Community Colleges reports that the average community college had annual tuition of $3,260, and the College Board found the amount of be almost identical.  

So how does a student offset this cost? Let’s first start with students whose parents have income and qualify for tax credits.  The American Opportunity Tax credit gives a $2,500 credit to any college student who earns below $80,000, or is married and has joint-income below $160,000.  The credit is gradually phased out for incomes above $160,000. While the source doesn’t mention this specifically, a student should have no trouble filing for the credit as long as his household income falls below $160,000 a year, as he can have a parent claim that credit and then pass it onto him. 

Now obviously, if a student or his family has no income, or little income, they can’t exactly take advantage of a tax credit when they pay little in income tax to begin with. But those students can take advantage of Pell Grants, which have a maximum value of $5,500 a year. Calculating eligibility for a Pell Grant is a bit more complicated than just defining an amount of income one must earn less than, as the Grant takes into account how much money a family has to spend on their child’s education, the cost of the institution they attend, and other factors. Most students who currently attend community college on a Pell Grant come from lower-middle class and poor backgrounds.

One third of the eight million students receiving a Pell Grant are attending a community college. To put into perspective how much of community college’s costs are already borne by the taxpayer rather than the student, less than thirty cents of every dollar a community college received in revenue from 2013-14 was in the form of tuition and fees. It was difficult to find information on what the value of the Grant is for the average community college student receiving one was nationwide. In the state of Pennsylvania, that value was $3,179 in 2011-12 among their 14 community colleges. According to the College Board, the average value of a Pell Grant received among all institutions during the same time was $3,685.

In fact it seems that the Pell Grant is the poor man’s ticket to a free community college education, while the American Opportunity Tax Credit is the middle class man’s path. So who does this leave falling through the cracks, unable to receive a heavily discounted or free community college education? Those from households earning above $160,000 -- who should be more than able to afford a community college education on their own. It thus seems that free community college can’t be sold as an entitlement to help the lower class, it is in fact yet another entitlement for the affluent among us.

Matt Palumbo is the author of The Conscience of a Young Conservative and In Defense of Classical Liberalism.