Biden's Free College Proposal Would Pay for Itself Within 10 Years, Report Says

By Owen Daugherty, NASFAA Staff Reporter

Democratic presidential nominee and former Vice President Joe Biden's plan to provide free college to millions of students would be massively expensive. However, researchers from Georgetown University contend the additional tax revenue the plan would generate would outweigh the costs within 10 years.

The new report from the Georgetown University Center on Education and the Workforce (CEW) estimates Biden's free college plan could cost as much as $49.6 billion in the first year and could reach a total of $683.1 billion after 10 more years.

Lead author and CEW Director Anthony Carnevale said the research shows that as a result of a tuition-free college program, individuals would be able to obtain an advanced degree more easily and get higher-paying jobs, in turn generating enough additional annual tax revenue to surpass the annual cost tied to the program within 10 years of its implementation.

"Free college isn't really free for the taxpayers who will end up paying for it," Carnevale said. "However, within 10 years, the annual benefits of some free-college programs could outweigh their annual costs."

Biden's plan, which would allow students of all income levels to attend public community colleges in their state of residence tuition-free and cover tuition at four-year public colleges and universities for students hailing from families with incomes under $125,000, is one of four that is analyzed in the report, "The Dollars and Sense of Free College."

To better understand the various free college plans, the report breaks them down into three categories: First-dollar programs, last-dollar programs, and debt-free programs. NASFAA previously analyzed the merits and drawbacks of free college in a three-part series, providing a comprehensive view of the current landscape of free college and how different programs are structured.

As described in the CEW report, first-dollar tuition-free programs generally guarantee that the government will fully pay for tuition at a public college, which would then give students the ability to use any additional financial aid to cover other costs of attendance, such as room and board, books, and transportation. This plan means that if tuition is $10,000 and a student receives a $6,000 Pell Grant, the government would pay the entire $10,000 tuition bill, leaving the $6,000 in grant aid to be used for other costs. Under a plan in which everyone would qualify regardless of family income, this type of program would cost $58.2 billion in the first year of implementation and could reach nearly $800 billion after 10 additional years.

Last-dollar tuition-free programs call for the government to pay any tuition remaining

at a public college after a student's existing federal financial aid award is used, meaning that if tuition is $10,000 and a student receives a $6,000 Pell Grant, the government would pay the remaining $4,000. The report found that a last-dollar program would cost $27.8 billion in the first year of implementation, the lowest cost of the three types of programs. However, the last-dollar approach would not allow the lowest-income students to use their additional aid for living expenses.

A free-college plan in which the government covers the remaining tuition after students' financial aid awards are taken into account would have a lower overall price tag, but "would give less financial support to low-income students in particular," the researchers found. A plan with those parameters in place would total $414.9 billion after 10 more years.

Lastly, a debt-free program calls for the government to cover tuition as well as all other costs of attending college, including room and board, books, and transportation, and is estimated to cost $75 billion in the first year alone, due to the comprehensive nature of the plan.

The researchers note that the concept of free college is growing in popularity and "enthusiasm for the idea has gained momentum with the growing realization that a healthy economy requires a well-educated workforce and that workers benefit immensely from education beyond high school."

With free college plans being adopted in several states across the country and a handful of Democratic candidates supporting various proposals during the campaign cycle, this report comes as Biden holds a lead over President Donald Trump in national polls and continues to advocate for his free college plan.

Biden's plan falls somewhere in the middle of the first- and last-dollar programs, with a price tag of roughly $50 billion in the first year. Of the approximately $50 billion, $33.1 billion would come from federal spending and $16.5 billion in state spending.

Overall, the report found that while Biden's plan would come with a hefty price tag, the benefits would outweigh the costs over time.

With more students earning college credentials and getting jobs, the report estimates it would lead to an additional $371.4 billion in federal and state tax revenue and private after-tax earnings gains of $866.7 billion.

Carnevale said in America's current economy and job landscape, 80% of well-paying jobs are going to workers with at least some postsecondary education. To him, that means a path to the middle class goes through a higher education institution.

Under Biden's plan, 29% of the funding would go to students in the bottom income quartile, compared to a program that only covers tuition after students' existing financial aid is awarded, in which 13% of the funding would go to students in the bottom income quartile — making Biden's plan "more targeted toward lower-income students and more racially equitable" than the alternative.

Additionally, Biden's plan would distribute funds more proportionally by race than the other plans, though the researchers acknowledge "more targeted funding would still be needed to ensure that underrepresented students receive the same benefits as white students."

"To cover all students' needs including those beyond tuition, policymakers should consider how a free-college program needs to be designed with race and class equity in mind," said Jenna Sablan, co-author and assistant research professor at CEW.

Biden's plan placing added importance on community college has been a staple of his campaign stump speech, often touting his wife Dr. Jill Biden's career as a community college professor. Carnevale said should Biden win and Democrats have to compromise on their proposals to enact legislation, tuition-free community college would be a priority that remains.

Biden has released a detailed plan for postsecondary education outlining his priorities, while Trump has thus far on the campaign trail generally abstained from significant policy input regarding higher education. His official second-term agenda touches on two items for  K-12 and higher education combined — teaching American exceptionalism and allowing school choice. 

The Education Department (ED) under Secretary Betsy DeVos has pushed for more career and technical education.

Carnevale said Trump calls for transparency and accountability and wouldn't support a massive expansion of the federal government's role in higher education that would come with a free college plan. But he said regardless of who wins the White House next month, it will be a difficult next decade for higher education as a whole, with the ongoing pandemic compounding with existing issues as a decline in the population of college-aged Americans is on the horizon.

"There's a painful 10 years coming for higher ed," Carnevale said. "The difference with Biden is he puts in a little money to help the medicine go down."

 

Publication Date: 10/6/2020


Julie A | 10/7/2020 4:49:38 PM

I can see the cost of education outweighing its true value in mass if caps are not placed on "educational expenses" and the federal government is picking up the entire tab. That being said, isn't that a bit why Gainful Employment regulations came about? The federal government thought students were not getting the best bang for the government buck? If the federal government were to start picking up the tab for all of the expenses, you can bet institutions will then be told what programs they could, should, and will offer if they want butts in the seats, compliments of the government.

Julie A | 10/7/2020 4:48:01 PM

I can see the cost of education outweighing its true value in mass if caps are not placed on "educational expenses" and the federal government is picking up the entire tab. That being said, isn't that a bit why Gainful Employment regulations came about? The federal government thought students were not getting the best bang for the government buck? If the federal government were to start picking up the tab for all of the expenses, you can bet institutions will then be told what programs they could, should, and will offer if they want butts in the seats complements of the government.

James C | 10/6/2020 9:53:31 AM

You could double Pell grants and pay for it completely by eliminating the back end education tax credits and tax deductions.

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