New Paper Models State Investment Needed to Participate in Free Community College Plan

By Owen Daugherty, NASFAA Staff Reporter

Virtually all eyes in the higher education space are fixed on Congress, as Democratic lawmakers are working on a legislative package that would make President Joe Biden’s campaign pitch of tuition-free community college a reality.

As lawmakers sort out details and attempt to get the legislation over the finish line, the State Higher Education Executive Officers Association (SHEEO) this week released a model detailing how the federal-state partnership would work to fund free community college, breaking down how much each state would be expected to pay under the America’s College Promise, the House Education and Labor Committee’s proposal for free community college.

States will, on average, have to increase their investment by 12%, or $387 per full-time equivalent (FTE) student under the federal-state partnership outlined in the free community college legislation.

The analysis from SHEEO is focused on state-owned community colleges, and the paper points out that the partnership has a different match and different requirements for Tribal Colleges and Universities and potentially U.S. territories and outlying areas.

Overall, SHEEO estimated that 985 state-owned institutions will be eligible for the program, serving 9.4 million students across the country.

Before diving into the analysis, it's important to understand the proposal and how the federal government plans to fund the massive investment in the country’s higher education. Under the proposed terms of the partnership, the federal government would foot the entire bill for the first year, with participating states being required to contribute 5% of the cost for each year until 2027-28, the last year of the program in the legislation, at which point the federal government will cover 80% of the grant and states will cover the remaining 20%.

States participating in the partnership would receive a per-student dollar amount based on the national median tuition. SHEEO estimated that the per-student subsidy in the first year of the program would be $5,162, assuming a 3% increase in inflation each year leading up to the program.

To meet that figure, SHEEO found that as many as 12 states would need to increase funding by more than 15% before the 2023-24 academic year in order to be eligible, and seven states would need to boost their funding by more than 25%. In the most extreme case, Vermont would have to boost its higher education funding by 142% to be eligible.

All told, 21 states have tuition rates above the median, meaning they will have a higher match because they are obligated to reduce tuition and fees to $0 for eligible students. For the 29 states with below-median tuition, they have already met the $0 tuition requirement and would have remaining federal and state funds from the match, which can be used for things like need-based aid at all institutions or to reduce unmet need at four-year institutions.

States that choose to participate must adhere to a maintenance-of-effort clause included in the legislation, requiring states to keep up institutional revenues, meaning states can’t take money from other parts of their higher education budgets to cover the federal match. In its model, SHEEO notes it assumed states would maintain existing total revenue at eligible institutions and increase state funding to offset the loss of tuition revenue.

One obstacle identified in SHEEO’s analysis is the fact that there is currently no consistent federal definition of a community college.

“The lack of definition can pose challenges in identifying those institutions that generally fit the idea of a community college, particularly across unique state systems,” the paper states.

The legislation defines a community college as a public institution where an associate degree is the highest or the most predominant degree awarded. 

The paper adds that the definition of a community college “could greatly influence which institutions qualify for the program. For example, technical colleges that do not meet these definitions (i.e. those that do not offer associate degrees) would not be included in the program.”

While the federal-state partnership, and the money that comes with it, represents a massive influx of federal funds to states and their higher education budgets, SHEEO’s analysis acknowledges that for some states to participate in the program, it would require significant increases in state and local funding.

SHEEO hopes the model can help states prepare in advance and plan for the necessary increases to participate in the program, noting that the federal-state partnership presents an opportunity to better serve students across the country. 


Publication Date: 9/29/2021

Peter G | 10/1/2021 2:58:37 PM

Political stances aside, and also leaving aside questions about the likelihood of states finding the money to opt into this, from a policy point of view this is a fairly complex program in ways that I don't think serve the goal.

Just as one example, in terms of the 'eligible student' requirement, as a CC we serve a pretty significant number of students who already have an associates degree (and sometimes a bachelors or masters) who are returning for a certificate, job retraining, etc. If they have an Associates from another institution and they don't tell us (or don't tell us in a timely manner) how will we know? NSLDS has data on some students but not others. This is going to add complexity in the program management, but perhaps more importantly it's going to create confusion in the messaging and the student understanding, which we've experienced repeatedly with our state "Promise" program as well.

We also have non-degree programs that could be eligible for Title IV but that we've never put forward for various reasons (e.g. short-term programs); this would likely pressure us to put them forward anyway. One downstream impact of that is that an already overstretched FSA School Eligibility team may see a spike in program approval requests all at once.

Jean M | 9/29/2021 7:55:29 PM

I agree with you, Terry! And the government does not have it's OWN money - it only has what it collects from the taxpayer!! I am not in favor of this legislation!

Terry B | 9/29/2021 11:28:43 AM

There is no such thing as "free" community college. Someone is ultimately paying for it. I really wish they would rethink their phrasing. When parents and students see a charge on the student account for "tuition," they call our offices and question why they're being charged tuition if it is "free." I then have to explain to them that nothing is free. The federal government, state, county, someone is ultimately paying for it on their behalf.

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