Making College Tuition Free is Neither Free Nor Fair

There are much more cost effective and equitable ways to make public colleges affordable for all than making them tuition free.

Some years ago, as interest in free-tuition plans grew around the world, Jamil Salmi, a distinguished international higher education expert, made the keen observation that tuition-free plans are neither free nor fair. This confirmed that the costs of providing a quality higher education do not simply disappear because students are not being charged tuition. This observation is just as true today as it was then and it should serve as a framework for discussing the growing number of efforts now to make college tuition free in the U.S.

Federal, state, and local governments spend $200 billion per year on higher education. In 2019, state and local support alone for the first time exceeded $100 billion. State residents paid roughly $60 billion in tuition and fees in that year. Replacing it will increase the budgetary pressure on states and localities or will require more federal support to make up the difference. This is the reality, and it meets hardly anybody’s definition of “free.”

Most free tuition plans are also not fair in who benefits. A majority of federal and state taxpayers who will be on the hook for any free tuition plan will not have attended or graduated from a public institution. So in most of these plans those who have not gone to college end up paying more in taxes so that those who do go to public colleges can pay nothing at all.

Free tuition plans are also not fair because the people who will benefit the most are students from middle- and upper-class families. This is because as tuition revenues dry up, we can expect fewer seats to be provided by cash-strapped colleges. Better-off students are likely to claim most of these seats because of their higher grades and superior preparation for college work.

These same arguments apply to community colleges in spades. Although a bigger share of low-income students attend community colleges than public four-year universities, millions of better-off students attend community colleges to take advantage of their lower price and closer location. Making community colleges tuition free would therefore be of great benefit for millions of students who can afford to pay. Moreover, for most Pell Grant recipients at attending community colleges are eligible for awards that more than cover their tuition payments. They thus might well not benefit at all from the elimination of tuition depending on how the plan is implemented.

The experience in Ireland over the past quarter century can be instructive here. Ireland did away with tuition for full-time undergraduates beginning in the mid-1990s. The share of college age Irish youth increased by one-half over the past two decades. The Irish attainment rate — the portion of college-educated workers in the economy — most remarkably has tripled, although most of this attainment explosion is due to the influx of well-educated foreign-born workers who were educated in non-Irish institutions.

But the goal of improving equity of access to college by not charging tuition has not panned out in Ireland. Students from better-off families still are overrepresented in the Irish higher education system, especially at the most selective institutions. Moreover, quality has suffered from the boom-and-bust funding pattern as government subsidies have fallen far short of offsetting lost tuition revenues, especially during economic recessions.

One of the key lessons from the Irish experience is that a free-fees regimen works well only if government provides enough support over the long term to offset the effects of foregone tuition payments. Without that sustained financial commitment, the promise of free tuition falls flat.

There is also the matter of how tuition is defined. When Ireland eliminated tuition in the 1990s, it instituted a registration fee to be charged to all students to offset partially the effect of eliminating tuition. The initial fee was roughly US $200 but over time it has been increased so that now it equals $3,600. So anyone proposing to eliminate tuition should be candid about whether other fees would effectively be taking their place.

Proposals to keep public tuition in place and offer much-expanded student financial aid are an improvement over free tuition for everyone, but these proposals often don’t wrestle with the basic problem of what public colleges charge and what they spend per student.

There are better ways to make public higher education affordable for all without making it tuition free for state residents. States could take the following steps to change how they pay for public higher education systems.

• The tuition at public institutions should be pegged to what the average family can afford. This could be accomplished by setting tuition as a share of state GDP per capita with the share higher at flagship public institutions and lower at community colleges.
• States should commit to providing enough financial aid to cover tuition for all those students whose families can’t afford it.
• To complement state efforts to make tuition affordable for all, federal Pell Grants should be modified to meet the living costs of the most economically disadvantaged students. Federal tuition tax credits should also be expanded for taxpaying middle-class families
• States could also force greater efficiency by using normative costs — a determination by state and institutional officers of what ought to be spent per student — in allocating funds to institutions rather than asking them how much they spend per student and allocating funds on that basis.
• States could share in the costs of enrollment growth by dedicating some public funds to create government-paid fees that pay schools for each student they enroll. Ireland created these payments-in-lieu-of-fees in the 1990s to offset the effect of losing student-paid fees. But an aggregate cap on these government-paid fees have blunted the benefits to the institutions as the per-student payments have declined over time as enrollments grew.

Changes like these would be much more effective in making public colleges affordable than would eliminating tuition for all state residents. Moreover, they could be accomplished at little or no additional government expense relative to what federal, state, and local governments already spend on higher education every year.