State of the Union Part 2: Obama’s Gamble on Free Community College

“This plan is your chance to graduate ready for the new economy, without a load of debt.” During his State of the Union, the president touted his America’s College Promise proposal, a plan to give students maintaining a 2.5 GPA free tuition at selected community colleges. The White House estimates that nine million students could continue their education, if the proposal is passed. While tuition prices around the country rise and employers demand more workers with higher education, millions face the possibility of incessant economic struggles if Congress does not act. Though the president’s proposal will help stop people from being excluded from the evolving economy, the opportunity costs of college could limit its impact.

This plan proposes that the federal government pay 75 percent of college costs with states picking up the final 25 percent. In addition to the costs of tuition, the plan will pay for counseling services and technical training for middle class jobs. Although costly, the president is banking on research showing that higher education creates more entrepreneurs, increasing human capital and thereby increasing GDP per capita.

Only 14 percent of students who start community college receive an associate’s degree. The president’s proposal replicates research recently published from NORC at the University of Chicago. The study by Barrow, Richburg-Hayes, Rouse, and Brock shows increased funding and counseling services for students who maintained a GPA above 2.0 led to a statistically significant difference between the treatment and control groups. Students were 18 percent more likely to enroll in their second semester and 12 percent more likely to enroll in their third.

Although significant, the rate of students graduating with an associate’s degree after enrolling in a program will still be less than desirable for the Obama Administration. A survey conducted by the Bill and Melinda Gates Foundation reported the main reason students leave school is the opportunity cost of staying there. Many students are giving up the opportunity to work full time in order to support themselves and others. Without consideration of these opportunity costs, the impact of the proposed legislation will be limited.

Article Source: Barrow et al. “Paying for Performance: The Education Impacts of a Community College Scholarship Program for Low-income Adults.” Journal of Labor Economics, July 2014.

Feature Photo: cc/(Wikimedia)