According to a Gallup study from last year on the state of higher education, better employment and earning opportunities are still one of the main reasons people pursue education past high school. Unfortunately, the cost of attending college is a barrier too steep to overcome for many people. According to that same study, the cost of a degree was the reason most commonly cited for people to drop out of programs.
Even among those who do go to college, over 48% took out federal student loans. This debt delays the income related benefits many graduates expect to receive as they spend their early professional years just getting back to even.
All of this can be summed up by saying college is very expensive right now, and in many cases it is prohibitively expensive. If we accept that having more people attend college is good for our overall economic wellbeing, then we might even say that college is too expensive, and that the public sector should intervene.*
How much would it cost the federal government to make public colleges and universities free to attend?
Before we can answer that question, we first need to determine what it even means to make college free to attend. If just the tuition is free, that means students are still on the hook for textbooks, living expenses, etc.
To see how some of these proposals might look in practice, we can follow a 2020 study by Georgetown University’s Center on Education and the Workforce looking at some of the free college plans proposed by the Biden campaign. They analyzed three proposals, the first two were tuition-free programs while the third was a complete debt-free program.
Tuition free programs still leave students with debt after college, but fully cover the costs of the program while they are attending. One option would be a “first-dollar” tuition free program, where the government fully covers the cost of tuition at each school, and students are free to take other forms of financial aid to cover expenses like room and board.
A less generous version of this is a “last-dollar” tuition free program, where students receive whatever financial aid they would otherwise be eligible for, and the government covers whatever tuition remains left over.
Last-dollar programs naturally cost less than first-dollar programs, but they end up giving less resources to people who need them more. If someone is eligible for more financial aid because they have less money to begin with, then they end up with less free money from the government.
The most generous option would be a complete debt-free program. This would mean the government covers the full cost of tuition, as well as any other school related expenses such as books or lodging.
According to that study from 2020, these programs would cost $27.8 billion, $58.2 billion, and $75 billion in the first year for the last-dollar, first-dollar, and debt free programs respectively.
If we adjust those for inflation, that would be $35 billion, $73 billion, and $92 billion.
If we compare these costs to other parts of the federal government, they are roughly similar to the budgets for the Department of Transportation ($38 billion) and the department of agriculture ($70 billion).
No matter which specific program the government went with, a free college program would cost a lot of money upfront. However, the good thing about getting more people to go to college is that in the long run we expect these people to have higher wages. That means greater tax revenue for the federal government over time, to the point where these costs would at least be partially offset. The Georgetown Study estimates that by year 10 of President Biden’s proposal, the additional tax revenue would fully offset the costs of the program.
The real benefit comes from realizing that people pay taxes for far longer than they attend college. By getting more people in the door, we can build up a larger tax base to cover each following year of college students.
Certainly any program with a price tag this big requires careful thought from policymakers. However, if we decide we can handle the short term costs, the long term benefits are clear.
*Obviously student loans are one such intervention, but they don’t lower the cost of a degree, just defer it.