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Promising Too Much?

June 18, 2014

WASHINGTON -- Calls for free college, long a goal of the left (and, long ago, a reality in some states), went somewhat mainstream Tuesday morning. Flanked by an array of former governors and congressmen, Morley Winograd – who once served as a top adviser to former vice president Al Gore – unveiled a new nonprofit that has armed itself with an unusual proposal. The group wants to create federally funded full-tuition scholarships for students at two-year and four-year colleges.

Dubbing itself “Redeeming America’s Promise,” the coalition, led by Winograd, makes several promises of its own. Most prominent is the pledge displayed repeatedly in the group’s promotional literature: the assurance that the federal government could subsidize tuition without raising taxes or increasing the nation’s debt. (Read the group's plan here.)

The coalition’s proposal has already attracted skepticism. Barmak Nassirian, the director of federal relations and policy analysis for the American Association of State Colleges and Universities, said calls for “free” higher education were often misleading.

“The minute I hear the word ‘free,’ I want to hang on to my wallet,” Nassirian said. “Education really isn’t free; it’s a service that costs money … ‘free’ is an appealing political PR label, but it’s not really financial policy.”

Redeeming America’s Promise, however, maintains that decisive action is necessary to address college costs.

“We face the slow death of the American dream,” said James Blanchard, former governor of Michigan and a member of the coalition, at the press conference Tuesday.

A Plan With Promise?

The plan’s major component is the establishment of a scholarship program, which the coalition says would be administered by the Department of Education. The American Promise Scholarships would give, on average, $8,500 a year to students at four-year colleges and universities and $2,500 a year to students at two-year institutions. This amount is roughly equal to the average annual in-state tuition cost for public four-year colleges ($8,893) and community colleges ($2,285), respectively.

Students with family incomes of $160,000 or less would be eligible for these scholarships. To receive a four-year scholarship, a student would have to graduate high school with a 2.75 grade-point average. Students could not receive more than four years’ worth of funding.

Tuition at public institutions differs across states. For this reason, individual states would set the value of the four-year scholarships, according to the coalition’s plan. Some states could set the value of the scholarships below the $8,500-a-year figure for students in the state. Other states could set it above the $8,500 figure, as long as the overall costs to the federal government did not exceed $8,500 per student. The plan did not detail how the states would negotiate which ones could have larger scholarships.

Public institutions, in effect, would not be allowed to charge more for in-state tuition than their state’s scholarship value. If, for example, Vermont set its scholarship value at $9,000, the University of Vermont – which currently charges $14,184 a year for in-state tuition – would have to “make up the difference from sources other than the student’s family,” the coalition’s report states.

Students could apply the federal funds to an out-of-state public institution or to a private institution, but wouldn't have as large a share covered.

The group argues that the federal government could pay for the bulk of the scholarships by redirecting existing higher education funds. Money that currently goes to tuition tax credits and Pell Grants could fund the scholarships, the coalition says. Families that do not pay tuition would not need to claim a tuition tax credit. And fewer tax deductions claimed by families means more money for the federal government. The group estimates that the scholarships would allow the government to recoup $25 billion that would otherwise go to tuition tax credits.

In addition, with scholarships covering tuition, fewer students would apply for Pell Grants, the coalition argues. The money that would otherwise be spent on Pell Grants could also go to the American Promise Scholarships, the group says. The group stressed that Pell money would still exist for students who needed it. The plan does not specify how much Pell money might shift, although it notes that if applications fell by half, the government would save $17 billion.

Redeeming America’s Promise also aims to introduce a loan system. College students would be able to borrow up to $10,000 a year for living expenses in income-based repayment loans. Students would incur no interest while enrolled. Upon graduation, their total debt would be reduced by 5 percent for each year it took to complete the degree: 20 percent of the principal amount for a bachelor’s degree would be written off immediately.

The Difficulty of Redemption

The plan from Redeeming America’s Promise aims to fix nearly all of higher education’s access and affordability problems at once. Its proponents say the scholarships, combined with the income-based repayment loans, would reduce debt and encourage low- and middle-income students to attend – and graduate from -- college. Winograd also argued that tying the four-year scholarships to a G.P.A. cutoff would encourage a “culture of success” in high schools. In addition, the plan would spur state institutions to cut costs, the coalition holds.

Winograd’s coalition includes several prominent Democrats, such as Blanchard, the former Congressman Robert Carr, and the former Democratic National Committee chairman Don Fowler. Michael Castle, a Republican who served as governor of Delaware and later as a Congressman, also voiced his support at the Tuesday press conference.

Although a number of former lawmakers have signed on to the plan, sitting politicians will likely prove more difficult to convince. The plan would require legislation -- a fact Winograd and others acknowledge. Their coalition hopes to start a “grassroots, cyber-roots movement” that builds enough strength to force a response from Congress, Winograd said at the press conference Tuesday.

Some observers in higher education, however, doubt the feasibility of the coalition’s ideas.

Dan Madzelan, the American Council on Education’s associate vice president for government relations, said the coalition’s funding calculus – the group’s claims that money from Pell Grants and tax credits could finance the scholarships – sounded “a bit optimistic.”

Pell Grants finance not only tuition but also books and supplies and room and board. Madzelan said there might be some reduction in Pell expenditures under the coalition’s plan if there are a significant number of applicants paying zero tuition. But students – even those paying no tuition – will likely continue to apply for Pell Grants to meet needs unrelated to tuition.

In addition, a substantial share of Pell recipients are non-traditionally aged college students, rather than members of the “Millenial” generation about which Winograd has written at length.

The other proposed funding source for the scholarships – tuition tax credits – might also be more limited than the coalition expects, Madzelan said. Students receiving $8,500-a-year grants can apply that money to private institutions. At a high-priced private institution, a family might still pay enough tuition to qualify for tuition tax credits, thus depleting the pool of resources the coalition envisioned.

Madzelan, who worked for years in the Department of Education, added that he was unsure whether some aspects of the plan – such as the requirement that state institutions lower their prices to match the scholarship, or make up the difference somehow – would pass legal muster. For this pricing requirement to work, Madzelan noted, the government would have to mandate certain actions from state legislatures, because legislatures are often involved in setting tuition for public institutions.

“It’s difficult to see how Congress can force states to do things,” Madzelan said. “States would have significant issues around unfunded mandates. It’s hard to require expenditures of state funds – telling states there are certain things they have to do without Congress providing resources for carrying those things out.”

Such a requirement could “pretty easily sidestep into price control,” he said.

The G.P.A. requirement for the four-year scholarships could cause problems as well, Madzelan observed, because not every high school uses grade-point averages – let alone a four-point scale.

Nassirian, from the American Association of State Colleges and Universities, said the coalition’s proposal “has the advantage of simplicity and neatness” but seemed “more like back-of-the-envelope calculations rather than any kind of serious analysis of policy consequences.”

The coalition’s use of averages, such as its $8,500 figure for the four-year scholarships, struck Nassirian as wrongheaded.

“Averages mask all kinds of variances,” he said. “There are all kinds of other averages going on here that they’re oblivious to, such as the fact that not all public four-year institutions are created equal, nor are they equally priced.”

A related issue, Nassirian said, was the coalition’s assumption that some states would set the yearly value of the four-year scholarship at less than $8,500, and others would set it higher, to reflect differences in tuition across states while keeping overall costs at a national average of $8,500 per student.

“Anyone who’s below that level will want to maximize their revenue, so that’ll pull up pricing” to the $8,500 mark, he said. For this reason, the law would cap tuition at $8,500 a year for public institutions – bad news for flagship universities with more costs.

Pete Boyle, a spokesman for the National Association of Independent Colleges and Universities – a group that represents private institutions – said the plan could lead students to choose institutions that aren’t right for them.

“If you see a Duke at one end of the spectrum and a free public education at another end of the spectrum, are you still doing your due diligence to make sure the education is the best fit for you?” he wondered. “[And] I don’t know how the publics will be able to handle an additional influx -- especially the flagships, which are already stuffed with students.”

Redeeming America’s Promise did not reply to questions about various criticisms of its plan.

Nassirian said the idea that a college education – a “terrifyingly expensive proposition” -- could “suddenly become manna from heaven” was “a bit too simplistic, more of a message than policy.”

“Free happens to be a number that appeals to human beings because, you know, nice and round,” he said. “Certainly the system we have is overly complicated just because of the decades-long evolutionary path it has taken. There is a tendency to want to simplify it in elegant ways that appeal to one’s sense of order and rationality. But my first concern about any kind of a radical overhaul of the devil I know is concern about unintended consequences and concern that, first, let’s not do any harm.”

 

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