The new federal proposal that the president is calling “America’s College Promise” is short on details but has inspired much commentary.
We’ll hear more on Tuesday in the State of the Union address and in President Obama’s next budget proposal, but he gave us enough information about the idea in a speech for us to estimate the potential program’s cost to North Carolina taxpayers.
Some background: Last Friday, Obama pitched his proposal to make the first two years of community college “free for everybody who’s willing to work for it.” He defined “work for it” as maintaining a 2.5 grade point average (a B- or C+) while enrolling at least half time, and making “steady progress” toward completion.
The idea is inspired by already-enacted programs in Tennessee and Chicago, called “Tennessee Promise” and “Chicago Star Scholarship.” The administration is touting America’s College Promise as a bipartisan effort that will boost the middle class by aligning their skills with the growing need for an educated workforce. The administration is also selling the idea as a modern successor to the universalization of public high school.
But are those stated goals going to be worth the cost to state and federal taxpayers?
To understand the cost of the president’s program, we need to know that attending community college is already free for many low-income students who qualify for Pell grants. Thus, the president’s plan would primarily benefit middle-class students. While not all the details have been laid out, it appears that, as with Tennessee Promise, the federal subsidies under his plan will kick in once students have exhausted Pell grants and other options.
The Obama administration has offered conflicting figures regarding the cost to taxpayers. One is $80 billion over 10 years—75 percent of that coming from federal funding, with the other 25 percent requiring state support. On the other hand, the administration says that 9 million students will benefit each year, with full-time students saving an average of $3,800 per year. That could mean as much as $34 billion per year, but even if all 9 million were half-time, that would mean a cost of $17 billion per year, or $170 billion over 10 years.
This is all in addition to Pell funding, which costs taxpayers over $35 billion, up from $15 billion in 2008. The administration raised the maximum award to $5,730 for the current school year, a $1,000 increase since 2008. The administration says the number of Pell Grant recipients has expanded by 50 percent since then.
So let us see what America’s College Promise would cost North Carolina taxpayers, based on the limited information available. We dug through some numbers from the Department of Education’s Integrated Postsecondary Educational Data System to find out.
To start, we have to eliminate all students receiving Pell grants, because Pell covers 100 percent of tuition and fees for the 58 schools in the North Carolina Community College System. It’s not totally clear that students cannot receive Pell and qualify for the new proposed program, but Tennessee’s program does not allow for that, and this program appears to closely follow that one.
As of 2012, the last year of available data, the average sticker price for tuition in the system was $2,176 plus $102 in fees—a total of $2,278—and no college charged more than $3,000. The average Pell Grant in the state was $4,004, easily enough to cover tuition at any community college.
Pell grants are phased out as income goes up and the cost of attendance goes down, so some higher-income students may receive much less than the average. However, we can be pretty sure that enrollment in any community college in North Carolina is already tuition-free for most Pell recipients—certainly for those with low incomes. That proportion of community college students that were Pell recipients in 2012 was 53 percent—that is, about half of the state’s community college students already pay no tuition.
Megen Hoenk, a representative of the community college system, told the Pope Center that in fall 2013, about 200,000 students were enrolled at least half time in the state. About 125,000 (63 percent) of those had a cumulative GPA of at least 2.5 through that semester. That means that 37 percent, or about 75,000, would not qualify for the federal free tuition due to low grades. If we assume that those numbers and the percentage of Pell recipients hold steady under Obama’s plan throughout the calendar year, we can figure out about how much North Carolina can be expected to spend to participate in America’s College Promise.
Assuming all current trends continue, we can estimate that North Carolina will spend between $16.7 million and $33.5 million per year—the low number for a population of all half-time students, and the high number for a population of all full-time students. For reference, the community college system budget for the current fiscal year is a little over $1 billion.
Remember that those numbers assume current trends will continue under Obama’s plan, which is hard to imagine. If North Carolina were to participate in America’s College Promise, we could expect community colleges to make sure students use any federal aid for which they are eligible, including Pell (otherwise, state funds would come into play). Not all students eligible for Pell are aware they have the option. Making more of them aware could reduce the cost of America’s College Promise by an unknown amount (with a corresponding raise in Pell grant spending, which is already skyrocketing under the Obama presidency).
While it is likely that community colleges would make sure that all students were getting the Pell grants for which they were eligible, reducing the cost to the state, a couple of factors could boost costs, making it likely Obama’s program would cost more than we estimate. The above calculations assume the program will not attract more students. But it is practically guaranteed to do so, and by design. Subsidizing 100 percent of the cost of college will ensure that more people will enroll; Tennessee reports that close to 90 percent of its high school graduating class applied in the first year of its program.
Such a program will attract people who would not otherwise have gone to college, as well as students who would have gone to a four-year college or a for-profit, but instead chose community college to save money.
Community college is already extremely inexpensive for North Carolina students. The cost of educating a community college student is roughly $6,000 to $7,000 per year, but only half of the state’s students pay tuition, and those that do are heavily subsidized.
While President Obama sells his proposal as a successor to the introduction of government-funded, universal high schools, one key distinction separates that from his universal community college proposal. Public K-12 schools traditionally lie under the purview of state and local governments. This proposal piggybacks off of state and local systems, but it relies on heavy involvement from the federal government. This ensures there will be some amount of micromanagement of state affairs; indeed, the administration has already announced some general requirements it would implement if this were passed.
That precedent is a cost arguably larger than the new spending that would be mandated by America’s College Promise. Most commentators expect Obama’s idea to fail in an opposing Republican Congress, but if something like this does pass, North Carolina should consider the painful consequences of another education entitlement.
(Update 11:13 a.m.: An earlier version of this article stated that college administrators would be likely to raise tuition under the plan. Because the General Assembly sets tuition for community colleges, that statement is incorrect. We apologize for the error.)
(Editor’s note: The Pope Center’s director of outreach, Jenna Ashley Robinson, contributed to this article.)
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