Wednesday, January 21, 2015

“Free” Community College for Everyone

During Obama’s SOTU address last night, he again proposed providing free community college. However, most folks know that nothing in life is really free. The White House’s own estimate is around $60 billion. There are plenty of studies out there that show college degrees do help improve a person’s lifetime earnings. So, at first glance, this might seem like a good idea to have a more educated workforce.

However, if the extra earnings from a college degree outweigh the costs of the degree, why isn’t everyone already in college. After all, there are already student loan programs available that alleviate the cost of obtaining the degree. Obama’s proposal really only makes sense if there was some kind of market failure that was preventing students from going to college.

There are two things that will happen under this proposal. First, students who would attend college anyway, will end up with less cost for their degree. The flip side is that this degree still costs money and now taxpayers will be on the hook for subsidizing this student. What is the benefit here?

Second, some people will attend community college who most likely would not have attended. These folks, without an option of free community college, would have internally weighed the costs and benefits of attending college and decided they would be better off by not attending college. After all, not everyone is successful in college as seen by the dropout rates. Also, some people have skills that would be better served in a trade occupation that might not need a college degree.

Obama’s proposal would have negative consequences when applied to this second group as the costs to provided a free college degree would not be covered by the degree’s benefits. If the issue is one of students not having the money to attend college then maybe there needs to be changes to the the student loan program.

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