Be Careful to Apply Free College

In CANADA Education

Charging or not charging tuition – both limit access to higher education. But if there is a way out?

Andrew Kelly, my colleague wrote a set showing that lots of free-college countries lag behind the U.S. on key metrics, consisting of enrollment, graduation and degree attainment rates last week,. He point a basic one: While free college may increase access to higher education, but the effect can well be the opposite if there are fewer seats available.

Kelly includes in his writing: “Ironically, and contrary to much of the rhetoric on the left, cost-sharing across students and taxpayers is key to maintaining higher education access.”

It means charging tuition may expand access by ensuring institutions have sufficient funding to serve all students who can benefit. On the other hand, couldn’t charging tuition also inhibit access for those who can’t afford it?

However, effective financing tools to help students cover those costs. And this is one of the major problems with the current higher education financing system in the U.S. it is possible to build financing tools with allowing cost-sharing while not diminishing access for students who lack the money to pay out-of-pocket.

Other countries provide examples of how to do exactly this such as the United Kingdom, Australia and New Zealand. These countries that have moved away from the kind of free-tuition system that is getting so much attention here in this election cycle. In these countries, policymakers deliberately raised the cap on tuition in an attempt to move from a capacity-constrained public system to one that was more accessible to a larger fraction of population.

So what happened? As the figure below shows, college enrollment rates rose significantly across all income groups in that country in the 10 years following the implementation of these reforms in Australia in 1988:

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The U.K. gives more evidence of the benefits of these reforms. In a document summarizing the changes in his country, economist Nicholas Barr notes that despite the new, higher tuition, “loans cover fees and most living costs, making higher education free, or largely free, at the point of use, in principle addressing student poverty.

In comparison to the U.S, the financing system is really riskier for students. For decades federal student loan options featured fixed monthly payments over a fixed time frame, which offer few protections against default and delinquency. Since 1990s, policymakers began adding a variety of income-driven repayment options to the federal student loan system; however, they are confusing and bureaucratic. As a result the Department of Education estimates about 25 percent of undergraduate loan dollars will go into default at some point during repayment.

However, this brings us full circle to the risk that capping tuition at zero or very low amounts will actually limit access by constraining the number of seats available. Instead of falling into this trap, policymakers should follow the lead of these other countries who have successfully facilitated greater access through a combination of cost-sharing and well-designed income-based loans.

Specifically, U.S students need better financing options that offer stronger protections from the financial risk of making such a large and uncertain investment. Presidential candidates Jeb Bush and Marco Rubio both put forward ideas in this regard based financing options : offering students improved and simplified income. Hillary Clinton’s college affordability plan would also take some steps in this direction by consolidating the existing income-driven plans available in the federal loan program, but would also impose tuition caps, with also all the access risks.

Finally, providing students with effective financing tools is essential to ensure access to higher education on a broad scale. It is not easy to fit on a bumper sticker as “free college,” these proposals are approaching the achievement equal access for all.

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