Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. His column appears in Indiana newspapers.
It is early in the electoral cycle, but at least two US presidential candidates have adopted as a policy platform, free college tuition. This is popular of course, but behind that popular rhetoric is simply another gift to affluent households. Let me explain.
There’s no denying the sticker shock of a college education. As both a professor and father I know it is daunting. Tuition at an in-state, public research university is typically $8,000 a year. Fees, books, food and housing along with various other expenses will usually push the visible out-of-pocket expenses to more than $25,000 a year. But what does this really mean?
For the past decade or so, actual expenses related to teaching have been fairly flat. The increases in tuition driven almost wholly by decreases by state aid to public universities. This decline in state aid should not surprise anyone. The share of educational benefits accrue to the graduate, they ought to pay most of the cost.
Moreover, there is a strong argument that the real sticker shock of a college education is caused by federal intervention. Huge loan and grant programs allow schools to be less cost conscience, so they compete on amenities like nifty dorms and recreation facilities. Add to this an unbelievable morass of federal regulations on almost every aspect of a modern university and non-tuition cost growth is inevitable.
In the end, an hour of class is just about as expensive as an hour at the movie theater. The teaching part of college is not only reasonable, a college degree has the highest rate of return of any investment. But, the candidates pushing ‘free tuition’ don't care about the effectiveness or cost of the program, it is its popularity that matters. And that is the unconscionable part of their policy, because it is nothing more than a gift to upper middle class families.
The great hidden fact about college tuition is that schools ruthlessly engage in price discrimination. Most students receive some sort of tuition discount. These discounts are fictitiously based on high school grades or athletic ability or test scores, or community works, or a great admissions essay. In reality, these discounts are designed to separate students by their ability to pay for college. Poor and hardworking students benefit enormously from the current tuition models. But who benefits from the ‘free tuition’ proposals?
The real benefits of ‘free tuition’ accrue to the ‘puppetry and street performance’ or ‘non-quantitative social science’ major with a 2.21 GPA from an upper middle class family. If you are a hard-working kid with good grades and a couple varsity letters, it is no help at all, except you’ll be paying higher taxes in ten years.
Still, the upper-middle class giveaway program isn’t the real sin of this proposal. ‘Free’ tuition doesn't do a damn thing for poor kids, except that it necessarily shifts resources away from such things as early childhood education to that mediocre, fifth-year puppetry or aviation psychology major. But then I suppose those folks make great campaign volunteers.