Most people know that the student loan burden in the United States is currently at an all time high as the total outstanding debt slowly approaches $1.3 trillion, but most people are not sure of how exactly do we fix this problem. With all of this being outstanding debt, I’m not too sure that total student loan forgiveness is the greatest idea at this point. President Obama has offered a partial fix to this problem on a going forward basis, creating a plan that would offer “free” community college to certain students. I do think that this is a step in the right direction, but what exactly does this plan mean and how much will it actually cost? We know there isn’t actually such a thing as free when it comes to programs like this.
I personally believe that community college is a great tool, and that it’s a great fit for many people. If I could go back in time I would absolutely choose two years of community college and still been able to transfer my credits to my school of choice. Going to a state school after would have been even cheaper, but just going to community college I probably would have graduated with $40,000-$55,000 of debt compared to the $80,000+ of debt I did rack up. If community college had been free? It would have been closer to that $40,000 amount which honestly would not have been bad at all considering my starting salary.
The current proposed plan by Obama would have the federal government pay 75 percent of the cost of tuition to go to community college, and the state governments would cover the other 25 percent. This provides the state with incentives to not cut the funding they are giving to community colleges and also provides them incentive to keep their costs down. This would be the exact opposite of what currently occurs with federal aid the cost of four year colleges. The student would have to be enrolled at least part time, maintain a 2.5 GPA, and the costs would only be covered for two years. They also have to show that they are making progress towards an actual degree or trade profession, they cannot just be taking random classes that have no purpose. You can read more about the tax implications and the potential sources for funding this program here.
Some tweaks that I would make to the program would be to raise the GPA requirement of 3.0 which requires the student to maintain a B average as opposed to C+ average that was proposed. I think it’s important that the money is going to someone that is striving to learn and applying themselves. If your GPA does dip below this threshold, you would be given a semester to recover. Maybe there could even be tutoring required for that semester? Tenneesee has already implemented a similar program and in that program they require community service. I think this should be added to the program that the students must complete 10 hours of community service in the county they are attending school per semester.
Although it does look like this may just be somewhat of a political PR talking point at this point, but I don’t want to really discuss the politics of the issue here. There aren’t many details on how the program would be funded and where they money would come from, but I am glad that this idea is out there. Some of the early estimates place the cost at around $60-$80 billion over the entire decade. When you put that into perspective on the total student loan burden and the large percent that will default, this might actually end up being cheaper! And since it’s wise to be skeptical with these estimates, even if it costs closer to $100 billion that is still much less than what we added to the military budget in 2015. Let that process, it’s not even close to the entire budget, just what was added! Wouldn’t increasing the education of our workforce without putting them into more debt be a valuable investment?
Some articles I have read have said that this will be funded by placing a tax on 529 plans, which would cause taxes to be taken when the money is withdrawn from the account. This would occur even when the money is used towards college, which almost defeats the purpose of these accounts. I do not agree with this because if someone is being responsible and trying to save for their child’s education I see no reason to penalize them retroactively. There is also the proposed increase on the capital gains tax for the top rate from around 25% to around 28% and would close a “loophole” for when someone passes away and the money is inherited. I’m not a tax expert, but it seems that this increase would mostly hit the upper class as the capital gains tax would not change for lower tax brackets.
Another argument against this plan is that it will cause even more saturation in job markets, as an associate’s degree would become the standard for jobs that really don’t require a degree for you to perform well in. You create a cycle where the 2-year degree basically becomes a high school degree value, and so on. It does not actually lower the cost for higher education if “everyone has one”. But purely based on education, I don’t see the downside to our workforce being more educated. Especially if focus on rewarding those that actually want to learn and better their community.
There is also the fact that many poorer and less privelaged students already go to community college at an average cost of around $0 once you factor in financial aid. Community colleges have been able to keep their costs down and those in need are getting education at a lesser cost. But that is only an average, and what about all the students that are above this average? Could they not benefit from this as well? And even though middle and upper class students should be able to afford community college, I see no need to penalize these students if their parents have not spent their money wisely.
Overall I feel like this is a good issue to bring into the “national conversation” though I’m not sure if it is actually a serious proposal as I had mentioned before. There are tax increases proposed by democrats, but they are as a whole and not specific to this one program – though I feel like many articles would lead you to believe. I do think with some tweaks this program could become something great, or it could at least motivate some states to adopt programs like the one Tenneesee currently has. I’m not sure if this is the right solution to a very complex problem and there’s a lot of pros and cons on each side. Maybe we will hear more details on the funding of the program during the State of the Union address tonight.
What are your thoughts on free community college? Do you think this is worthwhile investment or is there a better way to approach the student loan crisis?