Clinton’s Free College Tuition Proposal Would Cost $65 Billion

US Presidential candidate Hillary Clinton has just proposed a free college tuition plan. Numbers on the cost of the proposal have not come with the announcement. But they are easy to estimate. I’ve run a quick calculation and find her plan would cost somewhere in the neighborhood of $65 billion per year.

We’ll see what the real experts come up with, but my guess is that’s the ballpark cost for what it will take to completely unburden students.

A nice overview of the plan written by Doug Lederman can be read at Inside Higher Ed. There is, for example, a means testing component. But it would benefit the vast majority of college students.

The bottom line is not really all that complicated. For a plan such as this to work for colleges it would, minimally, need to replace all of the tuition revenue they collect.

To arrive at my estimate I simply summed the amount of net tuition US public post-secondary institutions collected, using data in the IPEDs database. These are most of the < 2yr, 2yr, and 4+yr institutions. The number arrived at represents tuition revenue at just under 1900 public institutions across the US and territories that enroll students after high school, including community colleges. Collectively, they report net tuition revenue of $65.552 billion in 2014.

Net tuition is, basically, the tuition actually collected from students after various scholarships and discounts. Net tuition has been rising as states have slashed budgets, shifting higher proportions of their costs to students. The burden puts even public colleges out of reach for an increasing number of students. Those who do attend are saddled with higher levels of debt, a burden that becomes extreme for those who never graduate.

Meanwhile, public colleges–too frequently characterized as the bad actors– are victims of a sort, too. Their enrollment has been steadily declining as they lose the cost advantage they once enjoyed over private colleges. This worsens their fiscal position, and they are under threat of becoming trapped in a vicious cycle of chasing higher tuition rates while losing students.

Is free college tuition affordable?
Federal spending. Image from the National Priorities Project.
Federal spending. Image from the National Priorities Project.

The Federal budget of $3.8 trillion is broken into two pieces, about $2.5 trillion is mandatory spending. Since mandatory spending is mostly on social security and health care, think of it as the fixed insurance obligation of the federal government.

Another $1.1 trillion is discretionary spending, the second piece, which includes everything else the federal government does. Because over half of discretionary spending is on the military, Noble economist Paul Krugman dryly refers to the government as an insurance company with an army, navy and air force.

Education spending is within the relatively small slice of the budget that is not mandatory or military spending.

All things being equal, Secretary Clinton’s proposal would increase the education component of the budget to just under $170 billion, or from 3% to 4.3% of the overall budget.

That doesn’t strike me as a large amount of money given the overall spending matrix. Perhaps most importantly, if you set out to invest an additional 1.3% of your budget on something, it is hard to imagine how you’d get a better long term payoff than putting that into higher education.

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Author: TJ Murphy

Gradschoolmatch Founder