The Free College Battle

Photograph Source: COD Newsroom – CC BY 2.0

The prospect of free public college is shaping up as one of the major divides between the more progressive candidates (Bernie Sanders and Elizabeth Warren) and the more centrist candidates (Joe Biden and Pete Buttigieg). Buttigieg in particular has been especially vocal in his opposition to making college free for everyone.

He has argued that it would be regressive to tax middle class people to pay for the children of the wealthy to go to college. Buttigieg argues instead that he would make public colleges free for children of families earning less than $100,000. He would have a sliding scale for families with incomes between $100,000 and $150,000, and have families with incomes over $150,000 pay full tuition.

Sanders and Warren have argued that college should be seen as a right, comparable to attending a public grade school, and that we shouldn’t expect people to pay for it. They also point to the strong political support for universal programs, like Social Security and Medicare, as opposed to anti-poverty programs like Temporary Assistance for Needy Families (TANF) or food stamps.

While these are important arguments for universal free college, there is another side of this issue that has been largely neglected. Specifically, Buttigieg and other proponents of means-testing tuition seem to have not grappled with the administrative difficulties of their plan.

It is one thing to write down on paper how much we think families at various income levels should pay for their kids’ college. Implementing this payment schedule in practice is a very different story.

Economists tend to believe that people respond to incentives. The Buttigieg plan gives families enormous incentives to make their income appear smaller than it actually is.

If that sounds strange, after all, we do a reasonably good job of collecting income taxes, let’s start with the most simple issue, divorced or separated parents. Roughly a third of all children are in families without two parents. Most often the mother is the custodial parent and usually has the lower income.

What does Mayor Buttigieg want us to do with children with low earning mothers, but high earning non-custodial fathers? Generally, parents are not responsible for supporting kids once they turn eighteen. We can change the laws to make both parents responsible for paying for their kids’ college, but enforcing that law may not be that easy.

Less than 44 percent of custodial parents receive the full amount of child support which the non-custodial parent is obligated to pay. This is often because the non-custodial parent literally does not have the money to pay child support, but in many cases the non-custodial parent is simply able to avoid paying through various legal or illegal dodges. Perhaps Buttigieg will find ways to crack down on these deadbeat dads, but that is a non-trivial task.

And, what do we do for the kids with low-earning mothers and deadbeat doctor dads? Does Buttigieg want to make them responsible for $25,000 in annual tuition based on their absent father’s earnings? Or, will he give them a pass, not wanting to punish the kids for the irresponsible behavior of their father?

Either route poses serious problems. Certainly it is not fair to punish children because they happen to have a relatively wealthy parent who is a jerk, so it doesn’t make sense to require them to pay tuition based on money they don’t see.

On the other hand, excluding the deadbeat dad’s income from the tuition calculation gives a very strong incentive for high-earning non-custodial parents to become deadbeats. If a professional earning $200,000 a year can save $25,000 a year in tuition by refusing to help support his kid ($50,000 for two college age kids), we have given them a very large incentive to disavow the kid(s). In fact, we can anticipate couples becoming legally divorced or separated just to be able to take advantage of Buttigieg’s free college.

While parental separation is a big and obvious problem with this sort of means-test, it is far from the only one. Many parents disapprove of their adult children’s behavior in various ways. This can mean anything from rejecting their choice of a college major, to disliking a partner, or disapproving of their sexual orientation.

High earning parents will be able to withhold tuition payments for their children based on these, or other, considerations. Children can become legally independent of their parents and thereby have their income excluded from tuition calculations, but this is a major legal hurdle. It is also likely to be in many cases a serious emotional hurdle that we probably do not want to force young people to have to deal with in order to be able to afford college.

And, if high-earning parents can avoid paying for their kids’ college by having them become legally independent at age 18, then they have a very strong incentive to have them become legally independent at age 18. In fact, Buttigieg’s plan is likely to spur a new industry of consultants who earn their income by figuring out how high earning parents can avoid paying for their kids’ college.

Of course these problems and the various types of subterfuges are not new. Colleges offering financial aid have been dealing with them for many decades. However, we can expect the extent of gaming, and the resources needed to contain it, to become qualitatively greater with a national program offering free college to the bottom 80 percent of the population.

If we want to ask the question seriously about whether the government should pay for college for the kids from wealthy families, we really have to ask how many resources should society be prepared to commit to make sure that more affluent parents do pay for their kids’ education?

After all, we allow the rich to use city streets and parks for free too. We can say this is regressive, and decide that we will charge higher income people to use these facilities. We can have check points where people either have to show that they are not high income or cough up the payment if they are. No one would suggest this move towards more progressive payments for streets and parks because the costs would be absurdly high compared to the money we would collect.

Arguably, it is the same story with free college. At the end of the day, the money we are likely to collect from high income families for their kids’ tuition is not likely to be worth the effort we make everyone go through to show that they in fact qualify for free tuition. And, the program will be largely funded with higher taxes on the wealthy in any case, so they will end up paying.

There are many serious issues that need to be thought through if we are to implement a national program of free college. For example, if we base the federal payment on current state payments, with the feds picking up the difference, we are giving an enormous subsidy to the states that have been stingiest in support of their public colleges.

We also have to recognize that this program will decimate the existing system of private colleges, with only the most elite likely to survive. That may be a small price to pay for universal free public college, but it is a cost that should be acknowledged.

There are many other important issues that will have to be dealt with when we get to the nuts and bolts of a free college policy. However, the concern that we could potentially be paying tuition for Bill Gates’ kids hardly seems like it should be at the top of the list.

This article originally appeared on Dean Baker’s Patreon page.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC.