U.S. Misses Billions in Gains as Free Community College Gets Ax

(Bloomberg) -- Free community college was among the first big proposals cut as Democrats battled to get President Joe Biden’s agenda down to size -- yet an analysis says dropping the $109 billion initiative carries a lasting economic cost.

The program, intended to address racial inequality in higher education, would have offered two years of tuition to community college students over the next five years. Proponents hoped the program would become permanent once enacted. 

If implemented nationwide and expanded over a decade, free community college would have boosted real gross domestic product by roughly $170 billion per year and tax revenue by about $66 billion annually, according to an analysis done by the Georgetown University Center on Education and the Workforce at the request of Bloomberg News.

Even with the promise of long-term gains for the economy and benefits for minority and low-income students who attend community college in higher numbers, the plan fell victim to sparring over the tax-and-spending bill’s top line that eventually cut Biden’s $3.5 trillion plan in half. Lawmakers are now turning the framework unveiled on Thursday into legislation that could get a vote in coming weeks. 

Democratic Representative Jimmy Gomez of California, a progressive who attended community college, said he hopes the scuttled community-college provision gets worked back in as the chambers consider the bill. Gomez, who recently met with Biden, said he’s working with fellow community-college alums in Congress. 

“We’re not giving up fighting for it, even though it is a tough fight,” Gomez said in an interview. 

The analysis of the higher-education plan is based on durable changes from higher earnings from more U.S. workers attaining associate’s and bachelor’s degrees, and some college credit, using the premises of a scenario in an earlier report by the Georgetown center. 

“We now live in a world where 80% of the good jobs that ultimately pay more than $65,000 a year go to people who have at least some college,” Anthony Carnevale, the center’s director, said in an interview.

Meantime, college is only getting more expensive and thus more inaccessible to minorities and low-income students. Between 2008 and 2019, state higher-education funding fell by $3.4 billion nationally after adjusting for inflation, according to a report by the Center on Budget and Policy Priorities. Since then, the economic downturn caused by the Covid-19 pandemic has driven even more cuts for public colleges and universities in 27 states.

Tuition at U.S. community colleges on average has increased by 37.5% between 2008 and 2019, according to the same report. 

Community college “provides people with so many opportunities to go transfer, or to get the skills that will help them live a good middle-class or even upper-middle-class lifestyle,” Gomez said. “So for me, community college is critical. And it’s what’s going to help us prepare the workforce for the 21st century.”

Douglas Harris, a senior fellow at the Brookings Institution, said excluding the provision -- a Biden campaign promise -- is “certainly a setback” for Democrats.

Free community college, he added, could “go a long way” toward addressing inequality in higher education. 

States would have chosen whether to participate in the program, funded solely by the federal government in the first year. Each following year, states’ obligation to the funding would have increased by 5%. 

Fallback Option

The bill now before Congress does include a $550 increase to the maximum Pell grant and expands access to Dreamers. It also includes investments for Historically Black Colleges and Universities and other minority-serving institutions. The bill also would boost workforce development funding by 50% each year for the next five years.

Some analysts argue there are downsides to making tuition at community colleges free. Bruce Sacerdote, an economist and professor at Dartmouth College, said there are more effective ways to spend money on higher education.

Sacerdote co-authored a 2019 report that found that Pell grants can fully cover community college tuition in several states. Additionally, Pell grants are based on income, which could help address inequality in higher education, Sacerdote said. 

Sacerdote stressed the importance of helping students graduate, suggesting it might be more beneficial to direct funding toward institutions that have higher success rates.

“It’s that attainment that really leads to different careers and hiring higher earnings,” Sacerdote said. “And so that is something that we should care about a lot. As much as we do care about access, meaning we’re getting people to go.”

States have cut funding for higher education substantially since the Great Recession, driving up tuition and making college less accessible for low-income students. 

Harris said omitting the proposal is a missed opportunity for Democrats to address racial inequality.

“Anything that is going to improve employment and earnings outlooks for Black and Brown people it’s going to lead to more income, and that’s going to lead to more wealth in the long run,” Harris said.

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