Free College: can taxpayers afford it?

This election season, free college has been talked about so much I decided to see if it’s doable. I checked the IRS, US Dept of Education, and US Dept of Labor websites for some data. Here’s what I’ve found based on some basic math. Keep in mind, there are many factors involved that are difficult to measure. This is only meant to be a high-level feasibility study based on the data I could find.

If the government paid off all outstanding student loans it would cost every taxpayer a one-time levy of $6,000 (excluding those who qualified for an “Earned Income” credit).

That’s based on 1.26 trillion in outstanding student loans divided by 218 million taxpayers. The problem with this calculation is that most tax payers cannot afford to write a check today for $6,000. In fact, most taxpayers couldn’t afford to fix the air conditioning on their house if it stopped working today. At this point you would hear some people say that “the 1% can afford it, send them the bill.” Ok let’s do that math. 218 million taxpayers times 1% equals 2.18 million people. Using the same total we used before, that would come out to about $578,000 per person. That’s about 72% of the annual income of your average once-percenter. Add the 30% in taxes they would already pay today and you’re now taxing them at a rate of 102% for the year.

To provide free tuition to public universities, taxpayers would pay at least 15% more and as much as 25% more in income taxes each year.

If we wanted to collect enough ongoing taxes for the federal government to provide free public college, it would raise everyone’s taxes by at least 10% from what we pay today. This assumes college enrollment in public universities stays the same and does not provide any aid for private universities. We could expect college enrollment to increase by at least 50% for recent high school graduates as soon as we offered up free tuition. What about people who didn’t go to college before but still want a degree? Now we have to account for those past the average college age. This could lead to over a 200% rise in enrollment for the first decade or so until older students make their way through a degree program.

The minimum tax increase of 10% I mentioned earlier is based on $3.3 trillion in IRS income tax revenue divided by $365 billion in public universities annual operating expenses, then adjusted to 90% of taxpayers since 10% of taxpayers would not contribute due to qualifying for the earned income credit.

As I mentioned before, there are many factors to consider. The following list are some of those factors that are more difficult to measure.

  1. What about the lack of infrastructure for these increases? We would be building new structures left and right just to support all the new students. While this would be a nice short-term boost in construction jobs, where will the cash needed today to pay for these improvements come from, more taxes?
  2. What about the negative effect on the value of a college degree? If 5-10x more people in the workforce have a degree, then having one is not going to provide as much of a benefit as today. This somewhat defeats the whole reason why we want more people to go to college.
  3. What about students who want to attend a private university? None of the expenses I’ve listed account for private universities, with the initial student loan payoff being the only exception. Now do we collect an additional 5-10% in taxes to provide free private college tuition? If the government foots the bill, won’t private universities demand more money for a degree?
  4. Will a degree from a private university be the only one of value? Will a degree from a public university be equivalent to the value of a high school diploma today?

It’s probably no surprise by now what my position is. Before we just blindly agree with a politician’s policies, let’s take a moment to see if it’s even possible. Do you think we can afford free college?

Sources:

National Center for Education Statistics :: Fast Facts
2016, Digest of Education Statistics 2015, Table 334.10. Expenditures of public degree-granting postsecondary institutions, by purpose of expenditure and level of institution: 2007–08 through 2013–14
2016, Digest of Education Statistics 2015, Table 334.30. Total expenditures of private nonprofit degree-granting postsecondary institutions, by purpose and level of institution: 1999–2000 through 2013–14
2016, Digest of Education Statistics 2015, Table 334.50. Total expenditures of private for-profit degree-granting postsecondary institutions, by purpose and level of institution: 1999–2000 through 2013–14
2015 IRS Data Book

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