State “Free College” Programs

​This analytical report responds to the current policy interest in some states in offering “tuition-free college” to income-eligible students attending certain public colleges and universities. In most cases only public two-year colleges are covered, although New York State’s Excelsior Scholarship program also covers public four-year colleges and universities. In Section One, we use the latest available empirical data to assess the early effects of the Excelsior program and the two longest-standing state “free community college” programs, Tennessee Promise and Oregon Promise, each of which is only a few years old. We also contrast these largely single-sector “free college” approaches to college affordability policy with the approach of another state, Washington. This state also makes a commitment to cover college costs for low-income students, as well as to give generous help to more moderate-income students, but without distorting aided students’ choices among higher education sectors (two-year vs. four-year or public vs. private). Sections Two and Three of the report analyze alternative approaches for states to create cost-effective incentives for increases in college enrollment and degree production.

In general, we find that the early effects of the Tennessee and Oregon tuition-free community college programs have been to increase community college enrollments significantly. However, it is too early to tell how many additional college credential awards will result. In the first year of implementation, four-year college enrollments experienced modest negative effects in both states; but thereafter these effects appear to have largely disappeared. To date, neither program seems to have meaningfully affected enrollments at private four-year colleges and universities in the two states.

In New York, the much-heralded Excelsior Scholarship program, which places many restrictions on student eligibility, has benefited fewer students than originally predicted. In addition, a high rate of students have been terminated from the program for failing to maintain full-time status. While data are still scarce, there are signs that the program may have shifted some student enrollments in the public sector from two-year to four-year institutions. Although the state accompanied Excelsior’s rollout in 2017 with the creation of a new Enhanced Tuition Awards program for eligible students seeking to enroll in New York’s private colleges and universities, this program imposed such stringent requirements on the colleges that there has been limited take-up in this sector. Still, the enrollment trend data for the private sector do not provide any clear indication that Excelsior has had much effect as yet, except perhaps on a subset of institutions heavily dependent on New York students. Other factors are at work as well, such as decreasing high school graduate numbers and a stagnant income eligibility ceiling and flat grant sizes in the state’s major student aid program (the Tuition Assistance Program, or TAP).

The Excelsior program, however, saw its income eligibility ceiling increase substantially in 2019–2020 to $125,000 in family income. The governor has proposed increasing it further to $150,000. These changes could have more substantial effects on both private college and community college enrollments as many more students become eligible for grants for public four-year college attendance. We suggest that a better approach for New York would be to reprogram the funds it now spends on Excelsior Scholarships so as to update the TAP program’s long-stagnant income eligibility and award levels. This would be more equitable in terms of student choice and would also take advantage of TAP’s more sophisticated formula (compared to Excelsior’s) for assessing family financial circumstances in order to determine need. Such a shift also may lead more students to be able to choose private colleges, thus relieving the state of some of the financial burdens of supporting them in public institutions.

We find that Washington State’s more traditionally designed need-based student aid programs provide an attractive model for state college affordability policies. This is especially true given recently enacted enhancements that make the programs among the most generous and even-handed (across sectors) in the country. The programs do not privilege two-year college attendance—beyond what greater proximity and lower tuition already do—and they facilitate the choices of needy students who wish to elect private college options but need aid to do so. The state also has an early commitment (from middle-school age) guarantee program for very low-income students that provides especially generous grants  for  attendance in any sector.

Section Two simulates, for the same four states studied in Section One, the effects on enrollments, degree production, and state budgetary costs of offering hypothetical enhanced state financial aid to state resident students on the margin of choice between a private and a similar public college, if the student elects the private sector option. The results vary by state, but in all four cases a grant increase of just $1,000 targeted at such students would save the state money by diverting some students from public to private colleges where they cost the state much less to support. In three of the four states, the private sector’s higher degree productivity per enrolled student also would lead to greater annual bachelor’s degree production.

Section Three sketches out possible designs for approaches that are “capitation”-based (that is, per enrolled student-based), rather than student-aid-based. This approach enables states to efficiently subsidize growth in private higher education utilization and capacity where there is a good match between state needs and this sector’s capacity and interest. Such an approach is likely to make most sense when a state’s public sector capacity is near its limit, whether state-wide or in a particular field or region of the state. It may also make sense when a public institution has had chronic low enrollments and it is clear that nearby private institutions could absorb more students, especially if they were subsidized. One possible program design considered would incentivize increased enrollments and another would instead reward additional
degrees produced. In either case, the state may be able to avoid bearing the full costs of public sector expansion by negotiating a cost-sharing arrangement along the lines suggested with willing private college partners that pays the college for additional enrollments (or degrees) of the targeted types.

In sum, several promising avenues are available to help states meet higher education needs efficiently and equitably while preserving student choice. All are likely to be superior to offering tuition-free college only to some in a single sector.

​Council of Independent Colleges
William Zumeta and Nick Huntington-Klein
May 2020

Affordability; Student Debt