Free college? Not really …

Free college tuition.

It became famous as one of Bernie Sanders’ biggest campaign promises.

He didn’t get into the White House. But some state and local governments are still pushing ahead with the idea on a smaller scale.

Take New York. The state’s Assembly and Senate just approved a new budget that includes free college tuition for a wide swath of students attending two- and four-year programs.

Here’s the deal in a nutshell:

Starting this fall, undergraduate students can receive "Excelsior Scholarships" to attend any State University of New York or any City University of New York … as long as their families earn less than $100,000. (That number will go up to $110,000 for 2018 and $125,000 for 2019.)

Are there are any other catches?


  It only covers annual tuition, which runs about $6,470 at state schools and $4,350 at community colleges. Room and board are not included in the scholarships.

  It obviously does NOT cover tuition at private schools.

  In addition, students must take at least 30 credits a year.

  And after they graduate, students must live and work in New York for the same number of years they received scholarship money.

Governor Cuomo applauded the approval of this new measure. He said, "Today, college is what high school was. It should always be an option even if you can’t afford it."

Of course, there are a lot of things to unpack below that surface idea.

Let’s Start with the Affordability Problem Itself …

You probably know college costs have been going through the roof for quite some time now.

According to the College Board, tuition and fees at a public four-year college averaged $9,648 for an in-state student during the 2016-’17 academic year.

Ten years earlier, they averaged $5,804.

That’s a 66% increase over a single decade.

Using the same academic years and student groups, the average room and board costs went from $12,837 to $20,092. That’s a 56% jump.

Looking at individual annual tuition increases over the last few years — which are the SLOWEST experienced since the 1970s — we still see 2.9% in 2014-’15, 3% in 2015-’16, and 2.4% in 2016-’17.

And if we start talking about out-of-state students or private universities, the numbers just get bigger.

11 states saw tuition/fee hikes of 20% or more between 2011 and 2016. Data source: The College Board, Annual Survey of Colleges

Even if we try to factor in inflation and adjust all the numbers to 2016 dollars, the College Board says average published tuition and fees at public schools rose 9% between 2011 and 2016, following a 29% increase between 2006 and 2011.

Please remember that these periods include a major real estate collapse … the largest financial crisis since the Great Depression … and very slow overall inflation in many other parts of the U.S. economy.

So Let’s Ask WHAT Has Been Sending College Costs Soaring in the First Place …

Your typical family doesn’t have $30,000 or $40,000 saved for each of their kids to go to a public New York college. Or any other college, for that matter.

Nor do they have hundreds of thousands for private colleges and universities.

That much we all agree on.

Yet we are also living in a world where every child is told, as Gov. Cuomo put it, "College is what high school was."

Enter the huge market for student loans, which aim to make college "more affordable."

You know, kind of how a 10-year car loan makes a Mercedes more affordable.

Or how zero-money-down, adjustable-rate mortgages made McMansions way more affordable during the last housing boom.

If I’m getting a little snarky, you’ll have to forgive me.

It’s just that the similarities are so glaringly obvious that I can’t understand why more Americans don’t see them.

Sure, it’s true that a college education may be a better long-term investment than a luxury car. But it certainly isn’t a guarantee.

Yet that idea hasn’t prevented lawmakers from perpetuating the myth that a college education is a surefire way to a better lot in life … and finding new ways to subsidize the costs. In most cases, thrusting them on taxpayers either directly (as is now happening in New York) or indirectly (as has already been happening through various federal student loan programs and guarantees).

At this point, we now have 44 million Americans who owe money on student loans, for a grand total of $1.4 trillion. Moreover, the average 2016 graduate walked away with $37,172 in outstanding debt. That’s a 6% increase from the year earlier.

For the record, I am not saying private lenders are blameless. Far from it!

But as with any other bubble, this process has become self-fulfilling: Money gets easier. Prices go higher. As prices go higher, people need to borrow more money. Or other "affordability" measures are put in place. And then the cycle continues until it bursts.

So yes, higher education is still a noble pursuit that can be a good investment for many students.

Academically qualified Americans should be able to attend universities regardless of their current financial situations.

And the more we can make the student loan market similar to other lending models, the better — including giving borrowers the ability to refinance.

At the same time, let’s recognize that schools squander plenty of money on outrageous athletic programs … grandiose buildings and facilities … and bloated administrative salaries, which are then passed along via cost hikes.

Let’s also acknowledge that plenty of students use their easy-money loans to rent luxury apartments and eat at nice restaurants rather than pay for tuition and books.

Heck, let’s even imagine that many families earning $100,000 a year will now look at their savings from New York’s tuition program as "free money" to use for a vacation or some other discretionary spend.

My ultimate point is that there is actually no such thing as "free college tuition" … someone is paying for it somewhere, now or in the future.

When my father was considering college in the 1960s, his family didn’t have the money for it. So he worked his way through school. It took longer than the usual four years, but he did it.

Meanwhile, perhaps because of that, my dad always impressed upon me the importance of good grades and hard work throughout my school days. And that ultimately paid off for me in the form of an academic merit scholarship to attend a private university.

So from my perspective, the idea of "free college" for all — or at least for every family making less than a hundred grand — raises a number of serious questions and may very well be fanning an already-large fire.

But I would love to hear your thoughts on this topic as well …

Best wishes,
Nilus Mattive

Your thoughts on “Free college? Not really …”

  1. Hello Nilus

    Thanks for your take on this. Government “free tuition funding” will just cause university administrations to see a new large pot of money from which to draw. The easy availability of new money will simply spur increasing costs. Giving money to a government or a college is like giving money to a drug dealer. The new found wealth is squandered on admin salaries and buildings. Furthermore, we forget that a college education was once very valuable mainly because few people had it. It’s much like printing a million dollars for each of us. We don’t all get rich, what happens is a million just doesn’t buy anything.

    Allen S.

  2. Higher College and University Education is a disgrace from an affordability and return on investment standpoint. It is simply becoming too expensive, with too little in return, except for the college and university brass, which is over paid and bloated in bureaucracy and to top it all off………..lots of immoral and unethical behavior all the way around….

  3. Nilus,

    A very thought provoking article, along with the several good reader comments.

    If you ever run across a comprehensive study by a reputable firm of college tuition costs, please share it with us. My hunch is that major universities are corporations first, and educational institutions second. They try to operate successfully in the game handed to them with top management being rewarded handsomely to win. Until something changes all of that, escalating college tuition costs will be a never ending subject. And frankly I don’t know what that “something” would be to make a college education affordable for most struggling American families.

    Let’s hope one of our brilliant graduates has a solution.


  4. I agree with you entirely. Families and students are getting scammed. The other thing fueling this fire of rising college loans is that the Federal government guarantees the loans. Colleges have no skin in it. With the Federal government backing so much of the student loan debt, colleges are free to raise salaries every year and spend on new students centers and other things that do not further students’ education.

  5. tHE FREE TUITION to encourage more young people to go to college as it is the key to a good job is a scam. statistics show that only a few majors really do give a person the probability to earn significantly higher income. The majority of majors simply do not provide the income to justify the cost of college especially if the student has to take out large loans to attend and are strapped with debt that prevents them from affording to purchase such items as cars or homes and even the basic cost of living as the debt payments exceed the added salary they will draw because they have a degree.

  6. Colleges are hidiously over priced for the poor value students receive. For too long they have gone to the spicket of low cost loans to push very liberal agendas and force many students into debt burdens many cant afford. The pride and prestige issue is over the top. The kids are pampered beyond belief- thus society pays and and mis taught students fall for such things as the Bernie Sanders free college gimmick. Most colleges are like a boat with no rudder. Shameful.

  7. Progressives, liberals and socialists love the word “free”, anyone that thinks that getting things free from the government is a good idea should look at Greece, Spain or France! In case they think socialism works and I use the word “work” as a pun. These countries are broke for a reason, other peoples money runs out eventually. Thank God we didn’t get a Bernie or Hillary that want to give things to people for “free” so they can be kept in office by freeloaders. I don’t see Hill or Bill giving up any of their stockpile of cash to help others, only to help themselves, progressives have been trying to kill the capitalist for a long time. Why is it that these same people all are wealthy….Reid, Pelosi, Clinton, Cuomo, et all. College costs are skyrocketing and it will be interesting to see when the bubble will burst. We saved to send our children to college, we could have bought a vacation home but we wanted to educate our children, they graduated from private colleges without any debt. I’m not sure that would be doable in this environment. It is a sad state of affairs!

  8. The real costs of all services, education and medicine coming first to mind, which are exempted from market forces and command their revenues by the force of the tax collectors’ bayonet will always spiral upwards exponentially.
    Such continues until the market economy eventually reacts, and destroys the previous subsidized and by then hideously inefficient model. Higher education is about to come face to face with the electronic and internet capabilities of the real world and economies of scale. Hold on to your hat!
    Post high school education was traditionally and will be returned to its proper place, as an investment in self. It must survive rational cost/benefit, risk/reward, investment/return and delayed gratification analyses. Its courses and costs must be practical and provide skills which are in demand by employers. It must be affordabe without subsidy to the investor student.
    So it was in the past, and it will be in the future.
    Education is not exempt from the market regardless of the attempts to make it so for multiple decades. Someone should remind the social do-gooders in the New York State government that free college tuition was once, but no more, a feature of the Peoples Republic of California. New York would be better to learn from history as opposed to repeating it.
    Additionally, the economic promises made in the very close to the fraudulent sales pitches to sell a college education are fallacious. Not kept they create embittered young adults who believed, pay for and feel ‘entitled” to advantages which cannot be delivered.
    It is definitional that when the average person has a college degree the salary commanded with that “qualification” will be of the average person. The “advantage” of the college graduate in the past (where the statistics come from) was determined by the fact that 15%, of the most favored, qualified and brightest, attended and graduated college. They, not surprisingly, did better than average in the real world meritocracy.
    This cannot be expected to continue in a world of a universal college education, where the standards must be adjusted significantly downward to allow the average to matriculate. In the past, the average college enrollee/attendee/graduate was at least one standard deviation above average at the get go.
    If the leaders of the society desire to extend social indoctrination for four/five years post-high school, then they should call it what it is. No matter what the leadership hopes, while all of the children in Lake Woebegone may have been above average, but that is not, and will never be, true for the Untied States or the World,

  9. I wholeheartedly agree with you! We must beg the question “Why is college a replacement for a public school education? Where have we gone wrong? We’ve taken the option of a vocational school or vocational training in high school out of the equation. I still believe that “free” anything is a bad idea. Students should learn that nothing is free and they (and their parents) have a responsibility to take care of themselves. We are veering in the direction of a socialistic society and that doesn’t bode well for citizens who work hard for their living and pay their own way. Thank you for your interesting and thought-provoking questions. I enjoy reading your views and follow the investing advice you give to your father.

  10. Not all people are college bound for many reasons. My grades in High School were to say the least, terrible.

    I was fortunate that my guidance counselor was approached by a sheet metal contractor in need of a new apprentice.

    I was fortunate in that I got that apprenticeship and finished, I have made a good living, even during Reaganomics.

    I believe the trades are a good way to go for students to go if they don’t want to go to school.

  11. Like you say, there is no such thing as “free college”. It costs someone in the long run. Students normally end up paying for loans for years after they leave college and enter the work force. Many with jobs that will never allow them to pay off the loans they acquired from private institutions.

  12. I attended community college for 2 years and private university for the last 2 years with a partal scholarship all while working full-time. My parents could not afford to help me at that time. I would have liked to have lived on campus but by living at home I was able to achieve my goal of graduating debt free in 1975. My daughter attended the local state university and lived at home and recently graduated debt free! We both feel we had a fine education. Her costs were about $8200. a year.

  13. One way to provide “Free” college education is to waive tuition, but require the graduate to pay a percentage of lifetime earnings (say 10%) above what an average high school grad would earn. This way, the present generation will support the next.

    The biggest challenge is to bankrole a program like this to get it started. Maybe Gates and Bezos could help on that score.

  14. My son had academic scholarships for tuition throughout his undergraduate program. As parents,we paid room and board (dorm year one;apartments years 2-4). He worked a year beyond graduation,then decided to go to U of Oregon for graduate school. That left him with over 35,000 in loans. In the long run,the graduate degree may help his career,but that hasn’t been evident as yet.

    Why is this country giving scant lip service to vocational colleges? There is a scarcity of trained people in many fields. We don’t even offer job fairs in most schools that inform students of opportunities in technical professions. Not everyone is going to be successful in
    an average college or university.

  15. A large part of the increasing college tuition and room and meals well in excess of inflation is due to states like Kansas continually cutting state funding in order to give tax breaks to the upper earners and in Kansas’s case,no tax at all for some businesses.

  16. Nilus, this problem is only going to get worse. Keep getting the word out. All three of my kids got through college the old fashion way. They worked their butts off. They all graduated with no debt. good to excellent grades and are all responsible citizens with cool grandkids for mom and I. Our help was as needed and was relatively small as to the totals. I have no soft feelings for the little kiddies that pay nothing, do nothing and graduate with huge debt and tlhen expect me to bail them out. I did not do that for my kids, why would I do this for someone else’s kids. I know I am an old geezer, but I went through college in 3 years, got a BS degree in finance, got married and graduated with no debt. I worked a lot, spent very little, and was a graduating senior at 20. So get to work kids and good luck.
    PS: I have made a very good living and have enough for a solid retirement, unless I have to give it all away to those who do not take care of themselves. Interesting!!!!!

  17. It’s hard enough for us profs to educate and motivate students who go into debt to get a degree, but what are we going to get now that it’s free?

  18. I don’t think Bernie Sanders’ definition of “free” is listed in my dictionary.

  19. You’ve scratched the surface on rising tuition and fees. Over the last few decades, states have reduced support; tuition has gone up accordingly (and then some). Admin salaries have risen. So have some faculty salaries. However, the trend has been toward a large fraction of classroom sessions being taught by adjunct faculty who work at near minimum wage considering all their efforts and have no job security, no benefits, no raises, and often weak qualifications. Further, I suspect admins view athletics as essential for recruiting and fund-raising, meaning that part of the problem is simply the accepted culture we live in. There are other avenues to gaining worthwhile knowledge but as long as college per se is seen as a ticket to the good life (probably left over from mid 20th century when only rich people and a few smart people went to college), the situation will be a mess.
    Perhaps market forces would offer a better solution than expert analysis but it’s hard to imagine how market forces could address the problems. In health care, getting people off health insurance would go a long way toward cost-conscious spending. There’s no good analogous solution for higher education.

  20. At the main campus of the UW in Madison square footage has quintupled(5X) since the early 70’s while campus enrollment is down 15,000. But every square foot has to be heated and cooled and maintained as well. Nothing but avarice here. But the worst is the republican governor and legislature both defunding 50% of what they used to pay for but also appoint the slug Regents who oversee the UW budget. If it isn’t apparent, repubs reduced the support 50% as part of the Reagan era to de-educate the 99% by making college education unaffordable while the repub Regents piled on by not properly managing the balance between research and education properly!

  21. Great insights, Nilus. I am a retired high school guidance counselor who has witnessed all of these scenarios and many more. I remember a wealthy family with a yacht that did not think it was their responsibility to pay for the education of their talented son. I witnessed lower middle class families who lived beyond their means receive generous financial aid while similar families that had the discipline to save did not. And we all know that when government money chases anything, the cost often rises exponentially. My advice: dividend reinvestment plans, starting with the child’s baptism gifts. Ah, the power of compounding! Worked for us!

  22. My first year at the University of Michigan in 1954 in-state tuition was $90/semester. Adjusted for inflation that would be a little over$800 today. So why is that same tuition $13,000+ today??!!

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