Earlier this month New York passed the nation’s first free education bill for public universities. In a program touted as “free education for the middle class,” families making under $100,000 per year (soon to rise to $125,000 per year) will be able to go to SUNY schools tuition free.

America’s higher education suffers a massive class divide, with high-income students being disproportionately represented. Cuomo and other supporters of free higher education claim that making college free will boost the enrollment rate of students from low-income backgrounds and would stem the rising tide of student debt. Sounds great right? Wrong. This bill, will do the opposite, funneling money to those who don’t need it and creating a significantly more unequal education system.

This bill, the Excelsior Scholarship, is ill conceived for multiple reasons, which can be summarized in two main critiques: flawed conception and flawed construction. The first section of this article will explore the fundamental problems with free college while the second section will focus on problems unique to how New York has put together its policy.

 

Flawed conception

I would first like to address the fundamental problems in any free higher education policy. Progressives base their arguments in support for this program on three claims:

1. That college grads are drowning in unpayable debt and need assistance

2. Low-income students attend college at lower rates because of its cost

3. That most of the benefit of free college will flow to middle- and working-class families

All three are untrue.

 

College Grads are NOT Drowning in Debt

College, like all investments in improving productivity, results in some sort of increase in money earned, called a wage premium. The annual wage premium for going to college according to research done by the New York Times (as of 2014) is $17,500 per annum (your average college grad will make about $47,500 per year, while someone with no college education will make only $30,000 per year). This massive increase in wages totally surpasses the amount of money it costs to go to college. For most, the cost of college is relatively light: 69% of undergraduates borrow less than $10,000 in total and 85% borrow less than $20,000.

Compared to the wage premium to be gained by going to college, these numbers are insignificant, which is why most college graduates pay off their loans in a little over a decade. While college debt is on the rise, the idea that it is unfair or unpayable is pure hyperbole.

College is actually one of the few places where loans work like they are “supposed” to. Loans are, in theory, meant to allow you to increase your level of productivity beyond what it was previously. In time, the lender receives his or her money back along with a portion of your increased productivity via the way of interest (which gives the lender his or her profit and covers the risk).

Think of a farmer taking a loan out to buy a tractor or a merchant using credit to purchase an extra ship. The loan was used to increase productivity of the worker and the lender, recipient of the loan and society at large all benefit. Unlike home loans, car loans or payday loans college loans actually function the way loan should.

 

Low-Income Students Attend College at Lower Rates NOT Because of its Cost

This fiscal reality is reflected in research. According to James Heckman, the 2000 Economics Nobel Laureate, “Given the current college financial support arrangements that are available to low-income and minority children in the U.S., the phenomenon of bright students being denied access to college because of credit constraints is an empirically unimportant phenomenon.” This means that claims that low-income students are blocked from higher education by its high costs are at best unreflected in the data and at worst outright lies.

If not high costs, what is the barrier keeping low-income students out of our college system? For this answer we must look earlier in life. The true barrier to college for low-income students is our deeply unequal primary education system, which leaves most low-income students unable to go to college despite the fact that they could afford to go.

According to Education Week, at current the majority of our high school graduates are not ready for college, based on national SAT and ACT scores. The ready-for-college deficit is most strictly observed in low-income districts. In New York there are school districts where only a subfraction of all graduates could ever hope to achieve higher education, largely due to the failings of their local public schools.

 

Most of Free College’s Benefits Will NOT go to The Working Class

As stated previously richer families are overrepresented in higher education and because of this will be the primary benefactors of a free college program. Wealthy families are much more likely to have a college-ready high school graduate, either due to the better state of their local public school (many of which are funded with local property taxes, meaning that rich towns spend more on education than poor ones) or from the ability to send their kids to private schools.

Besides better access to higher quality elementary, middle and high schools, children of wealthy (and upper-middle class) families get a significant head start over their low-income peers. New research has shown that inequality in home environment might even eclipse inequality in the school system itself as the main reason for our educational divide.

The home environment of many working-class families is oftentimes less conducive to education than that of wealthier families. Working-class families are more likely to have single parents and are more likely to parents away until late hours at work. By contrast, middle-class families are likely to be able to afford babysitters and wealthy families often have a tutor or two. This means that students from a wealthier background have a head start in the education system, starting ahead and staying ahead and ultimately more likely to go to college (and much more likely to receive a free education under a free higher ed scheme).

The fact that higher education is disproportionately wealthy means that the majority of the money spent on higher education will end up in the pockets of wealthier families who don’t need it. Earlier, I mentioned the fact that college has a massive wage premium. A college degree will almost always land you in the top half of American society. This means that free college given even to low-income families is subsidizing the soon-to-be upper crust. Why are we giving money to soon-to-be upper-middle-class-or-even-higher people (who will have little trouble paying their own costs) instead of to actual poor people?

Any progressive that supports free college is working against their stated goal of a more equal society. Free college would effectively be forcing the working class, the very group that progressives avow to aid, to subsidize the education of the soon-to-be rich. Truckers will be paying for bankers, forklift drivers will be paying for CEOs. Free college moves money from the poor to the upper crust and soon to be upper crust of society.

The fact that free college simply relocates money into the pockets of the wealthy was demonstrated in Scotland, whose university system and economy became more economically stratified when higher education was made free.

 

What Should be Done

If not free college, what can be done to increase the equality of our primary education system and by extension the equality of our higher education system? Quite a lot. Proposals (with significant empirical backing) exist across the political spectrum. Progressives advocate for subsidized preschool for low-income families, which would help iron out the starting gap between wealthy and poor families, as well as longer school days or more expansive (and mandatory) after-school programs for poorly performing students would keep them out of unproductive home environments that are even more unequal than our already unequal schools. Similarly Conservatives preach that a voucher system would also improve equality, giving low-income parents the opportunity to escape failing school districts and putting competitive pressure on schools to improve (along side detailed ranking of school and teacher performance). Conservatives also point out that vouchers have the potential to stealthily even out discrepancies in school funding since vouchers don’t vary in size from school district to school district. Either way, there are a whole bevy of proposed programs, from both sides of the political spectrum, of how our primary education system could be improved.  

Some people would ask: why not do both? Why not invest in improving primary education and making college free? Well you can’t do both, or at the very least you can’t do both well.

One of the most important theories in modern economics is the idea of opportunity cost. As long as resources are scarce there will be tradeoffs. By buying one thing, or doing one action, I cannot do another (one dollar could buy me a banana or an apple, but not both).

Since there is a limited amount of dollars in the economy, we must analyze each one and see if we are spending it on the thing that will provide the best value. Every dollar wasted on making society more unequal through a regressive free college program is a dollar not spent on making society more equal with improved primary education. Spending 100 billion dollars on making college free and 100 billion dollars on improving primary ed will be far less effective than 200 billion on primary education.

 

Flawed construction

Besides the fundamental flaws within free college itself, New York’s specific program contains some shockingly bad legislative elements.

 

The Hard Cap at $125,000

Cuomo’s free college has a hard cut-off at the $125,000 annual income mark. This creates perverse incentives. People just above the income cap may stop working or reduce their output to make it just below the cap. People just below the cap may refuse the chance to increase their income so as not to lose the benefits. Under New York’s scheme, someone making $120,000 per year will actually lose money if they increase their income to $130,000 due to being ineligible for subsidized tuition (this article from the Economist details the problems with the “welfare cliff”).

Hard cut-offs also contain significant logical breaks. Why is someone making $124,000 per year worthy of free college while someone making $125,000 per year not? Is that less than 1% difference in income so significant as to deprive them of tens of thousands of dollars a year of free tuition? Also why does someone making $124,000 per year deserve the same amount of money as someone making $50,000 or $20,000? It doesn’t make any sense.

The problems with hard cut-offs have been known for decades, yet somehow a capable governor and a whole state legislature ignored them. The superiority of sliding scales (benefits which slowly trail off as income rises) is apparent; they are far less likely to result in a situation where increasing one’s productivity leads to a lower effective income due to the suspension of a welfare program because your real income climbed too high.

 

The Lack of Rationing

Additionally Cuomo’s free college program lacks the restrictions found in virtually every other free college program on the planet.

There are two ways to constrain the consumption of something, either through market means or through rationing. In a market when the consumption of a product or service goes up the price will follow (barring a major increase in supply). When you eliminate the need to pay for something consumption naturally explodes. Therefore whenever a service is provided for free strict controls are put on its usage.

We see this in Europe, a place where many progressives point when trying to promote their programs. What progressives typically ignore is the fact that Europe exercises strict rationing in regards to its free college programs (and other things such as healthcare). In European nations where college is free or heavily subsidized, students are rigorously tracked. Starting at an early age, students with sub-par abilities are weeded out and placed in lower tracks. This is done to prevent students who are perceived as likely to abuse college funds from ever going to college. Poor grades early in life could doom you for the rest of your academic career (anyone who got some Cs in middle school or freshman year should ruminate on that).

The college majors you are eligible for are also severely restricted. In the United States, we are encouraged to experiment over the course of years and eventually settle on a major that suits us best. This is impossible in a free higher education system. European free college systems require students to pick their majors long before enrolling. Many don’t even allow you to pick, instead giving you a standardized test which will determine it for you at the age of 16 or even earlier.

Returning to college at a later date to get an additional degree (or to get a degree in the first place) is also usually impossible. In order to prevent students from staying at school indefinitely, most free higher education systems restrict the number of years you are allowed to spend at university and prevent you from returning later in life (so say goodbye to all those inspiring stories of people returning to college in their old or middle age to fulfil their dreams).

All of the above exists to suppress costs and to limit the consumption of higher education. And don’t even get me started on the fact that European schools are universally more austere than their American counterparts or the fact that they have lower graduation rates.

In effect, Cuomo is trying to have his cake and eat it, too. He is attempting to implement a (semi-) free college system without taking the painful steps that every other nation with free higher (or semi-free) education has had to take in order to make college free. It raises questions about the sustainability of the program.

 

Freedom Isn’t Free

So you may be asking yourself at this point: how on earth did such a regressive and poorly constituted bill even get out to a committee, let alone get passed by our Republican-controlled State Senate and our purportedly moderate governor? The answer is simple: cynical political posturing.

Many have speculated that Governor Cuomo seeks to run for president in the 2020 election. In order to do so, Cuomo hopes to harness some of the populist progressive energy that gave Bernie Sanders 45% of the Democratic Primary vote. By adopting a version of one of Sander’s key campaign points, Cuomo can garner some “progressive cred” which he hopes to leverage. Populism will allow him to effectively mask the deep flaws in his program (and personal history), just like Sanders and Trump used populism to shield theirs.

Members of our Democratic-controlled State Assembly will also be able to reap gains among progressives while members of our Republican-controlled State Senate can be confident in the fact that most of the program’s benefits will flow to the wealthy suburban districts—most of which vote Republican in New York. And in four years, when 2020 is won or lost by Cuomo, clawbacks built into the legislation itself will allow the bill to be effectively repealed, leaving New York more unequal, and still without proper primary education reforms.

A generation of rich (or soon-to-be rich) kids will walk away with less debt (which they easily could have paid off), while a new generation of working-class students will be doomed by our substandard primary education system. Progressives, whose laudable goal is to break down barriers in society, will have succeeded in making them stronger.