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Manhattan Institute

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University of Michigan's Free-Tuition Plan Will Help Low-Income Students

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University of Michigan's Free-Tuition Plan Will Help Low-Income Students

RealClearEducation July 7, 2017
EducationHigher Ed

The University of Michigan recently announced a new scholarship plan that will make tuition free for some students. While I’ve been critical of free college plans in the past, this one gets a number of things right.

First, the new free-tuition scholarship is aimed at low-income students. Eligibility for the new scholarship phases out at a level of household income of $65,000, which is approximately the median household income in the state. This is far more progressive than other recent proposals that deliver benefits much further up the income distribution. For instance, the eligibility threshold in New York State’s new plan is more than twice the median household income in the state. Similarly, Hillary Clinton’s presidential campaign platform promised “debt-free” tuition for families with income up to $125,000, which is nearly three times the median household income in the United States.

The plan at Michigan strikes the right balance, by creating the message that college is free for less well-off families without simultaneously increasing benefits unnecessarily for the rich.

Keeping benefit eligibility for the lowest income students is the right move for a few reasons. First, subsidies to lower income families are the most likely to actually increase educational attainment. Students from lower income families are the ones who might be incentivized by additional aid to attend college. Making college cheaper for students who are already going to college simply amounts to a redistribution of wealth, which could be more efficiently accomplished through the tax code.

Second, the plan succeeds in simplifying the message about college affordability. A big selling point of “free college” is that it can make low-income students realize that, despite the high sticker price, college is affordable to them. Because the college application and financial aid process are so complex (by design), increases in grant aid might go unnoticed by the students that policymakers are trying to reach. But the moniker of “free college” leaves no room for confusion. This rationale has been used to justify the large expense of regressive free college regimes. The plan at Michigan strikes the right balance, by creating the message that college is free for less well-off families without simultaneously increasing benefits unnecessarily for the rich. And since state and federal subsidies already exist to help these students, the scholarship is able to achieve the improved messaging about affordability at minimal cost.  

Third, free tuition at the University of Michigan comes with no strings attached. Some grant programs, including the new Excelsior Scholarship in New York State and the federal Teacher Education Assistance for College and Higher Education Grant, are designed with clawback provisions that convert grant dollars into loans when students fail to satisfy some predetermined conditions. A huge problem in higher education in the United States is the complexity of our student financial aid system. Many worry that the complexity of the federal student aid system is a barrier for getting the neediest students into college. Even students who do manage to enroll demonstrate low levels of financial literacy. Provisions like these might make sense from a theoretical standpoint, but fail to reflect the realities of the student experience.

Lastly, Michigan policy makers didn’t go all-in with a statewide initiative. Instead, they have created a stand-alone program at a single campus. There are a number of benefits of doing it this way. First, policymakers don’t have to oversell the benefits of the program in order to get political buy-in for a big price tag. That means that they’ll be free to assess the efficacy of the program and make changes as necessary, without reneging on promises made during the initial campaign to gin up support for the program. It also means that researchers will be able to accurately measure the impact of the program. Understanding how the program impacts students is critical to designing programs in the future to better meet the needs of both students and taxpayers.

The free-college movement probably won’t be making any ground in Washington while Republicans are in control of Congress and the White House. But the past few months have shown that state policymakers aren’t willing to let the movement rest. With college graduates among the most well-off workers in the economy, it’s difficult to argue that spending taxpayer dollars on this group is the best use of public resources. But if governors insist on jumping on the free-college train then they’d be well advised to follow in the footsteps of Michigan.

This piece originally appeared on RealClearEducation

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Beth Akers is a senior fellow at the Manhattan Institute and coauthor of "Game of Loans: The Rhetoric and Reality of Student Debt."

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