How to Make All Public Higher Ed Free in America (Version 2)

Flagship public universities across the nation are asking for more autonomy so that they can increase tuition and set their own enrollment targets. Meanwhile, student loan debt has surpassed a trillion dollars as states continue to cut their support for higher education. It is clear that the funding model for public higher education in America is broken, but no one appears to be coming up with a coherent plan to address the problem.

In my research for my upcoming book, I have discovered that we could make all public higher education free in America if we just used our current resources in a more coordinated way. Looking at higher education enrollment patterns in 2009-10, we find that 6.4 million full-time equivalent undergraduate students were enrolled at public universities and 4.3 million were enrolled in community colleges. In the same year, the average cost of tuition, room, and board for undergraduates at public four-year institutions was $14,870, and for 2-year public colleges, it was $7,629. If we multiply the number of students in each segment of public higher education by the average total cost, we discover that the price for making all public higher education free was $127 billion in 2009-10.

While $127 billion seems like a large figure, we need to remember that in 2010, the federal government spent $35 billion on Pell grants and $105 billion in new student loans, while the states spent $10 billion on financial aid. Furthermore, looking at various tax breaks for higher education, we can add billions to the public support for universities and colleges.

Here is a list of some of the current federal tax breaks and how much each one cost in 2010 (this list does not include state tax breaks): student loan interest rate exemption ($1.4 billion), the exclusion of employer-provided educational assistance ($1.1 billion), exclusion of interest on student-loan bonds ($0.6 billion), exclusion of scholarship and fellowship income ($3.0 billion), exclusion of tax on earnings of qualified tuition programs: savings account programs ($0.6 billion), the HOPE tax credit ($5.4 billion), the Lifetime Learning tax credit ($5.5 billion), parental personal exemption for students age 19 or over ($3.4 billion), state prepaid tuition plans ($1.75 billion), American Opportunity Tax Credit ($14.4 billion), and part of the deductibility of charitable contributions (education) ($4.9 billion).

To the almost $40 billion of federal tax breaks listed above, we also need to add the numerous state tax subsidies; in fact, many states offer tax credits and deductions that exceed the federal tax breaks. Moreover, there is currently over $100 billion in 529 College Savings Plans, and if we made all public higher education free, we could do away with these tax shelters, which mostly benefit the wealthiest families.

When we add the cost of tax breaks to the current level of state and federal financial aid for higher education, not only could the government pay for the full cost of undergraduate education for public universities and community colleges, but we could also make most of graduate education free at these institutions.