Critical ThinkingHigher Education

Weissmann strikes again! The fail is strong in this one.

Our old pal Jordan Weissmann has published yet another completely wrong and easily disprovable blurb in the Atlantic (h/t miserlyoldman), this time making the claim that the US Federal government could make college tuition completely free for all students for what it is already spending in various aid programmes.

If that sounds both absurd and way too good to be true, that’s because it is.

Long-time readers may remember the last time Weissmann ventured into this territory, when he made an also-wrong but at least marginally sophisticated argument claiming that colleges were using their financial aid systems to bilk poor students and subsidize wealthy ones.

Apparently, he hasn’t gotten any better at reading government reports since then, and the sheer innumeracy reflected in this new piece is truly staggaring.

Weissmann essentially makes three main points in the blurb, all of which are simply factually incorrect:

1) The total amount of tuition and fees paid by students at public (4-year) universities totals approximately $62.6 billion per year.

2) The government spends $69 billion per year on federal student aid programmes.

3) If the federal government simply redirected this aid money directly to public universities, it would completely cover the cost of tuition for all students at these universities.

So, let’s take these claims in order.

1) Weissmann claims his $62.6 billion figure comes from this NCES report, which he even waves around in his updates like some kind of talisman that absolves him of having to answer to criticism. Well, the problem here is that, while the $62.6 billion figure is indeed in the report, it refers to the total tuition for private four-year colleges, not public ones. The correct number for public institutions is actually $52.9 billion. This is actually good news for Weissmann’s argument, since in theory it makes the whole enterprise even more affordable. It is not however, bode very well for Weissmann as a finance journalist (seriously! that is his job!) when he can’t read even the simplest of tables. [Edit: Weissmann has clarified in the comments below that he derived the figure from adding together tuition for all public institutions, not just 4-year colleges. This is unfortunately not clear in the original text.]

2) Weissmann gets the $69 billion figure for federal student aid from the New America Foundation. It is accompanied by this helpful chart:

Pie chart representing federal aid spending

Credit: New America Foundation

Here you can see the actual breakdown of federal spending on student financial aid in 2013 (for both public and private institutions): $35.9 billion in grants, $32.6 billion in tax benefits, $0.93 billion in work-study, and a whopping $107.4 billion in federally backed loans. It is thus clear that Weissmann is deriving his $69 billion figure by adding the first three categories together while totally ignoring the amount spent on loans.

This is just shockingly, ridiculously, hair-pullingly, mind-bogglingly careless math. Where do you think all that loan money goes, Mr. Weissmann? I’ll give you a hint–it’s not for building giant robots to do battle in the skies over Tokyo.

I will reiterate that Weissmann actually put a copy this graphic in his own article, which presumably means he looked at it long enough to add those first three figures together without ever understanding that the fourth number undermines his entire argument. After all, if the government were actually committed to covering the full cost of tuition, a significant portion of these loans would have to be converted into grant money (costing even more money than their face value in the long term, as the government would also no longer be collecting interest on it).

3) These two things considered, the original argument about redirecting aid toward public school tuition fails miserably. Even assuming that every private school student pays 100% of their tuition with loans (which is certainly not the case), that’s still $44.8 billion dollars that need to be accounted for somehow.

Of course not all student loans go directly toward paying tuition and fees–the federal government requires only that they go toward “educational expenses,” which may include room and board, books, child care, or the purchase of a personal computer. With the information presented, it’s not possible to say exactly what percentage of federal loan dollars go directly toward tuition as opposed to other expenses, but it is at least worth noting that the maximum yearly loan allowances are lower than the annual tuition rates at nearly all public schools, so only students with federal grants or other forms of tuition remission would find themselves completely covered by federal dollars.

So how much would it actually cost to make public university tuition free?

This depends on a couple of factors. Weissmann seems to be advocating the idea that students abandon private universities entirely (or perhaps that they naturally would do so when faced with free tuition at public schools). In fact his whole argument relies on re-purposing federal aid directed toward private institutions in order to subsidize public ones.

This in itself, though, would not actually be enough to put the private universities out of business–that would require a change in the law and possibly massive federal buyouts in order to turn these institutions public (barring a major revolution, but, well, in that case this wouldn’t be quite so pressing a problem). Besides, the whole point of offering federal aid to students at private schools is to allow them to actually compete with their wealthier peers. Cutting this aid would just hasten a return to the days when elite private schools were the preserve students from wealthy and well-connected families, since attendance (if not admission) would be limited to those with the ability to pay, or those who were willing to take on incredible amounts of private loan debt).

Anyway, assuming that all these students begin attending public school, this means that we have to increase the figure for public school tuition presented in the NCES graph by one third (since currently approximately 25% of university students attend private institutions). So $52.9 billion becomes $70.36 billion.

Still a good deal, you say? But wait! That’s just tuition. The federal, state, and local governments would presumably also have to increase their other grants and funding to cover the additional burden on the system created by a 25% increase in the student population. This is a lot of money: currently annual expenditures on non-tuition grants and appropriations from government sources total about $93.8 billion for public four-year universities. Even assuming there can be some economies of scale (600-student lectures instead of 400-student lectures? Sign me up!), we’re still probably talking another $20-30 billion on top of the tuition-replacement money.

So what would it cost to make public university education tuition-free in the US? Based on these figures I’d guess somewhere between $90 and $100 billion per year, not counting initial expenses in setting up the system. That is indeed only about $30 billion more than current aid “expenditures,” assuming that in such a scheme all higher-education tax credits were actually eliminated and turned back into revenue (ha! fat chance!). So really it’s probably about $60 billion on top of current expenditures, which would require about a 43% increase to the federal education budget. For comparison that figure is equivalent to about 0.017% of total federal expenditures in 2012 and is slightly higher than the mean yearly cost of the war in Afghanistan to date.

Doable? Yes, in theory. But the costs would be vastly greater than Weissmann’s analysis makes them out to be. And let’s not forget, please, that free tuition doesn’t actually make education as accessible as people think, since there are so many other economic costs associated with pursuing a degree.

And this guy is a financial writer for a major publication? Sheesh.

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Dan

Dan

Dan has a PhD in historical musicology and has taught music history and theory at a major Canadian university. He mainly studies music from the Italian Renaissance when he's not busy performing stand-up comedy or playing JRPGs with his cat, Roy. He occasionally tweets as @incontrariomotu and blogs about geeky stuff at The Otaku Skeptic. He is also the glorious editor-in-chief of School of Doubt.

8 Comments

  1. January 8, 2014 at 1:55 pm —

    Excellent work, Dan! I have always wondered why we don’t have *a* free university like some European countries, but when I saw this article I figured it was likely horseshit. Thanks for explaining and researching it. 🙂

  2. January 8, 2014 at 5:24 pm —

    I think creating one free university might be a lot easier than making the whole system free, but there is always the problem of deciding who gets to attend, especially if it becomes a prestigious institution. Would it be based purely on entrance exams, like some of the elite public high schools in New York, Boston, etc? There is also the problem that, even if it is intended for those without means, things like room and board, child care, and the opportunity cost of not working would have to be built into the system to really make it fair.

    As skeptical as I am of distance learning, I think the best option for a free university would be something modeled on the UK’s Open University. This way students wouldn’t have to move (or even give up working) in order to progress through a degree. It would also be nice if it were open in the same way (i.e. previous academic records did not factor in to admittance), since that would provide a major leg up for students who had trouble in secondary school for personal or structural reasons. The important thing would be to differentiate it from the scammy for-profit universities and their distance learning programmes so that it isn’t seen as a kind of second-class degree.

  3. January 14, 2014 at 10:28 pm —

    Hey Dan! It’s Jordan. Stumbled upon your post and thought I’d give you a hand with a couple issues.

    First off, the correct number is $62.6 billion. That’s what you get when you add up tuition revenue collected by 4-year, 2-year, and less than 2-year colleges. Note, nowhere did I say “4-year.”

    Second, that $62.6 billion already includes all the money students pay with the help of loans. (Which, in the public sector, total about $40 billion off the top of my head). The NCES isn’t reporting tuition paid out of pocket. It’s reporting “tuition revenue,” which is the money collected by colleges, whether it’s paid with the help of Pell Grants, federal loans, or Jr.’s 529 savings plan.

    Ok, so we’ve got those straightened out. Now, I’m happy to say that the rest of your post is pretty good. Living expenses are a crucial, often overlooked piece of college cost. And we wouldn’t want students to bum rush public universities. Which is why in the 2,000-word article I wrote on this topic back in March (and which I linked to in my last piece), I actually said you probably wouldn’t want to make college free, just very, very cheap! You should read it. You might find some ideas you like.

    http://www.theatlantic.com/business/archive/2013/03/how-washington-could-make-college-tuition-free-without-spending-a-penny-more-on-education/273801/

  4. January 14, 2014 at 11:12 pm —

    If that’s how you were deriving the figure it would help to be more explicit about it. A large portion of your readership will see the unqualified term “public college” and believe this refers to four-year institutions, since this is pretty universally the way the term is used in real life. Two-year and other institutions are not normally included in this group by default.

    Yes I understand you are making the (unsupported) claim that that $62.6 bn figure includes approximately $40 bn in loan money. But your main argument is that both this loan money and what students pay out of pocket can somehow be covered purely with the funds used for other non-loan aid (grants, tax breaks, work-study).

    This argument is not valid, and you still haven’t addressed my arguments against it. First off, the vast majority of grant aid goes to pubic schools already, so this will not make quite as big a difference in reducing their loan debt as you think. And I seriously, seriously doubt tax incentives (which only work when there are out-of-pocket tuition fees to account for) would actually be converted back into revenue in order to fund education in the event that tuitions were drastically lowered. There is just no American political reality in which that would happen.

    Further, reallocating all aid used for private schools to public ones and drastically reducing public tuition would cause a massive influx of students into the public system that must be accounted for in any honest appraisal. This includes not only tuition costs, but a huge increase in all the other educational expenditures from federal, state, and local governments.

    • January 14, 2014 at 11:27 pm —

      To be clear: I have read the article from March, I just don’t buy the argument that the difference between free and a few thousand dollars will be a significant disincentive to prevent this flood, especially among students from higher income brackets.

    • January 15, 2014 at 5:51 pm —

      Hey Dan – last responses.

      First, a bit about college accounting. Schools track net tuition revenue, which is what they also report to the Department of Ed and SHEEO. Again, that’s all money they receive for tuition, whether it comes from loans, Pell Grants, or a savings account. I’m not making an “unsupported” claim.

      Meanwhile, I never said that tuition consumed all $40 billion students take out in loans. In fact, it certainly doesn’t. Much of those dollars are spent on living expenses, which I discussed in the March piece, and which is why I think you would still need grants for low income kids to pay for housing and keep loan debt low. The point, as I’ve said before, is we could make tuition free if we wanted to. It’s an illustration of how wasteful our current system is.

      Now about whether students might bum-rush public colleges if we made them all extremely cheap (say, 0K-5k, depending on family income), which is the actual policy proposal I’ve made. They might. But I kind of doubt it.

      First, very, very few 4-year schools are actually open admission — so it’s not as if colleges have to accept everyone who comes knocking. Meanwhile, community colleges are already pretty damn cheap. We can safely assume people who choose for-profit schools instead (which are generally the alternative) are essentially price insensitive. Same goes for students at 4-year for-profits.

      So ultimately, you’re concerned about 2.7 million students who go to traditional 4-year private schools. Are they all going to swarm public colleges? I’d say doubtful, because they a) skew wealthy, and many still want to pay for prestigious private schools, or at least colleges with nice luxury dorms and b) we have a demonstration via states like Florida, where public college tuition maxes out today at $6,100 (it used to be even lower) and plenty of kids still go to private colleges. Plus, private schools could, in the face of competition, always choose to lower their prices. (It would take reworking their cost structure, but hey, I see that as a feature, not a bug).

      Now, would poor kids lose their spots in public schools to upper-middle class students who suddenly see a wonderful deal open to them? Maybe some. But you could also accompany this all with economic affirmative action policies like you have in, say, Texas.

      Anyway, nice talking to you about all this. Keep blogging. But I suggest you tone down the snark. You gotta earn it first, man.

      • January 15, 2014 at 6:23 pm —

        You are misreading what I said. The $62.6 bn figure is fine (now that you have clarified what you are talking about) but your $40 bn figure is the one you haven’t provided a source for. And I see now you’re backing off the claim that it makes up most of the total tuition figure but to make an effective argument you actually do need to show exactly what portion it makes up right now.

        You’re being disingenuous about the public school flood. Your model is premised on ending aid to private school students, which is what makes the system competitive right now. Do you really think that aside from the major schools with big name recognition that the whole private system will be able to make up for this huge loss in funding? Come on, you can’t have it both ways.

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