Policy Design Matters for Rising “Free College” Aid

Since policymakers introduced the Tennessee Promise scholarship five years ago, states have enacted fifteen new financial aid programs under the “free college” banner.¹ This brings the total number of state Promise programs to twenty-two spread across nineteen states—an astonishing rate of increase, given that states launched the first seven programs over seventeen years, between 1990 and 2007. Through these programs, eligible state residents are guaranteed at least free tuition to community college, while some offer additional benefits such as a book stipend or free tuition at public four-year institutions.

These tuition guarantees come at a critical time—net tuition paid per student to public institutions (after all aid) was higher than ever in 2018. Such an increase lowers the likelihood that a student will enroll in college due to real or perceived costs, and it drives up the student debt that students take on. Research has shown that well-designed place-based tuition-free guarantees can, under the right conditions, mitigate some of those effects by increasing college applications and enrollment among low-income students, increase credential attainment among participants, and even improve student outcomes at the K–12 level.

Getting the program design right is increasingly important as Promise programs make up a growing share of state financial aid budgets.

On the other hand, research on the impact of state-level programs is early, and more recent design choices that limit dollars going to high-need students may not have similar effects. When key populations like adults and part-time students cannot access the programs, or when the programs are last dollar and offer no non-tuition aid, people who need financial help get left out. Getting the program design right is increasingly important as Promise programs make up a growing share of state financial aid budgets.

Breaking Down the Numbers

States have increased their appropriations to Promise programs significantly in the past five years, despite eligibility requirements (often included to contain program costs) included in many of these programs.

The hesitancy to commit to a truly universal “free college” model has meant that in some states as few as 5 percent of all students actually qualify for the program, and so the aggregate investment is moderate compared to total state appropriations or overall financial aid. But due to the increasing popularity across states, total investment in Promise programs enacted since 2014 has risen by an average of $107 million per year over the past three years, a rapid increase. Figure 1² shows inflation-adjusted investment in recently enacted Promise programs from fiscal year 2016 through fiscal year 2020.³

Figure 1

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The Promise programs enacted since 2014 will now comprise a projected 4.2 percent of all state public student aid in fiscal year 2020, or a total of 12.1 percent when counting pre-2014 programs. This is a relatively small share of total student aid; however, these programs comprise a much larger percentage of new student aid.

With more programs enacted every year and existing programs generally receiving more funding over time, we estimate that recently enacted Promise Programs comprise nearly one-quarter of the growth in state public student aid since 2015. Figure 2 charts growth in states’ public student aid dollars since fiscal year 2015.

Figure 2

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This trend raises a key question for future research: are Promise dollars fueling a larger overall increase in state financial aid, or are they displacing and/or eliminating increases in funding for other financial aid programs? For now, it is clear that the increasing role of Promise investment in states’ affordability efforts highlights the importance of getting design features right.

With Growth Comes Responsibility

There are now nineteen states with free college programs. Of the fifteen active programs enacted since 2014, eleven are both last-dollar and limited to tuition and fees, which will generally require the student to pay for the remaining 70 percent of the full cost of attendance.⁴ Four of those newer programs are inaccessible to those who are not recent high school graduates, who tend to be lower-income; and four leave out part-time students, who are more likely to be financially independent. All of those design choices limit the programs’ positive effects.

The free college model has shown clear resonance with state-level elected officials in the past five years and, when done well, can address serious affordability challenges. The rapid growth of such programs makes it even more urgent to ensure they are designed in a way that fulfills their promise.

1. Sixteen states technically enacted new free college programs, but Minnesota’s program sunsetted.
2. For this and the following charts, data is adjusted by the state’s relative cost of living, using an index provided by State Higher Education Executive Officers Association and the Consumer Price Index.
3. For the seven states in this chart that have existing programs but have not yet passed a budget for fiscal year 2020—Tennessee, Oregon, Rhode Island, Nevada, Hawaii, California, and New Jersey—the investments included in the states’ 2020 executive budget proposals are used. This chart and the following charts do not include states that have proposed Promise programs for 2020 but have not yet enacted them.
4. On average, published tuition and fees for full-time students at community colleges are $3,660, which is 29.7 percent of the average published total of tuition, fees, room, and board ($12,320).
5. Montana has enacted a Promise program, but it has not yet been funded. Additionally, California’s existing aid programs could conceivably be considered a Promise structure. The Cal Grant program covers tuition and fees for students just out of high school whose families earn below an income ceiling of almost $100,000 (for a family of four) and who earn at least a 3.0 in high school. Students earning a 2.5 are eligible for Cal Grant B, which has a lower income threshold of just $52,000 for a family of four and only covers a small living allowance in the first year. In the second year it covers tuition and fees as well as the living allowance. Both programs also have asset ceilings. Furthermore, California waives tuition for almost half of all students at community colleges. The determination is made at the campus-level and made based on a set of metrics to indicate financial need.
6. Some programs cover associate’s or certificates that are typically awarded at community colleges but that a student pursues at a four-year institution.
7. Requirements that a student enroll after high school vary from the semester following graduation to several years after high school.
8. Maximum for a family of four; the ceiling increases for larger families.
9. The Scholarship covers up to $5,500 in tuition. If tuition is higher than that and no other aid makes up for it, SUNY or CUNY must award a “tuition credit.”
10. If does not maintain 30 credit hours, will owe money for the second semester.
11. $55K when they enroll, must be below $100K when they start receiving benefits.
12. Did not originally have income limits, now has a maximum EFC limit of $20,000 set by their Commission.
13. The College Bound Scholarship is last-dollar when it comes to state aid, but does not take into account Pell when it comes to covering the gap in tuition.
14. $46K when they enroll, $55K when they graduate from high school.
15. The California College Promise Program is designed to give participating community colleges flexibility with their funding, so the nature of the financial benefit differs by institution.
16. $100K for single-parent household; $150K for two-parent household
17. In 2019-20, the Washington College Grant is not guaranteed to all eligible students. However, we include it in our analysis because it will become a guarantee by 2020-21.

Tags: debt free college, student debt, financial aid, Free College