Senator Bernie Sanders is well known for targeting millionaires and billionaires with his rhetoric, and he is equally well known among college students for his promises of free college. For many college students, promises of free tuition from politicians are quite appealing. High school students across the country are experiencing rising pressure to attend college and rising expenses while in college. Despite the significant increases in tuition, fees and books, demand (the number of enrollees) continues to increase for most colleges.
The rising costs of education have certainly gained the attention of many college students. Sen. Sanders has proposed the College for All Act (CAA) to address these problems. Other Democratic candidates have begun to unify around the message of making college affordable; Sen. Sanders’ CAA has upped the ante. The plan’s priority is to provide funding to eliminate tuition and fees at public universities and colleges. This would eliminate most upfront costs that prevent students from attending college. The next step Sen. Sanders proposes is to provide grants/assistance for all cost of living expenses and require state government contributions. This would abate the secondary costs associated with attending college. Sen. Sanders' final major CAA item is to offer debt forgiveness for all student loans and cap interest rates on future student loans at 1.88%. But would Sander’s plan be feasible if it was implemented?
The CAA does seem to make college life easier for students, particularly in the immediate future; however, it will have a significant impact on the economy worth considering. After all, most college students will enter the workforce during or after college. While the CAA will create a macro increase in demand for college education, this will cause upward pressure on tuition, fees and expenses. Additionally, students in poor financial standing will have more difficulty getting approved for a loan. Is free college enticing enough to suffer these economic consequences?
The CAA will present unique challenges to many public institutions because they will need to accommodate a significant increase in demand for their services. Given that many high school graduates do place a high value on a college education, many colleges will likely experience a significant increase in enrollment following the enactment of the CAA. With the direct costs of college being reduced to essentially zero, there will be an increase in demand for college (at least in the short run). With 69% of high school graduates pursuing degrees, the largest portion of potential college enrollees could be individuals several years or even decades removed from high school because only 33% of Americans have a bachelor’s degree. There is potential for a sharp increase in demand for college education.
The CAA plan to address the secondary costs of pursuing a college education will also drive up prices. College housing, food and miscellaneous expenses will all increase due in part to the increase in demand for these goods and services and also due to the nature of the funding. It can be reasonably assumed that as more students seek college degrees, all the expenses associated with college degree seekers will also increase. If Sen. Sanders is seeking to increase enrollment, then there will likely be an increase in costs caused by the increased enrollment.
The final major piece of the CAA involves debt forgiveness and interest rate capping. It will make it more difficult to get a loan; with a cap on the highest interest rate able to be charged (1.88%), only the most qualified loan seekers will be able to get a loan. Student loans make up a significant amount of GDP at $1.6 trillion. With effects similar to rent controls, placing an interest rate cap will push out unqualified loan seekers. If interest rates are capped at 1.88%, banks and loan agencies will be inclined to offer fewer loans and select only the most qualified applicants for those loans. This will put the least qualified loan seekers (who probably need the loans the most) in a more difficult financial position than before the interest rate capping.
With these quantitative economic arguments in mind, consideration of moral concerns surrounding the CAA is warranted. It is reasonable to contend that there is a moral imperative to assist the vulnerable members of society; college students, according to Sen. Sanders, are among the most vulnerable with 45% of college students struggling with hunger and 17% struggling with homelessness. Shouldn’t policymakers consider moral concerns when adopting legislation? The argument could be made that perhaps these qualitative concerns outweigh the quantitative difficulties and the CAA should be adopted. But as strongly as moral concerns may encourage us to act, it is prudent to pursue a feasible course of action. Unfortunately, Sen. Sanders’ College for All Act is not feasible.
The feasibility of the CAA is impacted by multiple variables. As the number of student applicants increases there will be upward pressure on prices surrounding college. The CAA seeks to reduce the impacts of this upward pressure on price by offering grants, financial assistance and capping interest rates on student loans; however, this further accelerates the problem. Because interest rates and inflation are inversely correlated, we expect that a reduction in the interest rate will be followed by an increase in inflation. Capping interest rates will put further upward pressure on prices. Due to the economic problems the CAA will likely create, it’s not a feasible plan for the American education system.