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Where will the money come from for Hillary Clinton’s college plan? Hillary for America, CC BY-NC

Clinton’s debt-free college comes with a price tag

Democratic presidential candidate Hillary Rodham Clinton recently released a major policy paper to address the hot topic of college affordability. Her “New College Compact” is an attempt to gain recognition as the candidate who will stand up for college students and their families.

While there is much to like in her proposal, both from the perspective of those paying for college as well as those on the receiving end of those payments, there are some major problems that will likely render it as unrealistic and unattainable.

For over two decades I have conducted research on college costs and finance, and worked with policymakers in Washington as well as in state capitols to craft programs to help make a postsecondary education more affordable for American students.

American presidential campaigns are famous for bold and innovative pronouncements. For the winner of the contest, however, the reality of having to govern, often in conjunction with at least one if not both houses of Congress under the control of the opposing party, causes the former candidate to become more pragmatic and measured in what is actually introduced in legislation.

Many a grand idea from the campaign is lost between the election and the stroll down Pennsylvania Avenue following the inauguration.

Where the money will come from

Clinton’s set of proposals to address the affordability of college has at its core a key feature: pumping more taxpayer money into the system. And she has put US$350 billion (over 10 years) on the table to do this, a sum that would double the current investment in the federal Pell Grant program, the largest federal grant program for students. This would be an unprecedented rate of growth in federal spending for higher education.

More than half of the total sum, according to the Clinton plan, would come in the form of direct grants to states and students. The money given to the states would be to help control the growth in tuition prices at public colleges and universities, which have skyrocketed in recent years, especially during the recession.

In 10 years, college tuition increased by 42%., CC BY

Data from the College Board’s Trends in Student Pricing report show that in the ten years from 2004 to 2014, the sticker (non-discounted) price of tuition at the average public, four-year university rose 42% in real dollars, ie, after discounting for inflation. Community college prices grew 28% during this period.

Net prices, or the price students paid after subtracting grant aid, grew less rapidly, as the federal government and many institutions stepped forward with increased scholarship aid. But since incomes have stagnated for most American families, college has still become much less affordable.

Here’s what experience tells us

The idea of using federal funding to leverage state behavior is not new.

The 2008 Higher Education Opportunity Act (HEOA), which reauthorized the Higher Education Act of 1965, included a “maintenance of effort” provision which required states to maintain certain thresholds of their own spending on colleges and universities in order to qualify for additional federal funding for higher education.

Most observers believe that this stipulation was only partially successful, with whatever success that was achieved attributed to the federal government’s awarding of American Recovery and Reinvestment Act (ARRA) funds to states. ARRA funds were designed to help states maintain funding for critical needs, including K-12 and higher education, during the depths of the recession.

Once the ARRA program ended in 2012, state appropriations for colleges and universities dwindled. Funding in 2013 was almost 10% below the level in 2009. On a per-student basis, funding dropped even more precipitously, as the combination of the loss of ARRA funds and continued stagnation in state revenues.

The experience with the HEOA shows us that federal funds can be used to supplement state investment in higher education, but only as long as those dollars from Washington continue to flow.

If that spigot is turned off, it is likely that public colleges and universities will once again see their revenues from tax dollars reduced.

What’s the cost of more federal dollars?

States and their higher education institutions must also realize that a large expansion in federal dollars will come at a cost; no better example of this can be found than what occurred with passage of No Child Left Behind (NCLB).

This landmark act passed during the first administration of President George W Bush (and whose policies were largely continued by President Obama) greatly increased the federal role in K-12 education as a requirement for accepting federal dollars. States were required to create new, broad-based school accountability plans focused around testing of all students in grades three through eight.

The question is, are the states willing to participate in a similar quid pro quo in return for Clinton’s proposed large-scale expansion of federal funding for higher education?

Given their experience with NCLB, I suspect most states will tread cautiously before agreeing to this bargain. They learned with NCLB that the value of getting federal money is often outweighed by the requirements that accompany those dollars.

No matter who controls the next Congress, Democrats or Republicans, a newly-elected President would have a Sisyphean battle to get these policies through Capitol Hill.

If elected, Clinton’s proposed mechanism for paying for this new funding, by eliminating or reducing tax credits and deductions for wealthy Americans, would also face fierce opposition from both sides of the aisle.

Nevertheless, by being out early with a splashy proposal on a topic of importance in the public sphere, she has likely forced her opponents to address the issue of college affordability as well.

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