Should College Be Free? The Pros and Cons


A person with short hair and glasses sits on their floor, looking at a laptop


 Americans have been debating the wisdom of free college for decades, and more than 20 states now offer some type of free college program. But it wasn't until 2021 that a nationwide free college program came close to becoming reality, re-energizing a longstanding debate over whether or not free college is a good idea. 

And despite a setback for the free-college advocates, the idea is still in play. The Biden administration's proposal for free community college was scrapped from the American Families Plan in October as the spending bill was being negotiated with Congress.12

But close observers say that similar proposals promoting free community college have drawn solid bipartisan support in the past. "Community colleges are one of the relatively few areas where there's support from both Republicans and Democrats," said Tulane economics professor Douglas N. Harris, who has previously consulted with the Biden administration on free college, in an interview with The Balance. 

To get a sense of the various arguments for and against free college, as well as the potential impacts on U.S. students and taxpayers, The Balance combed through studies investigating the design and implementation of publicly funded free tuition programs and spoke with several higher education policy experts. Here's what we learned about the current debate over free college in the U.S.—and more about how you can cut your college costs or even get free tuition through existing programs.

Key Takeaways

  • Research shows that free tuition programs encourage more students to attend college and increase graduation rates, which creates a better-educated workforce and higher-earning consumers who can help boost the economy. 
  • Some programs are criticized for not paying students’ non-tuition expenses, for not benefiting students who need assistance most, or for steering students toward community college instead of four-year programs.  
  • If you want to find out about free programs in your area, the University of Pennsylvania Graduate School of Education has a searchable database. You’ll find the link further down in this article. 

Types of Publicly Funded College Tuition Programs 

Before diving into the weeds of the free college debate, it's important to note that not all free college programs are alike. Most publicly funded tuition assistance programs are restricted to the first two years of study, typically at community colleges. Free college programs also vary widely in the ways they’re designed, funded, and structured:


  • Last-dollar tuition-free programs: These programs cover any remaining tuition after a student has used up other financial aid, such as Pell Grants. Most state-run free college programs fall into this category. However, these programs don’t typically help with room and board or other expenses.
  • First-dollar tuition-free programs: These programs pay for students' tuition upfront, although they’re much rarer than last-dollar programs. Any remaining financial aid that a student receives can then be applied to other expenses, such as books and fees. The California College Promise Grant is a first-dollar program because it waives enrollment fees for eligible students.3

  • Debt-free programs: These programs pay for all of a student's college expenses, including room and board, guaranteeing that they can graduate debt-free. But they’re also much less common, likely due to their expense.  

Pros: Why College Should Be Free 

Proponents often argue that publicly funded college tuition programs eventually pay for themselves, in part by giving students the tools they need to find better jobs and earn higher incomes than they would with a high school education. The anticipated economic impact, they suggest, should help ease concerns about the costs of public financing education. Here’s a closer look at the arguments for free college programs.

A More Educated Workforce Benefits the Economy 

Morley Winograd, President of the Campaign for Free College Tuition, points to the economic and tax benefits that result from the higher wages of college grads. "For government, it means more revenue," said Winograd in an interview with The Balance—the more a person earns, the more they will likely pay in taxes. In addition, "the country's economy gets better because the more skilled the workforce this country has, the better [it’s] able to compete globally." Similarly, local economies benefit from a more highly educated, better-paid workforce because higher earners have more to spend. "That's how the economy grows," Winograd explained, “by increasing disposable income."

According to Harris, the return on a government’s investment in free college can be substantial. "The additional finding of our analysis was that these things seem to consistently pass a cost-benefit analysis," he said. "The benefits seem to be at least double the cost in the long run when we look at the increased college attainment and the earnings that go along with that, relative to the cost and the additional funding and resources that go into them." 

Free College Programs Encourage More Students to Attend 

Convincing students from underprivileged backgrounds to take a chance on college can be a challenge, particularly when students are worried about overextending themselves financially. But free college programs tend to have more success in persuading students to consider going, said Winograd, in part because they address students' fears that they can't afford higher education. "People who wouldn't otherwise think that they could go to college, or who think the reason they can't is because it's too expensive, [will] stop, pay attention, listen, decide it's an opportunity they want to take advantage of and enroll," he said.


According to Harris, students also appear to like the certainty and simplicity of the free college message. "They didn't want to have to worry that next year they were not going to have enough money to pay their tuition bill," he said. "They don't know what their finances are going to look like a few months down the road, let alone next year, and it takes a while to get a degree. So that matters." 

Free college programs can also help send "a clear and tangible message" to students and their families that a college education is attainable for them, said Michelle Dimino, an Education Senior Policy Advisor with Third Way. This kind of messaging is especially important to first-generation and low-income students, she said. 

Free College Increases Graduation Rates and Financial Security 

Free tuition programs appear to improve students’ chances of completing college. For example, Harris noted that his research found a meaningful link between free college tuition and higher graduation rates. "What we found is that it did increase college graduation at the two-year college level, so more students graduated than otherwise would have." 

Free college tuition programs also give people a better shot at living a richer, more comfortable life, say advocates. "It's almost an economic necessity to have some college education," noted Winograd. Similar to the way a high school diploma was viewed as crucial in the 20th century, employees are now learning that they need at least two years of college to compete in a global, information-driven economy. "Free community college is a way of making that happen quickly, effectively and essentially," he explained. 

Cons: Why College Should Not Be Free 

Free community college isn’t a universally popular idea. While many critics point to the potential costs of funding such programs, others identify issues with the effectiveness and fairness of current attempts to cover students’ college tuition. Here’s a closer look at the concerns about free college programs.


It Would Be Too Expensive 

The idea of free community college has come under particular fire from critics who worry about the cost of social spending. Since community colleges aren't nearly as expensive as four-year colleges—often costing thousands of dollars a year—critics argue that individuals can often cover their costs using other forms of financial aid. But, they point out, community college costs would quickly add up when paid for in bulk through a free college program: Biden’s proposed free college plan would have cost $49.6 billion in its first year, according to an analysis from Georgetown University Center on Education and the Workforce.4 Some opponents argue that the funds could be put to better use in other ways, particularly by helping students complete their degrees.

Free College Isn't Really Free 

One of the most consistent concerns that people have voiced about free college programs is that they don’t go far enough. Even if a program offers free tuition, students will need to find a way to pay for other college-related expenses, such as books, room and board, transportation, high-speed internet, and, potentially, child care. "Messaging is such a key part of this," said Dimino. Students "may apply or enroll in college, understanding it's going to be free, but then face other unexpected charges along the way." 

It's important for policymakers to consider these factors when designing future free college programs. Otherwise, Dimino and other observers fear that students could potentially wind up worse off if they enroll and invest in attending college and then are forced to drop out due to financial pressures. 

Free College Programs Don’t Help the Students Who Need Them Most 

Critics point out that many free college programs are limited by a variety of quirks and restrictions, which can unintentionally shut out deserving students or reward wealthier ones. Most state-funded free college programs are last-dollar programs, which don’t kick in until students have applied financial aid to their tuition. That means these programs offer less support to low-income students who qualify for need-based aid—and more support for higher-income students who don’t.56

Community College May Not Be the Best Path for All Students 

Some critics also worry that all students will be encouraged to attend community college when some would have been better off at a four-year institution. Four-year colleges tend to have more resources than community colleges and so can offer more support to high-need students. 

In addition, some research has shown that students at community colleges are less likely to be academically successful than students at four-year colleges, said Dimino. "Statistically, the data show that there are poorer outcomes for students at community colleges […] such as lower graduation rates and sometimes low transfer rates from two- to four-year schools." 

What the Free College Debate Means for Students 

With Congress focused on other priorities, a nationwide free college program is unlikely to happen anytime soon. However, some states and municipalities offer free tuition programs, so students may be able to access some form of free college, depending on where they live. A good resource is the University of Pennsylvania Graduate School of Education’s searchable database of Promise Programs, which lists more than 120 free community college programs, though the majority are limited to California residents.

In the meantime, school leaders and policymakers may shift their focus to other access and equity interventions for low-income students. For example, higher education experts Eileen Strempel and Stephen Handel published a book in 2021 titled "Beyond Free College: Making Higher Education Work for 21st Century Students." The book argues in part that policymakers should focus more strongly on college completion, not just college access. "There hasn't been enough laser-focus on how we actually get people to complete their degrees," noted Strempel in an interview with The Balance. 

Rather than just improving access for low-income college students, Strempel and Handel argue that decision-makers should instead look more closely at the social and economic issues that affect students, such as food and housing insecurity, child care, transportation, and personal technology. For example, "If you don't have a computer, you don't have access to your education anymore," said Strempel. "It's like today's pencil."

How To Cut Your College Costs Now 

Saving money on college costs can be challenging, but you can take steps to reduce your cost of living. For example, if you're interested in a college but haven't yet enrolled, pay close attention to where it's located and how much residents typically pay for major expenses, such as housing, utilities, and food. If the college is located in a high-cost area, it could be tough to justify the living expenses you'll incur. Similarly, if you plan to commute, take the time to check gas or public transportation prices and calculate how much you'll likely have to spend per month to go to and from campus several times a week. 

Now that more colleges offer classes online, it may also be worth looking at lower-cost programs in areas that are farther from where you live, particularly if they allow you to graduate without setting foot on campus. Also check out state and federal financial aid programs that can help you slim down your expenses, or, in some cases, pay for them completely. Finally, look into need-based and merit-based grants and scholarships that can help you cover even more of your expenses. Also consider applying to no-loan colleges, which promise to help students graduate without going into debt.

Frequently Asked Questions (FAQs) 

Should community college be free?

It’s a big question with varying viewpoints. Supporters of free community college cite the economic contributions of a more educated workforce and the individual benefit of financial security, while critics caution against the potential expense and the inefficiency of last-dollar free college programs. 

What states offer free college?

More than 20 states offer some type of tuition-free college program, including Arkansas, California, Connecticut, Delaware, Hawaii, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Montana, Michigan, Nevada, New York, Oklahoma, Oregon, Rhode Island, Tennessee, Virginia, and Washington State. The University of Pennsylvania Graduate School of Education lists 115 last-dollar community college programs and 16 first-dollar community college programs, though the majority are limited to California residents.7

Is there a free college?

There is no such thing as a truly free college education. But some colleges offer free tuition programs for students, and more than 20 states offer some type of tuition-free college program. In addition, students may also want to check out employer-based programs. A number of big employers now offer to pay for their employees' college tuition. Finally, some students may qualify for enough financial aid or scholarships to cover most of their college costs.






How Much College Costs (and Why It's Still Worth It)

 

college costs

With the average cost of college steadily rising every year, many people may wonder if the hefty price tag is still worth it. Will you get a return on your investment if you put in all the time, effort, and money? As much of the research still shows, in most cases, going to college will still pay off in the long run.

Average Cost of Tuition 

Typical costs vary widely by type of institution. According to the College Board, the average cost of college tuition and fees (which may include the library, campus transportation, student government, and athletic facilities) for the 2020-2021 school year was $37,650 at private colleges, $10,560 for state residents at public colleges, and $27,020 for out-of-state residents attending public universities.1

These numbers do not include housing, meals, textbooks, or school supplies which could easily tack on another $10,000 to $18,000 a year. Multiply those numbers by four years of college, and you are looking at a hefty college bill. It’s no wonder that student debt levels topped $1.5 trillion in 2020.2

Average Cost of College by Type of School
 Public 2-Year (In-District)Public 4-Year (In-State)Public 4-Year (Out-of-State)Private 4-Year
Tuition$3,770$10,560$27,020$37,650
Room and Board$9,080$11,620$11,620$13,120
Total$12,850$22,180$38,640$50,770
Source: College Board, "Trends on College Pricing and Student Aid 2020"

Why a College Degree Is Still Worth It 

Footing the college bill can be a tough pill to swallow when you look around and see many graduates struggling to find work. Still, the data largely supports the fact that college will be worth it for most students.

The Pay Gap 

According to the Bureau of Labor Statistics, the pay gap between those with a four-year degree and those with a high school degree is still significant. Those with a four-year college degree earn a median weekly salary of $1,305, whereas employees with a high school degree average $781. The difference is even higher when comparing employees with doctoral degrees with those with some or no college degree.3

Average Salary and Unemployment by Degree Level
Degree LevelAverage Weekly SalaryUnemployment Rate
Less than high school$61911.7%
High school diploma$7819%
Some college, no degree$8778.3%
Associate degree$9387.1%
Bachelor's degree$1,3055.5%
Master's degree$1,5454.1%
Professional degree$1,8933.1%
Doctoral degree$1,8852.5%
Source: Bureau of Labor Statistics (Current as of April 21, 2021
)


The Lifetime Earnings Gap 

As you can see, this gap is further widened by the fact that the lower your degree, the more likely you are to be unemployed. Given higher unemployment rates and annual salaries, it's no surprise that these numbers can add up to significant differences in the long run. In fact, not going to college could cost you dearly, to the tune of $1 million in lifetime wages, according to a Georgetown University study.4

The Long-term Financial Impact of a Degree 

It's not just about going to college or not, though. The degree you choose also has a significant long-term financial impact. The same Georgetown study revealed a gap of $3.4 million in lifetime earnings between the highest- and lowest-earning majors. The top-paying majors unsurprisingly include STEM (science, technology, engineering, and mathematics), health, and business. The majors with the lowest median earnings are in education, the arts, and social work.4

Average Annual Earnings Examples for Various Degrees
DegreeAverage entry-level salaryAverage mid-career salary
Computer science$62,000$95,000
Finance$52,000$85,000
Business$45,000$70,000
Marketing$42,000$74,000
Secondary Education$38,000$50,000
Philosophy$36,000$62,000
Source: The College Board. "Education Pays 2019" 

Of course, there are a lot of choices and a range of potential earnings for every degree. Our economy needs teachers and engineers. We need social workers just as we need accountants. It’s easy to obsess over what major could make you the most money, but it’s more important to find something that you enjoy in a field in which you can excel.

In the current digital economy, the future of work is changing fast and one thing that emerges is that despite specialties and core areas of learning, some fields are fusing. A competitive candidate is one who is curious to learn, and that may mean intersecting technology with finance, business with social studies, and math with psychology. A lot of success happens in these intersections.

Useful Online Tools 

There are many helpful resources online that can guide you in your decisions about your education. These include:

  • state-by-state comparison of the average costs of private and public colleges from the National Center for Education Statistics
  • college savings calculator that you can use to plan ahead and save for the costs of college
  • Georgetown University's study comparing the value of different college majors
  • Reviews of some of the best value collegesout there

The Bottom Line 

Before you decide that the price tag on college is too high, be sure to look at what the statistics show. The financial benefits of college, on average, far outweigh the immediate costs. Compare the costs of college vs. work after high school, too, before making any decisions. If you are concerned about saving for college, check with a financial advisor to discuss a college savings strategy.


Is It Better to Finish College Faster or Debt-Free?

 

Paying for college can be a juggling act. It can be difficult to balance the amount that you borrow with how much you work and how quickly you can graduate from college.

If you are determined to graduate debt-free, it may take you a bit longer to graduate, since you may be working full time and taking only a few classes a semester. And if you decide to attend school full-time, you may accumulate more in student loans, since you won't be working full-time.


Consider the following as you decide whether it's better to graduate college more quickly or graduate with less debt.

Working While You Attend College 

One of your options to graduate college with less debt is to work full-time and to attend school part-time. This schedule may be a good option if you are already supporting a family, though you should consider how much your earning power will increase once you get your degree.

If you are working, your employer also may offer to reimburse the cost of tuition for a certain number of credit hours each semester. In exchange, you may need to agree to work for them for a set number of years after you graduate. This work-for-school exchange may make attending school possible for you.

For some, working while attending school can be a good option. But if you are not making steady progress toward your degree, you may want to cut back your work hours a bit and add a few more school hours into your schedule.

Tips for Working Through College

  • Keep your current financial responsibilities in mind, plus how much you'll need to meet your other financial obligations.
  • Be sure that you find a job that pays well, which can reduce the amount of time you need to spend working while covering your expenses. 
  • Look at alternatives to attending school during the day so you can work. Online options, night school, and classes that only meet once a week can be viable options.
  • Be sure to take advantage of study groups at your college to help you balance both work and school. Tutors and study sessions can help if you are juggling a lot and trying to do well in school. 

Attending School Full-Time and Taking out Student Loans 

Another option is to attend school full-time and take out student loans to cover your tuition and expenses. You may justify this by considering the timeline—if you attend school full-time, you will graduate more quickly, so the time you'll spend paying for tuition, books, and other school-related expenses will be less.


If you decide to take out student loans to go to college, it is important to think about your career prospects once you graduate. For example, if you are spending tens of thousands of dollars on a technical degree that will have you earning $10/hour once you graduate, the investment may not be worth it. But if you are attending a prestigious business program that will likely have you earning six figures once you graduate, it may be worth it.


Tips for Minimizing Debt

  • If you cannot work and go to school, try increasing your course load so you can graduate more quickly.
  • Take the time to apply for scholarships and grants to help cover your college costs.
  • Work on reducing your expenses. Be sure to live as cheaply as possible while in school. You may consider living at home to reduce the cost further.
  • Consider working multiple jobs during the summer and saving up money to reduce the amount that you have to borrow each year. 

Finding the Right Balance 

It is important to find the right balance for you. Some people have a difficult time working and attending college, so to balance things, they work multiple jobs over the summer and save aggressively to help lower the amount they need to borrow for school.

Other students find that they can work part-time and take a slightly lighter course load while attending a few classes over the summer to keep them on track for graduation. Some semesters the student may be able to increase their hours while planning on a lower workload during the last few semesters of school.

There is not going to be a single right answer for everyone. A lot depends on your major, your expected earnings, and the amount that you end up borrowing. As you decide on your situation, you need to make sure you are following a tight college budget, and that you are working on keeping your tuition costs down. It does not make sense to lose your full-tuition scholarship to keep a minimum wage job.



What Is the Legal Lending Limit?

 


What Does the Bible Say about Lending and Borrowing?



A legal lending is the maximum amount of money a bank can lend to a single borrower. Every financial institution in the U.S. has a legal lending limit that is overseen by the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC). 

The current code on legal lending limits states that a financial institution cannot lend more than 15% of its capital and surplus.1 However, this can vary somewhat, depending on whether the bank operates at a state or federal level and whether a borrower uses collateral to secure the loan. 

Definition and Examples of the Legal Lending Limit 

The lending limit is the highest amount of money a bank or financial institution can lend to an individual borrower. In the U.S., the legal lending limit is outlined in Part 32.3 of the U.S. Code (USC). The FDIC and OCC are responsible for managing the legal lending limit and guiding banks on how to enforce it.

The legal lending limit cannot exceed 15% of a bank’s capital and surplus for a single borrower. If the borrower is taking out a secured loan, the bank can lend up to 25% of its capital and surplus.1

A bank’s capital is defined as the difference between its assets and its liabilities. In comparison, surplus includes things like profits and loss reserves. 

How Does the Legal Lending Limit Work? 

Lending limits exist to promote the safety of putting your money in the national banking system. These limits also prevent banks from offering excessive loan amounts to one individual, which supports the diversification of loans.

As mentioned, the standard lending limit dictates that a bank can’t lend a single borrower more than 15% of its available capital and surplus. If the borrower secures the loan with collateral, banks can lend them up to a quarter of their capital and surplus.

However, certain loans are not subject to legal lending limits, including those:1

  • To other financial institutions
  • Arising from the discount of commercial or business paper
  • Affiliated with a federal agency 
  • Issued due to U.S. obligations
  • To the Student Loan Marketing Association (SLMA), also known as Sallie Mae
  • To leasing companies and industrial development agencies

Types of Capital  

Banks and other financial institutions must maintain a certain amount of money in their reserves as capital and surplus. In the U.S., these minimum requirements are set and regulated by federal laws. A bank’s capital is the difference between its assets and liabilities and represents its total net worth. This capital represents a bank’s ability to absorb losses if the bank liquidates. 


Bank capital is classified into three separate levels: tier 1, tier 2, and tier 3.

Tier 1 

Tier 1 capital is a bank’s core reserves and primary source of funding. It is the assets a bank holds to continue providing for the needs of its customers. Tier 1 capital includes common stock, retained earnings, and preferred stock.

Tier 2 

Tier 2 capital is the bank’s supplementary capital and includes things like revaluation reserves, qualifying preferred stock, and subordinated debt. 

Tier 3 

Tier 3 capital is the supplementary capital banks hold to support their minimum capital requirements. It includes a greater variety of short-term debt than either of the first two tiers. 

Key Takeaways

  • The legal lending limit is the maximum amount of money a financial institution can lend to a single borrower.
  • The lending limit is set by the U.S. Code and overseen by the FDIC and the OCC.
  • For a single borrower, the legal lending limit cannot exceed 15% of the bank’s capital and surplus.
  • A bank’s capital is the difference between its assets and liabilities, and it represents the bank’s ability to absorb losses.
  • There are three different tiers of capital: tier 1, tier 2, and tier 3.  



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