Why making public colleges tuition free won’t close the enrollment gap

Financial constraints are widely seen as the reason why fewer students from low-income families make it to college than those that are better off. That reasoning has long prompted calls for tuition-free public college education. In fact, the inadequacy of college preparedness among low-income students is a bigger obstacle than financing tuition costs, according to Wharton doctoral student in finance Mehran Ebrahimian. His paper new paper is titled “Student Loans and Social Mobility.”

Piggy bank with a graduation cap on top of a pocket calculator.

In order to explore the effectiveness of policies aimed at reducing financial barriers for low-income students, Ebrahimian built a model using panel datasets covering 2.6 million high-school graduates and 1.6 million college students enrolled for the first time in the 2003–2004 academic year. The overriding finding of his research is that “the main reason why we see such a disparity in college education, and education inequalities, is not because paying for costs of college education is more difficult for low-income students.”

Instead, Ebrahimian’s research took him to “more fundamental” reasons. “Maybe low-income students didn’t attend good high schools and are not equally prepared for college. Or, think about the awareness of college opportunities and perceptions of the expected return on college education for lower-income students,” he says. Students that come from neighborhoods that don’t have high-quality high school education may get “conditioned” into believing that they wouldn’t be able to get much value from higher-quality and expensive colleges, he adds. All those factors make up what his paper described as “fundamental factors,” as opposed to pure monetary reasons.

According to Ebrahimian, making public colleges tuition free “entails social inefficiencies and is a regressive policy.” He estimated the budget cost of making public colleges tuition free at around $57 billion a year, and the increase in the students’ well-being in dollar units at about $40 billion—about $17 billion less than what the government would pay as subsidy.

Furthermore, making public colleges tuition-free would disproportionately benefit wealthier students. “Even if you apply the policy of tuition-free public colleges, the unequal pattern of education would prevail due to the heterogeneity in fundamental factors, or preparedness,” he said. He estimated that students from families in the top income quartile receive around $15 billion more in tuition subsidy annually than those from the bottom income quartile.

Read more at Knowledge@Wharton.