Running head: FINANCE RESEARCH PAPER 1

Finance Research Paper

James Gilbert

Georgia Southern University

EDLD 8432, Fall 2016

Dr. Amy Ballagh

November 9, 2016
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Abstract

President Barack Obama proposed legislation that would make community college free. This

program is believed by many to be a vehicle to help address the cost of higher education. It is

also believed that this would make a college education achievable for many of those who would

otherwise be unable to participate in higher education and thus increase enrollment in higher

education. This writing explores some of the details of the proposal and more specifically

examines the debate over how this new proposal would impact four-year institutions in both

enrollment and finance.

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Introduction

One of the major buzzes in the political arena is free college tuition. Community colleges

have been the locus for a number of state college promise proposals, largely because they

are one of the last remaining affordable routes to a postsecondary degree (Morris, 2015).

President Obama proposed a federal program designed to offer free community college.

There is an ongoing debate as to whether community college should be free. The current

administration proposed free college tuition for community colleges and many states have

adopted programs for free tuition. Georgia has established a similar program known as Move On

When Ready which is dual enrollment program that allows high school students from 9th 12th

grade to earn college credit while working on their high school diploma. In Georgia, this

program replaces Accel, HOPE Grant for dual enrollment and now covers tuition, text book and

fees.

This paper will examine the rational for support of similar programs by examining its

potential costs and potential positive impact. It will also note the rational of those in opposition

to the program. Within the scope of this examination, critical issues such as impacts upon state

budgets and federal subsidies will be explored. What is the financial cost of supporting these

programs and how will public funds be utilized and how will other programs be impacted?

One crucial impact that will be examined in depth is the effect that these programs could have

upon four-year institutions particularly the financial impact that could result and how that would

affect enrollment and academic programs. Could these institutions see a decrease in freshman

enrollment due to students opting to get two years of free tuition during high school. What are

the financial implications and how will institutions change in order to address loss of revenue

and maintain continued enrollment levels?

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Free Community College Program

As Fillion (2016) noted, the presidents proposal for free community college was

modeled after the Tennessee Promise program implemented in 2014. Fillion (2016) stated,

Tennessee lawmakers approved pioneering legislation creating the statewide Tennessee Promise

a scholarship and mentoring program designed to make it more likely that high school students

will get into college and succeed (p. 16). Perhaps a major reason that President Obama chose

this program as a model is because of its success in increasing enrollment. The Tennessee

Promise program spurred a 24.7 percent increase in enrollment in state community colleges for

first-time freshmen students (Toner, 2016). The Tennessee program seeks to make at least two

years of community college for responsible students as universal as high school (Fillion, 2016).

This program gives all recent high school grads the chance to attend, without paying tuition or

mandatory fees, either one of the community colleges, colleges of applied technology, or another

eligible institution offering an associate degree program (Fillion, 2016).

The Tennessee program is a scholarship program that uses last-dollar grants which means

that students must first use all other sources of financial aid, including federal Pell, HOPE, and

Tennessee Student Assistant Award program and if all these sources do not cover all mandatory

cost, then students will receive a Promise scholarship for the unmet tuition and costs. (Fillion,

2016).

Tennessee program has certain stipulations and criteria for students being able to

participate such as complete eight hours of community service for each term of enrollment and

maintain a year-end GPA of at least 2.0. and other programs such as Oregon who requires

students to be Oregon residents, enroll within six months of graduating from high
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school or passing the high school equivalency exam, and have a GPA of 2.5 (Fillion, 2016).

However, the presidents plan is somewhat different. President Obama called for two free

years of community college for all Americans (Toner, 2016). The president's plan, referred to as

the America's College Promise, would cover students' tuition for qualifying community college

programs, so long as students maintain a 2.5 GPA. (Sheehy 2016). Furthermore, (Sheehy, 2016)

noted that unlike the similar plans in Chicago and Tennessee, which are only open to recent high

school graduates, Obama's proposal would also cover tuition for nontraditional students. The

plan would also only require students to attend part-time and would cover certificate programs,

as well as courses that lead to an associate degree or those transferred toward a bachelor's

(Sheehy, 2016).

How Would It Impact

As outlined in the previous section, the plan proposed by the president would build on

those characteristics of similar state plans and expand the types of recipients. Much of the

discussion is on whether or not this program would positively impact student enrollment and

success in higher education. To effectively examine the potential benefit of this plan, its impact

must be examined from several different aspects.

One aspect to consider is how would it impact community colleges. As noted in the

previous section community colleges in Tennessee saw nearly a 25 percent increase in

enrollment. Mangan (2015) described the impact of the Tennessee programs as colleges

experiencing booming enrollments as the first wave of students accepted under the state's free-

tuition program cram into classrooms. Consequently, there are some who believe that the

presidents plan would have a positive impact such as John Levin of the California Community

College Initiative at the University of California, Riverside who stated (as cited in Goral, 2015,
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p. 14), The plan could boost not only college participation rates, but also program completion

rates.

There are many who not only believe that this plan will positively impact enrollment in

community colleges, but also believe that this success would spill over to four-year institutions.

For example, Cubberley (2015) stated,

Where limited resources preclude a number of people from considering college, having

the opportunity to enroll in community college for free could inspire, and prepare, many

to realize their dream of obtaining a bachelors degree. This could positively influence

the enrollment pipeline for many four-year colleges and universities, deflecting some of

their criticism that the Obama proposal excludes them. As I see it, this would be a win-

win for all (p. 22).

If Cubberly is correct, this programs should lead to large increases in student enrollment

and student graduation in community colleges and should also lead to increases of students

entering into four-year institutions obtaining bachelor degrees. The expectations and outlooks

should be positive.

However, there is a significant number of people who are not sold on the success of this

program. For example, many believe that this program would neither guarantee success for

community college students nor would it have the positive impact upon four-year institutions as

believed. For example, However, Judah Bellin of Minding the Campus, the online magazine of

the Manhattan Institutes Center for the American University, (as cited in as cited in Goral, 2015)

, stated that making community college free will likely have little to no impact on student

success and because only about 20 percent of community college students actually transfer to

four-year institutions and its not clear how simply making it easier for more students to attend
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community colleges will improve outcomes. Furthermore, community colleges appear to not

have favorable graduation rate because According to recent Department of Education (ED)

data, the three-year graduation rate at community colleges was 21.2 percent (Morris, 2015, p.

13).

A study by Doyle (2009) seems to support the lack of support Belins position. In this

study Doyle (2009) noted that according to a 2005 report by the Department of Education, the

vast majority of students who begin their postsecondary education in community colleges do not

go on to attain a bachelors degree and of the students who begin at a community college with

the intention of completing a bachelors degree, only 21% do so within 6 years. After considering

multiple factors related to community college students the study concluded the following

implications should be considered:

The use of nonparametric propensity score matching yielded results consistent with

previous findings, all of which indicate a negative relationship between community

college attendance and eventual degree completion. Policymakers who seek to shift

enrollments to community colleges should be aware that lower graduation rates are a

distinct possibility. Further research should investigate policy interventions at the

community college and 4-year level that would aid both the transfer of credits between

institutions and the time to degree for community college students who transfer to

4-year institutions. Doyle, W. R. (2009, p. 206).

This study appears to advise law makers to carefully consider the low completion rates among

community colleges and study several factors that prohibit transferring and completion of

degrees before investing heavily in community college enrollment.

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Many believe that not only does this program not boost four-year college enrollment, but

it actually hurts the enrollment among many institutions. One group that it is believed could be

unfairly impacted is private community colleges. Claudia Goldin, a professor of economics at

Harvard University believes that since the plan would designate federal money specifically for

public community colleges, unlike existing financial-aid funds, which students can access at any

participating institution this could mean a shift in enrollments from for-profits to community

colleges (Carlson & Kelderman ,2015).

Furthermore, as Carlson & Kelderman (2015) noted, small less-selective private four-

year colleges that enroll significant numbers of low-income, first-generation, and at-risk students

and graduate those students at much higher rates than do community colleges could be

negatively influence as well. According to Mangan (2015), several private colleges in Tennessee

attributed enrollment declines at least in part to the free-tuition program, which has helped raise

freshman enrollment across the state's 13 community colleges by 14 percent.

Public institutions could also be negatively impacted. The American Association of State

Colleges and Universities, which represents some 400 of those colleges, issued a statement

warning of the long-term costs of the plan and the shifting of resources to community colleges at

the expense of other sectors could negatively impact public colleges depending upon their size

and mission (Carlson & Kelderman ,2015). Some elements of this can be seen in trends that

emerged in Tennessee. Mangan (2015) noted that while students were parking on the grass at

Motlow State Community College's Smyrna Center, where parking lots are full, some of the

state's four-year campuses had a lot of empty seats such as Freshman enrollment being down

about 12 percent at the University of Tennessee at Martin and about 9 percent at its Chattanooga

campus.
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It is important to note that Flagship universities because they can, in many cases, recruit

both nationally and internationally may feel less competition for students from community

colleges, but they are still concerned that state and federal money for higher education which is

already scarce could become more so if many states participate in the presidents plan (Carlson

& Kelderman ,2015).

Under the current Tennessee program not all four-year colleges are facing serious

enrollment declines. Mangan, K. (2015) highlighted that the flagship campus of The University

of Tennessee in Knoxville, as well as the state's prestigious private colleges like Vanderbilt

University, have not been affected by the free-tuition program.

The smaller public universities are having to take steps to attract students. Claude O.

Pressnell Jr., president of the Tennessee Independent Colleges and Universities Association

stated that those institutions where students' socioeconomic profiles look a lot like those of the

community colleges are having to spend a lot more institutional aid in order to get students to

enroll which further strains their already razor-thin operating budgets (Mangan, 2015).

Mangan (2015) also noted that in Tennessee four-year public colleges that suffered only

minor enrollment declines have had to dig deep into their coffers to entice students with generous

scholarships that may be hard to maintain without additional state money.

Perhaps one of the greatest threats of President Obamas free tuition program is that it

could be temporary. Richard Alvarez, vice president for enrollment and student retention at

Queens College of CUNY stated that one major challenge with this free college concept is its an

unfunded mandate from the federal government that may not be supported by the next

administration and states will be forced to defund other state programs or initiatives to pay the

bulk of tuition costs (Patton, 2016).

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Conclusion

After, reviewing the multiple writings concerning the free community college tuition

programs, this writer would like to make the following analysis. Higher education institutions

face several financial challenges depending upon the economic and political climate. As a result,

government funding is a major portion of the institutions budget. Kretovics (2011) stated that

institutions receive government funding through two distinct methods; direct funding which

occurs in forms such as grants, research awards, and stimulus funding and through indirect

funding which is financial aid that is award to students. This funding comes in some part from

both state and federal entities.

Due to the limitations in funding sources, institutions compete for both direct funding and

to a larger degree, indirect funding tied to student enrollment. While it is true that community

colleges tend to be less funded and offer an often less expensive pathway for individuals to

participate in higher education, the free tuition for community colleges may not be the most

effective method to ensure greatest successful participation in higher education. The program

does appear to have a very positive effect upon enrollment in community colleges. However, the

adverse effect upon other four-years institutions may diminish those benefits. If the goal is to

increase both enrollment and degree completion, then a program that favors one form of

institution while negatively affecting others that serve the same target group may prove to be

self-defeating in the grand scheme. It may lead to a rechanneling of a pool of students rather than

increasing multiple opportunities.

Perhaps the populations would be better served if a system was developed that at least

made the same number of funds given to community colleges available for four-year institutions

that serviced similar social-economic groups as community colleges. However, at the very least
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it is clear that more research may be needed to adequately assess both the benefits and the effects

of free tuition programs for community colleges.

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References

Carlson, S. & Kelderman, E. (2015). Who Has a Stake in Obamas Free Community-College

Plan? Chronicle of Higher Education, 61(19, retrieved from

http://www.chronicle.com/article/Who-Has-a-Stake-in-Obama-s/151131/

Cubberley, F. (2015). THE REALITY OF FREE COMMUNITY COLLEGE TUITION. Journal

Of College Admission, (227), 21-23

Doyle, W. R. (2009). The effect of community college enrollment on bachelor's degree

completion. Economics Of Education Review, 28199-206.

doi:10.1016/j.econedurev.2008.01.006

Fillion, R. (2016). TACKLING TUITION. State Legislatures, 42(3), 14-19.

Goral, T. (2015). Obama proposes free community college tuition. University Business, 18(2),14.

Kretovics, M. A. (2011). Business practices in higher education: A guide for todays

administrators. New York: Routledge.

Mangan, K. (2015). Free Community College Jolts Enrollments as Questions Persist for 4-Year

Campuses. Chronicle Of Higher Education, 62(4), 15.

Morris, C. (2015). Pay it forward: the national debate to make community colleges free

continues as more states develop a tuition-free plan for students. Diverse Issues In

Higher Education, (23), 12.

Patton, C. (2016). Is Free Tuition Working?. Journal Of College Admission, 23230-33.

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References

Sheehy, K. (2016). Obamas Free Community College Plan: What Students Need to Know.

Retrieved from http://www.usnews.com/education/community-

colleges/articles/2015/01/16/obamas-free-community-college-plan-what-students-need-

to-know.