On Wednesday, President Obama announced a plan to make community college free for all Americans. The White House says the average student could save $3,800 a year, as long as she makes good grades and progress toward graduation.
The president’s plan could lead to even bigger changes in the community college market. There have been few studies on how tuition prices affect enrollment rates specifically at two-year institutions, but one recent working paper suggests that these kinds of students are even more sensitive to price changes.
Jeffrey Denning, a PhD student at the University of Texas at Austin, studied what happened when high school students suddenly got a discount on community college. In Texas, community colleges are supported in part by local property taxes, so students who live in tax-paying districts get a special tuition rate.
Denning looked at five communities in Texas where, over time, more and more districts joined a college’s tax base — meaning that more and more students became eligible for lower tuition at that college. The discounts varied, but in general, costs were cut in half. Students paid about $1,124 less each year.
Here’s what that process looked like:
Denning compared students before and after the abrupt tuition change in each district. About a quarter of high school graduates were going to community college immediately in the fall. Denning estimates that a $1,000 tuition cut leads to a 5.1 percentage point increase in that rate. That is to say, the number of people immediately enrolling in community college goes up by 20 percent when you lower the price by $1,000.
Even more students, about 38 percent, were in community college within a year of high school graduation. Denning estimates that a $1,000 decrease in tuition leads to a 7.1 percentage point increase in that measure — again, a boost of nearly 20 percent.
The tuition discounts also helped students stay in college, which suggests that many students drop out because college is costly. Federal Pell grants generally cover the entire tuition at community colleges, so the students who benefit most from these discounts are the ones in the middle class who don’t qualify for federal aid.
The ultimate goal of going to college is to get a degree, and here the data are less encouraging. Few students make it out of community college in the first place, so it was hard to measure the effect of tuition cuts on graduation rates. In the coming days, people will point out that only a third of people in community college get some kind of degree or certificate within six years. This is probably why Obama’s plan include measures to make community colleges bring up the success rate.
Denning did find that the tuition cuts slightly increased the number of people transferring to four-year colleges, and that the four-year college graduation rate ticked up a bit. About a quarter of people helped by the discounted tuition ended up transferring and getting a four-year degree. This isevidence that there are talented students who would use community college as a springboard to a bachelor’s degree, if only they could afford to start down that path.
Denning noticed that the discounts in Texas caused many black students to enroll in community college instead of a four-year college. This was surprising, but the four-year-college graduation rate wasn’t affected, so it’s possible that these students were taking advantage of the discount and transferring later. If Obama’s proposal is rolled out, Denning’s data suggest that there will be more people who choose community college over a four-year college, but perhaps not that many, and probably not to their detriment.
Mostly, it seems, the president’s plan will have two main effects. It will increase community college enrollment by a lot, maybe as much as 20 percent, as Denning saw in his Texas study. And it help the students stuck in the middle, who are not poor enough to get federal grants but for whom even the cost of community college is unaffordable. There are a lot of these students, it seems.