Last Friday, President Obama announced a plan to make community college free for millions of students. Community college students would have up to 75 percent of the cost of the average community college covered, with the remainder covered by their states. If all states participated, this could affect up to 9 million students.

The Pros

There are two promising features to this plan.

First, it calls for federal funding to “cover three-quarters of the average cost of community college.” This is a welcome departure from the way aid is typically delivered. Traditionally, such an aid program would cover three-quarters of the cost, but this amount would vary based on how much each community college charged. That has the unintended consequence of rewarding colleges for charging more, because the higher their price, the more aid their students receive. Basing awards on the average cost, as proposed for this program, avoids this problem. This is a prudent safeguard for any financial aid program and establishes useful precedent that can be adopted for other aid programs.

Second, the proposal contains a matching provision to reward states for investing in community colleges. This feature addresses a chronic problem in federal higher education funding: providing federal money tends to provide an opportunity for states and institutions to cut back on their own funding and use the money saved elsewhere. Structuring this proposal as a matching grant helps avoid this problem.

The Cons

The main drawback to the proposal is that it is not likely to benefit students who need the most help in paying for college.

As others have noted, if this will be a “last dollar” program, it will interact with existing aid programs in a way that renders it regressive – the higher your income, the more you will benefit from this proposal. This is largely because many of the neediest students already have their tuition largely covered by Pell grants, and would receive modest, if any, benefit under this proposal. Yet as student and family incomes increase, Pell grant eligibility declines, and the benefits received under this proposal increase. On the other hand, if this program will be applied before other aid, such as Pell grants, then it will no longer be regressive, but the budgetary cost to the federal government will be much higher.

One aspect of the proposal that has received little attention is that it will likely make it harder for disadvantaged students to gain access to the most sought-after programs (or rationed courses). Making community college free can be expected to encourage more well-off students to enroll. This shift in behavior, combined with the fact that community colleges are capacity constrained—they have limited ability to add courses, programs, and faculty, at least in the short run—which means that needy students, will likely be crowded out by students from more affluent families. On average, affluent students, who have studied at higher-performing high schools, bring social and cultural capital (e.g., information from family and friends who have attended college) that aids them in negotiating application and registration processes. This is particularly important for gaining timely access to selective programs such as nursing.

If the goal of federal investment in postsecondary education is to increase the likelihood that students will enroll (and persist) who otherwise would not, it would be better to target that population directly, and let the aid follow them wherever they go. In practice, this means that a better use of these funds would be to invest in an improved Pell Grant program (e.g., by adopting the “average cost” concept from the President’s proposal).