By Tom Gorman, CPA
In his address, the President laid out a broad framework for the proposal that would cost an estimated $60 billion over 10 years. The stated goal of the proposal is to increase the number of students attending community college, and hopefully increase the number of graduates with job skills to enter the workforce. The proposal would be funded through a variety of higher education tax reforms. The most controversial of those was taxing distributions from Section 529 college savings plans. This option was soundly opposed by both Democrats and Republicans, and was subsequently withdrawn from consideration.
Under the proposal, students would need to attend school at least half-time, maintain a 2.5 GPA and show progress towards completing their degree program. In exchange, the federal government would provide 75 percent of the cost of tuition, and states would be required to provide the remainder. In addition, community colleges would need to ensure their credits would be fully transferrable to four-year institutions for those that choose to continue their studies. For their part, four-year institutions may very well develop and expand articulation agreements with community colleges to enhance the pipeline of students with a demonstrated interest in completing their degrees.
Many critics of the proposal point out that the average annual price of tuition and fees at community college was recently estimated at $3,347 by the College Board. This is well below the maximum award limit for the Federal Pell Grant of $5,730 for the 2014-2015 award year. Others argue that relieving community college students of the financial burden of attending will enhance their completion and graduation rates, and ultimately result in the workforce improvements hoped for by the Obama administration.
The other sticking point of the proposal is the reliance on states to fund one-quarter of the cost of the program. During the economic downturn, state support of higher education—at all levels—fell to some of its lowest levels in recent times. Only recently has state support of higher education increased, and it has just barely returned to pre-recession levels. Many worry that placing additional burdens on states to fund the community college program will simply shift funding from other priorities.
Access, Outcomes and Where We Go From Here
It is hard to look at this free community college proposal in isolation, given the backdrop that exists with the proposed higher education rating system that is being rolled out. The focus on greater access to a college education is laudable; however, funding tied to outcomes and completion rates may prove more challenging. The community college proposal is still at the conceptual stage, with legislative action still to come. We will keep you updated as this proposal takes shape in the coming months.
This article originally appeared in BDO USA, LLP’s “Nonprofit Standard” newsletter (Spring 2015). Copyright © 2014 BDO USA, LLP. All rights reserved. www.bdo.com