×

New York is offering free college — California may be next

  • In total, U.S. citizens hold $1.31 trillion in student loan debt.
  • New York became the first state in the U.S. to offer its residents tuition-free attendance at public four-year colleges and universities and community college through the Excelsior Scholarship program.
  • California state lawmakers introduced the $1.5 billion Degrees Not Debt scholarship in the spring to help students struggling with student debt.
Paul J. Richards | Getty Images

A growing group of states across the nation are offering to pay the tuition costs for college students. In April, New York became the first state in the United States to offer its residents tuition-free attendance at public four-year colleges and universities and community college when the state legislature approved the Excelsior Scholarship program. In May, Tennessee lawmakers gave final approval to Tennessee Reconnect, making community college across the state tuition-free for adults over 24 — as it has been for high school graduates in state since 2014.

California could be the next to join the ranks: In April state lawmakers introduced the Degrees Not Debt scholarship. A $1.5 billion program to be phased in over five years, Degrees Not Debt would make money available to University of California and Cal State University undergraduates who already qualify for need-based aid but struggle paying non-tuition expenses, such as books, transportation and housing. The projected impact in the state, where roughly half of students graduate with student loan debt, was 392,000 students.

education
Getty Images

The scholarship was one piece of a larger Degrees Not Debt budget package designed to make paying for college easier. But the budget act that the California State Assembly approved in mid-June did not include the scholarship — nor a proposal to make the first year of community colleges free for all full-time students.

"The Degrees Not Debt scholarship is part of a multiyear plan," said Terry Schanz, spokesperson for Democratic Assemblymember Kevin McCarty, who chairs the state legislature's budget subcommittee on education finance. "There was never going to be a budget allocation this year."

So what did California do? Set aside $96 million to preserve the Middle Class Scholarship, a program introduced in 2013 to help pay up to 40 percent of tuition and fees for UC and CSU students from families whose annual incomes do not exceed $156,000. It also made $50 million available in supplemental grant money for full-time community college students to help them pay non-tuition costs, like housing and transportation.

Lending a helping hand

The rising cost of college has only increased Americans' share of debt. In total, U.S. citizens hold $1.31 trillion in student loan debt. In turn, various state legislatures have begun looking for ways to make college more affordable. In addition to efforts already under way in California, New York and Tennessee, four other statesKentucky, Oregon, Minnesota and Arkansas — have programs to cover either the cost of tuition at all in-state community colleges or the costs associated with two-year programs in "high-demand" fields of study. In February, San Francisco became the first U.S. city to offer free community college to all students regardless of financial need.

"They're all, at least in theory, working toward a common goal: to move toward some level of free public college education. What they're doing are these little, incremental stabs at it," said Sara Goldrick-Rab, a professor of higher-education policy and sociology at Temple University and someone who has argued that U.S. students should get two years' free college at any public college or university.

Indeed, most of these programs are not so much free tuition programs as they are grants to cover last-dollar costs, or the remaining amount in tuition and fees not already paid for through other federal and state aid programs. The programs enacted by Tennessee and New York this spring are the most comprehensive but differ in several ways.

"They're all, at least in theory, working toward a common goal: to move toward some level of free public college education. What they're doing are these little, incremental stabs at it. " -Sara Goldrick-Rab, professor of higher-education policy and sociology at Temple University

While Tennessee's programs don't take income into consideration, the aid administered through New York's Excelsior Scholarship is restricted by income. In its first year, the scholarship program will be available to students with household incomes that don't exceed $100,000. By 2019, students from families that make up to $125,000 will be eligible to attend all State University of New York and City University of New York colleges tuition-free.

Critics speak out

New York has budgeted $87 million for the first year of the Excelsior Scholarship, or enough to cover tuition costs for 22,000 students. The office of New York Gov. Andrew Cuomo estimates some 940,000 families with college-age students will be eligible for the scholarship program by 2019. There are caveats to receiving the scholarship: A student must be enrolled full-time, take at least 30 credits a year and live and work in the state for the same number of years they attended college. The work and residency requirement kicks in after students graduate, and if students leave the state too early, the scholarship grants they've received turn into loans they have to repay.

student debt personal finance
Blend Images | Agency Collection | Getty Images

The idea of states dipping into their own coffers to help residents pay for college has critics from both sides of the political spectrum. Mary Clare Reim, an education policy analyst at the Heritage Foundation, has written that New York's Excelsior Scholarship "will likely lead to further increases in the cost of higher education," which are then shifted onto taxpayers instead of students.

Goldrick-Rab has also been critical of key provisions of the Excelsior Scholarship. The requirement to take 30 credits a year, she said, puts low-income students at a disadvantage, since they oftentimes have to juggle academic and job responsibilities simultaneously. The live-work requirement is also troublesome, she said. What happens to a New York college graduate who can only find work in northern New Jersey or manages to find a job in New York City but can only afford to live in northern New Jersey?

"Everybody in this country benefits when a student finishes college, because they pay taxes to the federal government. This is incentivizing unemployment," she said.

For California, when it comes to higher education, the questions to consider are different from New York's. It's already one of the most generous states in the nation when it comes to picking up the cost of tuition and fees for college students. The state's Middle Class Scholarship has offered 190,000 grants in its three-year existence, and the larger, Cal Grant program, for lower-income students, has distributed close to $2 billion in aid to nearly 330,000 students since 2006.

Graduation, grad, student debt, education, student loans
Laurie Rubin | Getty Images

"Our existing programs are already helping students reduce tuition costs," said Debbie Cochrane, vice president of the Institute for College Access and Success in Oakland. "What's going to help students succeed is not the free tuition, but the money to help them with the other costs of attendance."

In short, the exact costs that the Degrees Not Debt Scholarship program was intended to cover. According to Assemblymember McCarty's office, Californians should expect the same proposal to crop up during budget talks next year.

"I am committed to make college more affordable and more accessible, including making the first year of community college free for California students," McCarty said.

— By Andrew Zaleski, special to CNBC.com

Latest Special Reports

  • CNBC|Survey Monkey Small Business Survey animation

    The Small Business Survey provides insight to Main Street opinions on regulation and hot issues facing smaller firms.

  • The latest news from the Squawk Box team on investing and business.

  • Business icons and provocateurs share their innovative models. Learn how to upend old industries and start new ones that move markets.