President Obama made a big proposal last week: Free tuition at community colleges for every American. This universal program would help students work toward earning a two-year certification or transferring credit to a four-year bachelor’s program.
The goal of this program would be to make college “as free and universal as high school,” according to the president.
While this sounds like a great leap for college students everywhere (and especially those looking to avoid debt), is it all it’s cracked up to be?
Why This Plan?
This program aims to allow more students to obtain a degree without having to worry about debt. The president believes that Americans need more knowledge and skills to compete in the global economy.
According to his proposal, 35 percent of job openings by the year 2020 will require at least a bachelor’s degree. Another 30 percent will require at least some college or an associate degree.
How Would It Work?
While the details aren’t all laid out yet, this program would cover tuition costs for community college students who meet the requirements (more on that below). The president’s proposal reports that full-time community college students could save an average of $3,800 per year.
It’s estimated that 9 million students could benefit from this program each year. It would cost the federal government about $60 billion over 10 years. In terms of who covers the cost, the federal government would foot 75 percent of the expense. States who decide to participate in the program would cover the rest.
What Are the Requirements for Students?
This program would be universally available to community college students regardless of income or other economic measurements. To be eligible, students must:
- Attend community college at least half time
- Maintain a GPA of at least 2.5
- Take courses toward completing a certificate or degree program
Students would either earn a two-year certificate or be able to transfer full credits toward a four-year bachelor’s program.
Would Attending Community College Be Completely Free?
No, this program only covers tuition. Students would still be responsible for some fees as well as other costs of attending college, like room and board.
This could lead to continued reliance on student loans to cover these other costs. However, since the cost is significantly lowered, it could decrease the student loan burden. Students could still participate in work-study and other programs to cover the additional costs.
How Would This Actually Help Students?
The more education students have, the more they may be able to earn.
The Washington Post points to a couple of studies showing that graduates can earn more with a two-year degree than just a high school education. One review found that “each additional year of school raises earnings between five percent and 10 percent per year.”
The Post also points out that the degree you choose matters, too. It might not be worth it for low-earning degrees, but for others in fields like health care, it can mean a big boost in wages.
Who Would Benefit Most?
According to some, this program might end up benefitting mid- to high-income students more than low-income students. This is because low-income students often already receive grants that cover the cost of community college.
Some students who stand to benefit from this program may already be able to afford tuition costs, and many believe it’s a good thing to increase economic diversity in community colleges.
Would It Actually Help More People Get Degrees?
That’s highly uncertain; several media outlets have already published their own criticisms or cast doubt on the plan.
The Atlantic touched on these points in their article “Where Obama’s Community-College Plan Falls Short.” They report that “just 20 percent of students who started community college in 2009 had completed their programs three years later in 2012.”
It turns out that many students don’t go on to earn bachelor’s degrees, either. One study says “only about 15 percent of all students who start at two-year public colleges earn a bachelor’s degree within six years.”
Is This Program Definitely Happening?
No. As of now, there’s no start date for this program, as Congress will need to approve funding for the program first. With Republicans now in full control of Congress, the president would need to drum up support from the opposing party.
Some Republican Congressmen did join the president for his announcement, but it’s uncertain if there’s enough widespread support to fund the program. Other attempts to pass federal student loan refinancing and other aid in Congress haven’t fared so well.
There’s also the question of what states will choose to participate. Since they’ll have to contribute about 25 percent of the program’s cost, it’s uncertain at this point if states will agree to this.
What are your thoughts on President Obama’s proposal? Let us know on Twitter @StudentLoanHero!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|