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Why making community college free won’t solve the student debt crisis

Why making community college free won’t solve the student debt crisis

Pursuing higher education in America today can feel something like a Catch-22 — with a college degree, graduates are more likely to be employed and earn more over their lifetime. But as the cost of college rises, so, too, does the amount of debt students have to take on to pay their way through school.

To help solve matters, President Obama put forth an ambitious proposal this year to make two-year community college tuition free for all students across the country, saving them an average of $6,700. Obama’s plan was inspired by a similar initiative in Tennessee, where state officials made community college tuition free for high school graduates beginning this fall (the first class to participate started classes a few weeks ago). The idea so far has caught on in Oregon and Minnesota, which rolled out their own statewide community college programs this year. Presidential candidates Hillary Clinton and Bernie Sanders have been stumping their own tuition-free community college plans on the campaign trail.

But is it fair to expect community colleges to fill the gaps that exist in higher education today? After speaking with community college leaders and reviewing federal data on student outcomes, we found a host of challenges that may pose a big risk to the government’s ambitious plan to make community college free for all.

Community college graduates take out less debt but have more trouble paying it off

Visual by MagnifyMoney

(Graphic provided by MagnifyMoney.com)

Graduates with six-figure debt loads have colored the headlines following the student debt crisis in the U.S. While the average student graduates with nearly $30,000, half of college students borrow less than $10,000, and it is those who borrow less than $5,000 who have the most trouble making their payments. According to the Federal Reserve Bank of New York, 34% of borrowers with less than $5,000 in loans went into default within two years (missing at least one payment), compared to just 18% of borrowers with $100,000 or more. The reason behind this, researchers note, is that most students with six-figure debt tabs are typically in graduate school and tend to earn much higher salaries than those with a bachelor’s or associate’s degree alone.  

“The less you borrow, the likelier you are to default and that is very much a community college phenomenon,” says David Baime, a senior policy expert at the AACC, the American Association of Community Colleges.

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These differences are compounded when we compare community college borrowers to borrowers at public four-year institutions. In 2011, about 20% of community college borrowers defaulted on their student loans within two years, compared to 8% of undergraduate borrowers who attended four-year schools and 2% of borrowers in grad school. Default rates among community college borrowers were even worse than for-profit institutions, which are notorious for charging exorbitant tuition rates.

“The rhetoric surrounding community colleges is false — they are not doing a good job at promoting social mobility,”  says Judah Bellin of the Manhattan Institute, a nonprofit research group. Bellin authored a new report, published Thursday, which looks at the limitations of community colleges and possible solutions.

Several factors can be attributed to the trouble community college students have in repaying loans. They’re more likely to come from low-income families and disadvantaged neighborhoods. Median wages for graduates of two-year schools have also fallen over the last decade, from $30,100 to $25,900, while wages for four-year graduates rose from $47,300 to $48,000 and from $61,000 to $63,100 for graduate borrowers, according to a recent study by the Brookings Institute. But the biggest wedge standing between community college students and post-college success is the fact that they are much less likely to complete their degrees than traditional students. Only 26% of two-year community college students graduate within six years of enrolling and drop out at a rate of 43%, according to Bellin’s study. Students are more likely to graduate within six years at both private for-profit two-year colleges (57%) and private nonprofit two-year colleges (36%).

With the exception of vocational schools, which offer targeted training in a specific field, a central purpose of community colleges is to provide an affordable launch pad for students hoping to transfer to a four-year institution. With experts predicting that 35% of jobs will require at least a Bachelor's degree by the year 2020, it’s never been more vital that community college students make that leap. However, less than 10% of community college students successfully complete their degrees at a four-year school, Bellin found.

Baime adds that student loan servicers — the companies commissioned by the government to manage federal student loans — could do a better job of informing students of options for income-based repayment plans. “Clearly, inadequate servicing is part of the reason students default,” he says. “Another reason is that students will in some cases leave community college without a forwarding address and it’s difficult for the colleges to track them.”

Johnny Lozardo, 42, is one of many success stories from ASAP, a groundbreaking community college reform program launched in 2007.

How to improve the community college system

Johnny Lozada, 42, had always excelled in high school but dropped out in his senior year when he found out he would soon be a father. He did well enough without a diploma, working full-time in office administration for a transportation company. Getting his GED seemed like an unnecessary formality, until his teenage son told him he planned to follow in his footsteps.

“When my son told me he wanted to be just like me, I knew I had to not just say, but do and lead by my actions,” says Lozada, who lives in Queens, N.Y. He earned his GED through a program at LaGuardia Community College in 2011 and went on to pursue an Associate’s degree in psychology through a special program called ASAP — Accelerated Study in Associate Programs. ASAP, launched by The City University of New York system in 2007, has emerged as one of the most successful community college reform initiatives in the last decade. It relies heavily on a team of advisors who work closely with students to hold them accountable for completing their Associate’s degree in at least three years (beginning with mandatory meetings twice per month). They sweeten the deal with bonuses like tuition waivers, career counseling, tutoring, financial assistance for textbooks, and help paying for commuting costs.

“I felt like if I didn’t have that one-on-one advising I would have been lost,” Lozada says.

In a study of five groups of students enrolled in ASAP since its launch in 2007, more than half (52%) graduated within three years, compared to CUNY’s system-wide average of less than 25% and nationwide average of 16%.

“What we’ve been able to demonstrate is with the right resources and structure we can make an enormous difference in students’ timely graduation rates,” says Donna Linderman, ASAP’s executive director.

ASAP works because it is tailored to the unique needs of community college students, who are often juggling full-time jobs and families while attending school, offering custom class schedules that can fit around their other responsibilities. Advisors also work with students to transition them into four-year schools. MDRC, a nonprofit nonpartisan education and social policy research organization, gave ASAP rave reviews in an independent study of 900 ASAP students released in February. The group found that one-quarter of students participating in the ASAP program transferred to four-year schools later on compared to 17% of students not enrolled in ASAP.

Lazardo was among them. After earning his Associate's degree in 2013, he completed his Bachelor’s in applied psychology at New York University in May 2015. He admits the transition was "daunting" but says "ASAP gave me the skills I needed that allowed me to focus on my studies, buy my books, schedule my classes, everything." 

The program is currently being replicated at three community colleges in Ohio, with plans to launch in nine more states. But with such a clearly successful track record, why aren’t more school systems flocking to adopt CUNY’s model? In a word, money. CUNY spent roughly 67% more per student ($16,300) through ASAP over a three-year period, MDRC found. But Linderman says those costs have significantly lowered as the program has expanded to serve more students. They now spend about $3,700 per student. Thanks to a $77 million investment from New York State and New York City, the program is on track to serve 25,000 students by 2018.

Vetting community colleges

Community colleges may not solve every problem facing higher education today, but they are still a valuable option for people who don’t feel comfortable jumping feet-first into a four-year school. But just as you would diligently shop around and compare traditional four-year schools, it’s important to properly research community colleges before enrolling. We’d start with the Department of Education’s (ED) College Navigator, where you can search schools by name and look at their graduation and student loan default rates, among other information. It’s not very intuitive to use and you can’t compare schools side-by-side easily, but it’s better than nothing. ED recently rolled out a new site, the College Scorecard, that lets families sift through schools and is more user-friendly.  

Jonathan T. Rothwell, a fellow at the Brookings Institute, recommends using Brookings’ “College Value Added Data Explorer” tool, where you can see how schools rank based on how much their graduates earn and how likely they are to repay their loans on time.  

“The issue for me with community colleges is there are huge differences across institutions, some that are doing great and some that are consistently doing very badly,” Rothwell says. “It’s important to check them out.”

Mandi Woodruff is a reporter for Yahoo Finance and host of the weekly podcast Brown Ambition. Follow her on Tumblr or Facebook.