Dear Jimmy: Making “Free College” Pay in New York

New York is poised to become the 3rd state in the country to offer some version of college-for-free, and the first to include public universities in the deal. Unfortunately, Governor Cuomo and Senate Republicans also aim to make it the first to include a “live and work” requirement that undermines the economic and educational impact of free college. They are wrong to do so, and ought to simply delete the requirement immediately.

I get it — New Yorkers, especially those in Albany, want to ensure a strong ROI on this program. Take “Jimmy G from New York” who sent me this email earlier today:

Dear Big Mouth: How much do you make compared to the average citizen? You feel that requiring someone to stay in the state where the tax payers paid for their education is a bad thing. First of all, education past the high school years is not a guarantee for anyone, nor is it required by law. Still people like you will beat your chest saying “everyone else should give” while you sit back with your grants also funded by tac payers (sic) and private contributors and factually asses like you never show any real appreciation. People especially like you need to learn how to give back, but people like you feel anyone should come to this supposed unlimited financial well take from it and leave. No talk of paying it forward in some manner of giving back. No…you just bitch about bait and switch, double standard and so on. Why don’t you simply forgo your salary and contribute it to the free education fund for the kids. See how much appreciation you will get back from that generosity, geez why do you feel you can write checks on the backs of the working class? Please go back wherever your from or shut up if your not willing to put up.”

Here’s the problem, Jimmy: requiring people to live in New York after graduation costs New York more money. A lot more money.

The “live and work” requirement stipulates that beneficiaries of the plan must repay the state by continuing to live AND work in New York for as many years as they received the benefit, otherwise the benefit converts to a loan. In other words, if they continue to live in New York but work in one of its 5 border states, they will suddenly be saddled with debt. Here’s what this will accomplish:

1. It will incentivize unemployment. Unemployed college graduates will face a strong incentive to remain in New York, not paying taxes and leaning on the state’s social services, rather than accepting a low-paying job in New Jersey — and repaying debt.
2. It will reduce income that could be spent in New York. People offered a low-paying job in New York and a higher-paid job in Connecticut — and could live in New York either way — will choose the lower-paying job in New York. This harms their overall earnings trajectories and reduces the amount of money they will invest in New York’s economy.
3. It will discourage service. College graduates who see a future in the military will face a strong incentive to avoid serving their country — if they go off and serve, they must repay debt.
4. It will discourage talent development. Sometimes getting the best possible education requires leaving New York for training or graduate school. This requirement means that those folks will be slapped with debt — which will no doubt reduce their desire to ever return to New York to start a family.
5. It will cut against family ties. People who need to leave New York to care for a family member will also be smacked with debt. When they are done with that important work, do you really think they’ll want to return to New York?

All of those so-called returns costs real money, by the way — to collect on all that debt will require the creation of an administrative bureaucracy. Can you imagine paying people to come after New Yorkers who are just trying to work, care for family, serve in the military, or go to grad school? What a huge waste of taxpayer dollars.

Here’s the good news: New York doesn’t need to do this in order to reap a strong return on its investment. About 80% of New Yorkers will stay in the state anyway and New York is going to gain plenty of new residents by offering college for free. Yes — brain gain is the way to deal with brain drain —attract more people, and create a generation of grateful New Yorkers who will stay in state in order to give this opportunity to their kids. Trying to trap and punish the 20% or so who work or even more outside New York because they have to costs more than its worth. That 20% will be among the most vulnerable people — most likely they will be the sort who were the first in their families to attend college (and didn’t understand this requirement), or people who face more difficulty finding jobs in New York because of narrower social networks, job opportunities, or even labor market discrimination. And by the way, going after them with this requirement doesn’t help Upstate — people can still move downstate and not have their grant turned into a loan.

If the “live-work requirement” is the only way New York wants to have this program then the outcome is simple: The Excelsior must no longer be referred to as “tuition-free” education and should not be discussed as part of the national movement. Rather, characterize these funds a priori as short-term loans, from which students may receive forgiveness if they remain in New York State. The default categorization should be debt, and the opportunity to retroactively convert to a grant should be presented as the “potential” outcome.

So Jimmy — of course I care about New Yorkers getting a return on their investment. My family is from New York, and I’ve spent many years studying what the high prices of college are doing to its students. Here’s where we differ: I want New Yorkers to have an effective policy that makes economic sense, so that this policy pays off. The “live and work” requirement does the opposite.