Feel the Bern! Free Tuition!

Bernie “Feel the Bern” Sanders is a strong believer in the idea of free college – no tuition.   I covered some of his thoughts in a post I wrote back in February: https://terryliebman.wordpress.com/2016/02/08/the-economics-of-politics/

What would happen if a college actually tried this?  Offered tuition-free enrollment?  Well, Arizona State was kind enough to answer the question for us.  In October of last year, the Arizona State University W.P Carey School of Business decided to make their 2-year B-school program free.   Tuition normally runs $54,000 a year for ‘in-state’ students … and up to $90,000 for international students.

This fall:  Free for everyone!  No tuition!   Of course, they still plan to pay the teachers.

Today’s Wall Street Journal, in an article entitled ‘What Happened When a Business School Made Tuition Free‘,  gave us these insights:

1. Applications skyrocketed.  As of April 4th, the school had received 1,165 applications for admission.   About triple the usual number of applicants for the 120 open slots.
2. The cost of administering the ‘free’ tuition offer, answering phones, responding to emails from around the world, increased significantly.
3. The number of disappointed, rejected applicants is also at an all time high, resulting in a lot of unhappiness and hurt feelings.

Apparently the school was caught off-guard by the huge surge in demand.   Amy Hillman, the dean of the school, commented, “I really didn’t understand the extent to which there was a demand for scholarships.”

Really?   The dean of the business school was surprised?  Offering to give something valuable away for free…and SHOCKINGLY demand surges?

I can – maybe – understand a ‘liberal arts’ school being shocked … but you’d think a business school would not.   One would have hoped they would understand how price  affects supply and demand previously in equilibrium.   I hope this isn’t an indication of their understanding of basic economics.  After all, this is a business school!

Tuition may not be free, but students don’t appear to be in a hurry to repay student debt.  This graphic appeared in another WSJ article today:

Economist Carlo Salerno commented the government imposes virtually no credit checks on borrowers, requires no cosigners and doesn’t screen applicants for their preparedness. “On what planet does a financing vehicle with those kinds of terms and those kinds of performance metrics make sense,” he said.

Tuition may not be ‘free,’ but about half the students with debt, and the US Education Department providing that debt, act like it is.

A shame.

• Terry Liebman