During the President’s recent State of the Union address this week, he proposed sweeping reforms of nearly everything from government spending to the tax code to higher education.

Not surprisingly, he also released details on a program that would offer free community college for all – or at least some of us.  Here’s what he said:

“By the end of this decade, two in three job openings will require some higher education — two in three.  And yet, we still live in a country where too many bright, striving Americans are priced out of the education they need.  It’s not fair to them, and it’s sure not smart for our future.  That’s why I’m sending this Congress a bold new plan to lower the cost of community college — to zero.  

Keep in mind 40 percent of our college students choose community college.  Some are young and starting out.  Some are older and looking for a better job.  Some are veterans and single parents trying to transition back into the job market.  Whoever you are, this plan is your chance to graduate ready for the new economy without a load of debt.  Understand, you’ve got to earn it.  You’ve got to keep your grades up and graduate on time. “

Of course, my initial thought was, “Yay!  Free community college.”  After all, I love free stuff!

The Problem with Free Stuff

But then I remembered an unfortunate truth I learned years ago – that nothing is free.  Everything that is given to someone must be taken from someone else first and redistributed in some way, shape or form.  Like it or not, that’s the cold, hard truth.

And after some simple research, I also learned just how the administration plans to pay for the free community college – by taxing distributions on College 529 plans.  An excerpt from Time Magazine:

“The president proposed ending a key tax break on state 529 college savings plans. Today, the money you invest in a 529 plan isn’t deductible on your federal taxes (34 states and the District of Columbia give you a break on state taxes), but your savings grow tax-deferred, and you won’t owe any taxes on your earnings when you withdraw that money to pay for higher education expenses, including tuition, room and board, and books. Under Obama’s plan, those investment profits would be taxable, even if the money went toward college.”

Taking a Closer Look at the Fine Print

My initial reaction was complete and utter outrage.  I mean, you want to make college more affordable by….taxing college savings?  Riddle me that.

But it’s not as bad as it seems.  For starters, the proposed taxes would only be levied on earnings accrued in 529 funds, not contributions.  Further, the change would only apply to new monies contributed to 529 accounts, and not on funds people have already saved.

Still, it seems like a strange idea to me.  If you plan to tax 529 distribution earnings as income, it’s likely that you’ll see a lot fewer people using 529s altogether.  My state (Indiana) offers a 20 percent tax credit on the first $5,000 we contribute each calendar year, which sweetens the deal, but most states don’t.  And if you take away the tax advantages that 529 plans offer, why would people use them?

All Two-Year Degrees Aren’t Created Equal

I think it’s also important to realize that not all two-year degrees are created equal.  Sometimes all I can do is shake my head at the college degrees people actually pursue and pay for.  For example, you can get an Associate’s degree in General Studies, Liberal Arts, or even History.  You can also get an Associate’s degree in Pre-Law (Say what?), Dance, Music Therapy, or even Latin.

What kind of jobs can those degrees help you get?  I have no idea.  But I do know that community colleges will gladly take your hard-earned dollars in exchange for that diploma.  And I’m sure schools, drunk with greed, would come up with all kinds of new Associate’s programs if taxpayers were ultimately footing the bill for their new customers.  For example, we would probably see Associate degrees in things like Arts & Crafts, Scrapbooking, and Breathing.  Sounds like a fun way to spend a Saturday, but will that really help anyone?

Let’s Focus on Job Training or Technical Education Instead

While I’m not thrilled about the idea of the government (who has no money, by the way) financing free community college for the masses, I think it makes a lot more sense if you apply those funds to degrees or job training that could lead to an actual career.  For example, fields like health care and information technology have exploded over the last decade, and there are plenty of entry level jobs in those fields that require an Associate’s degree.  According to the U.S. Department of Labor, the following Associate degree careers have some of the brightest job prospects:

# Occupation Employment  Percent  *
Change
Earnings Typical Education
  2012   2022
1 Diagnostic Medical Sonographers 58,800 85,900 46% Median wage is greater than $56,230 per year Associate’s degree
2 Occupational Therapy Assistants 30,300 43,200 43% Median wage is between $34,760 to $56,120 per year Associate’s degree
3 Physical Therapist Assistants 71,400 100,700 41% Median wage is between $34,760 to $56,120 per year Associate’s degree
4 Dental Hygienists 192,800 256,900 33% Median wage is greater than $56,230 per year Associate’s degree
5 Cardiovascular Technologists and Technicians 51,600 67,300 30% Median wage is between $34,760 to $56,120 per year Associate’s degree
6 Medical Equipment Repairers 42,300 55,100 30% Median wage is between $34,760 to $56,120 per year Associate’s degree
7 Medical and Clinical Laboratory Technicians 161,500 209,400 30% Median wage is between $34,760 to $56,120 per year Associate’s degree
8 Veterinary Technologists and Technicians 84,800 109,800 30% Median wage is between $22,610 and $34,720 per year Associate’s degree
9 Magnetic Resonance Imaging Technologists 30,100 37,200 24% Median wage is greater than $56,230 per year Associate’s degree
10 Radiation Therapists 19,100 23,600 24% Median wage is greater than $56,230 per year Associate’s degree
11 Radiologic Technologists 199,200 240,800 21% Median wage is between $34,760 to $56,120 per year Associate’s degree
12 Nuclear Medicine Technologists 20,900 25,100 20% Median wage is greater than $56,230 per year Associate’s degree
13 Web Developers 141,400 169,900 20% Median wage is greater than $56,230 per year Associate’s degree
14 Registered Nurses 2,711,500 3,238,400 19% Median wage is greater than $56,230 per year Associate’s degree
15 Respiratory Therapists 119,300 142,100 19% Median wage is between $34,760 to $56,120 per year Associate’s degree

If we’re offering people hope and the opportunity to get ahead, we should at least steer them towards options that can actually help them get a job.  Because, as The problem with free community college? Someone has to pay for it. Read this post on why community college may not be a great idea after all.we all know, that Associate of Arts in Women’s Studies probably isn’t going to help.

In the meantime, I’m going to keep saving for my kid’ s college education in their 529 plans.  Because nothing is free. 

And even if it is, someone has to pay for it.

What are your thoughts on free community college?  Do you think it makes sense for every degree? 

Additional reading: