Community College Tuition Changes, Michigan

Hendren and Sprung-Keyser (2020) calculate the net cost of eligibility for in-district tuition. First, they consider the initial program cost of $261, which is the difference in the average tuition rate for in-district and out-of-district residents in Michigan scaled by schooling take-up. Next, Hendren and Sprung-Keyser (2020) include the additional costs due to increased educational attainment. These estimates are based on results from Acton (2018), who calculates the impact of reduced tuition on semesters of college completed, enrollment across various post-secondary institutions, and degree completion. Hendren and Sprung-Keyser (2020) translate these educational gains into additional government costs by following the approach of Zimmerman (2014). They calculate government costs per full time college enrollee based on data from the Delta Cost Project. Changes in enrollment due to in-district tuition increase costs by $243. Finally, Hendren and Sprung-Keyser (2020) account for the changes in taxes paid and transfers received due to the program’s impact on lifetime earnings. That results in a fiscal externality of -$444. Putting these components together, the total net cost of program eligibility is $60.

Combining these estimates, Hendren and Sprung-Keyser (2020) get an MVPF of 29.46. To obtain the confidence intervals, Hendren and Sprung-Keyser (2020) bootstrap the enrollment, earning and tax revenue outcomes. Hendren and Sprung-Keyser (2020) assume (conservatively) these estimates are perfectly correlated across bootstrap iterations. This leads to a confidence interval of [-2.33,\infty].

Hendren and Sprung-Keyser (2020) also consider alternate approaches to calculating the earnings effect and determining the willingness to pay. In the case of the earnings effect, Hendren and Sprung-Keyser (2020) create a specification where their earnings projections are based on semesters of college completed. Hendren and Sprung-Keyser (2020) then apply the same earnings projection method from Zimmerman (2014) using these schooling increases. This produces an MVPF of \infty (95% CI: [0.26,\infty]).

Hendren and Sprung-Keyser (2020) also have an alternate specification that forecasts the earnings gain in education from community college and bachelor’s programs separately. This uses returns to community college taken from Mountjoy (2019). This produces an MVPF of 54.84 (95% CI: [-3.01,\infty]). In the case of willingness to pay, Hendren and Sprung-Keyser (2020) also consider a specification where the scholarship is valued at the cost of the transfer rather than based on the change in long-term earnings. This conservative willingness to pay method ignore any effect from increases in earnings. Instead, it applies the envelope theorem to those induced to get more schooling and assumes they are indifferent to the expenditure. All those who do not change their behavior as a result of the scholarship value it as a dollar-for-dollar transfer. The resulting MVPF for this alternate specification is 3.78 (95% CI: [0.54,\infty]).