Tennessee Promise and Community College Subsidies

According to the Tennessee Higher Education Commission, Promise outlays averaged $28 million per year, or about $600 per participant, per semester from 2019-20 through 2022-23. The paper calculates average Promise costs by assuming participants receive $1,200 per year over the average length of program participation of 2.3 years for a total Promise cost per student of $2,760. The paper also accounts for additional expenditures on students who were induced to enroll in postsecondary education as a result of Promise. The paper calculates additional expenditures by summing total state and local support with total financial aid per full-time equivalent student using data from the State Higher Education Finance (SHEF) Report by the State Higher Education Executive Officers (SHEEO) Association (SHEEO 2025). This is equivalent to $32,345 during the time a student is utilizing Promise and an additional $51,548 for the induced students who went on to receive bachelor’s degrees. Average cost per Promise student is calculated to be $14,793. This value is fairly low because most Promise students would have enrolled in higher education even in the absence of Promise, so they only incur the additional cost of $2,760.

Estimates of additional lifetime additional lifetime income are taken from estimated returns to postsecondary education in Tennessee (Carruthers 2023). The paper applies a flat tax rate of 26%, which is calculated based on counterfactual income of individuals with only a high school diploma or less. The paper estimates additional tax revenues paid by individuals who increased educational attainment as a result of Promise to be $24,845 across all Promise students. This yields a net cost of -$10,053.

With a positive willingness to pay and negative net cost, Tennessee Promise is estimated to have an infinite MVPF.