A San Francisco start-up is offering high school students a new way to earn scholarship dollars. Raise.me is a middleman that connects the college with the student.
On the college side we have the offer to give scholarship credits as high as $4,000 a year for student achievements. If the student is accepted by that school, she gets the money applied to her tuition bill. The Raise.me website says they have 130 participating colleges.
Earning “micro-scholarships” during high school, students have an ongoing incentive to excel. Just taking a pre-algebra class at a participating high school got one young woman a $100 scholarship credit at Pennsylvania State University. In addition, high grades meant an extra $1500 and a visit to a Penn State campus was worth $250.
Where are we going? To free tuition incentives.
At 82 percent for the 2013-2014 school year, a vast majority of students graduate from high school. But while graduation rates are up, college enrollment rates are down. Asked why, economists suggest the reason relates to the recession. When the economy contracted, school made sense. But now with job availability up, more males from lower income families are entering the labor force rather than college. To flip the trend, some suggest that free tuition is the best incentive.
Before 1998 in the U.K., tuition was free and living expenses were funded. However enrollment climbed, expenses soared and England started to charge tuition while in Scotland the public universities did not. Contrary to what we might have expected, enrollment rose more in England than in Scotland because of the free schools’ living expenses. Called regressive because those who earn less have to spend a higher proportion of their income than those with more, the free tuition program jeopardized the education of the very people it was meant to help.
Looking at free tuition more generally, we again have some counterintuitive results:
Our Bottom Line: Incentives
As economists we know there is no such thing as a free lunch. Just like raise.me, student loans, or any college financing plan, free tuition creates incentives that might have a cost.