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These 2 U.S. States Will Pay for Your College Education

By Sean Williams - Updated Mar 7, 2017 at 2:36PM

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Want to get a college education for free? You no longer have to head overseas to make that happen, as these two states are now offering eligible students an opportunity to go to college for free.

Source: Pink Sherbet Photography via Flickr.

We all know that going to college is becoming a prerequisite to landing a good job, but the costs of attending a four-year college these days is backbreaking for the average American family.

According to data from the College Board, tuition and fees for a single year at a private nonprofit college jumped nearly 4% in 2014 to $31,231. Without inflation you'd be looking at approximately $125,000 out of pocket over the course of four years. If you're in a master's program or looking to get your PhD, you can potentially double that total before you've attained your degree.

Furthermore, based on data from, between 1985 and 2011 the college education inflation rate totaled 498.5%, compared to just 114.9% for the consumer price index. If a college education had increased at a rate commensurate with the CPI, each $1 in 1985 would translate to about $2.15 in 2011 -- but based on the actual rate of college education inflation, each $1 in 1985 would now be nearly $6!

Source: Flickr user Morgan.

Why are college costs consistently outpacing the rate of inflation? It's actually a confluence of factors, including increasing faculty and overhead costs and the need to renovate older buildings, buy new equipment, and expand by building new libraries and research facilities necessary to keep up with an increasingly digital age.

The end result is that today's college grads are walking away with backbreaking amounts of debt -- a cumulative $1.2 trillion in student loan debt is currently outstanding -- and high school grads are in some cases just bypassing college altogether because of the increasingly exclusionary costs.

Understanding these obstacles are standing in the way of good students who may not have the financial means to attend college, two states have undertaken a radical new program that other states may soon follow: granting high school graduates the opportunity to attend community college for free!

The idea of a free college education isn't new, but until now Americans who wanted one needed to hop on a plane and head out of the country. Denmark, Finland, Iceland, Norway, Sweden, Germany, Mexico, and Brazil all either offer free college education to students or have very favorable grant systems that allow students to attend college for little or no cost.

Until recently, nothing like this existed in the United States. However, Oregon and Tennessee are looking to change the game.

Source: Flickr user Ashley Basil.

Tennessee and Oregon offer college students free rides
In February 2014, Tennessee became the first state in the nation to offer a free community college education to select students. The impetus was a forecast from the University of Tennessee that 55% of jobs in the state will require a post-secondary credential by 2025 -- and as of the time of its study a mere 32% of Tennesseeans held two-year degrees.

Under Tennessee's free community college program, "Tennessee Promise" scholarships are handed out to students who can maintain a minimum grade point average of 2.0 and who've exhausted all other sources of financial aid, such as Pell Grants and Tennessee Hope scholarships. The goal is to capture around 500,000 high school graduates over the next decade who would not otherwise have considered going to college.

How are these scholarships being paid for, you're probably wondering? The Tennessee Promise scholarships are being funded by $110 million in excess reserves from the state's lottery and a $47 million endowment by the states' General Assembly. In total, the average scholarship per student is projected to be $971, though that also includes grants received from the in-state Hope scholarships and other possible financial aid.

This past week Oregon joined Tennessee when its Senate passed Senate Bill 81, also known as the Oregon Promise, to offer a free education at community college to eligible in-state students.

As Senator Mark Hass (D-Beaverton) put it,

We're saying to our young people, if you finish high school, keep up your grades, stay out of trouble, we promise to provide you with an opportunity to reach the middle class on your own.

Senator Mark Hass via Facebook.

The Oregon Promise will allot $10 million to at least 10,000 prospective in-state college students, although the requirements to qualify in Oregon are a bit tougher than in Tennessee. As in Tennessee, students need to apply for federal and in-state grants first, and then can seek assistance from the Oregon Promise program.

However, unlike Tennessee, students will need to apply within six months of graduating high school, and they'll need to maintain a GPA of 2.5 or higher. Students will be responsible for a $50 fee to the community college per term. OK, so it's not 100% free and clear like Tennessee, but $50 for a few terms each year compared to the College Board figure of $31,231 in annual tuition is practically free by this definition.Additionally, students with jobs are eligible to receive prorated scholarships as long as they continue to meet the above requirements.

Why a college education is so critical
You might be wondering why a college education is so critical to begin with. I mean, Bill Gates dropped out of Harvard and he turned out fine, right?

According to a study released by the Pew Research Center in Feb. 2014 on millennials aged 25 to 32, those with high school diplomas earned a median of $28,000 in income annually. If you went to a two-year college or had some college experience and then dropped out, your median annual income rose by $2,000 to $30,000 per year. But for four-year college grads (and up), their median annual income rose to a whopping $45,500.

As we examined last weekend, if a college grad could somehow live on the same budget as a high school grad for 42 years (between ages 25 and 67, the full retirement age for millennials as defined by the Social Security Administration) and invest the difference between their median wages, he or she could be looking at a $5 million difference (under ideal circumstances) by going to college. Even the $2,000 difference per year between a two-year grad and a high-school grad could total $700,000 if invested at a return of 8% over 42 years!

Plus being a college graduate gives a person more opportunity to get raises and move up the socioeconomic ladder.

Source: Nazareth College via Flickr.

Will other states follow Oregon's and Tennessee's lead?
The move by Oregon and Tennessee to boost post-secondary graduation rates by offering free community college is intriguing, and I certainly wouldn't be surprised if a handful of other states joined within the next couple of years.

However, funding a free community college program adds yet another expense to a states' budget. For some states that's a problem, since programs may already be stretched thin without adding a $10 million -- or $110 million -- program. In order to make a college education a reality for high school graduates who can't afford one and don't qualify for enough in grants and scholarships, it could be necessary to taxes on citizens. And voting to increase taxes is always a dicey proposal at best.

My opinion is that we're going to see Oregon, Tennessee, and perhaps three to five additional states run with their free community college programs over the next five years while the rest of the country sits back and watches this experiment in action. If the program is a success, it could be worked into additional states, or perhaps (and this is a real longshot) even the federal budget.

I, personally, won't look for a college education to be handed out in a majority of states anytime soon, but this is certainly an intriguing start to much-needed education reform.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy

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