Last week, presidential hopeful Elizabeth Warren unveiled her sweeping plan to transform higher education funding in America. Her package — which calls for large-scale college debt forgiveness, a significant expansion of the Pell grant, federal funds for historically black colleges and universities, and a big federal investment in making public two- and four-year colleges tuition-free — would offer benefits to both past and future students.

While Warren’s ideas around debt forgiveness have attracted perhaps the most attention, the rest of the proposal is just as ambitious. Under her plan, public institutions would become free for all students, no matter their income level; lower-income students, meanwhile, would have expanded access to Pell grants, allowing them to obtain a degree without borrowing lots of money to cover their living expenses.

Warren’s attention to this issue is driven by a landscape in which the rising cost of college is stressing students and families across the income spectrum. In its most recent report on college pricing, the College Board, the nonprofit that distributes the SAT, calculated that average tuition and fees at private four-year colleges shot up from $17,010 in 1988 to $35,830 in 2018. Tuition at public four-year colleges increased from $3,360 to $10,230 during the same time period. Community college tuition grew from $1,700 to $3,660. (Real earning growth during this time period, by contrast, has been disappointing.)

At the same time, while more Americans than ever are enrolling in college, completion rates are nothing short of abysmal, particularly at the community colleges that serve many low-income and first-generation college students: Less than 40 percent of first-time college students who enrolled in community college in 2012 had completed a credential within six years.

Warren’s plan is big, bold, and ambitious. But given the problems plaguing America’s postsecondary education system, is it enough to restore the traditional promise of higher education? Will it ensure that the many young (and not so young) Americans who enroll in college with the goal of obtaining a valuable credential or degree will be successful?

The journey from high school to labor market success used to be a lot more straightforward (for white men, at least). But beginning in the 1980s, those high-paying jobs for high school graduates started to disappear, and some kind of postsecondary credential or degree emerged as a necessary ingredient for economic security. Unfortunately, just as more Americans started turning to higher education, the price of that education started to climb.

Economists point to a variety of factors to explain the rising cost of college. Many on the right argue that federal financial aid is actually part of the problem. This theory — that federal financial aid is aiding and abetting colleges and universities in their relentless tuition raises — is known as the Bennett hypothesis, named in honor of William Bennett, who proposed it in an op-ed published in the New York Times in 1987.

“If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase,” Bennett wrote. “In 1978, subsidies became available to a greatly expanded number of students. In 1980, college tuitions began rising year after year at a rate that exceeded inflation. Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.”

Most researchers, however, believe that another factor is to blame for tuition increases at public two- and four-year colleges: states’ disinvestment in public education. Faced with less government funding, many public institutions have responded by slashing services and implementing tuition increases.

“What the public sees is rising tuition costs,” explains Judy Scott-Clayton, a professor of economics and education at Columbia Teachers College. “If tuition is going up every year, how can it be that institutions actually have fewer resources? The answer is that states have been systematically investing less in higher ed per student than they were 20 to 30 years ago.” This divestment has resulted in a tuition spike as schools raise their prices to recuperate some of the money lost.

“Colleges are doing all kinds of things they didn’t used to have to do.”

Meanwhile, the non-tuition costs of attending college — housing and health care, for example — have also increased.

“Students are borrowing a lot of money to pay their living expenses, so even students who aren’t paying any tuition are borrowing a lot of money to live,” explains Sandy Baum, a senior fellow at the Urban Institute. “You have to look at the minimum wage [and] the cost of living when you’re thinking about student debt.”

Both public and private institutions are also spending more money educating students than they did a decade ago. Personnel costs are one driver of this: Colleges employ lots of highly educated workers, a group that, as a whole, has enjoyed wage gains in recent years.

“Colleges are doing all kinds of things they didn’t used to have to do,” Baum says. “They’re complying with lots of regulations, buying more computers, wiring their campuses. And they have more students who have come to college not prepared to do college-level work, so they’re spending on academic supports or counseling services.”

Warren’s debt-free college plan has been positively received by many on the left. On the right, however, there’s been a good deal of criticism that has made reference to the Bennett hypothesis. Neal McCluskey, director of the nonprofit Cato Institute’s Center for Educational Freedom, worries that Warren’s Pell grant and public institution funding might “just keep fueling the sticker-price skyrocket.” Similarly, in her critique of Warren’s plan, Mary Clare Amselem of the Heritage Foundation, a conservative think tank, writes that “[s]chools have no incentive to lower tuition, because generous federal subsidies have created, effectively, unlimited access to loans and grants.”

Of course, if the Bennett hypothesis is true, it has dire implications for Warren’s plans, particularly her proposal to expand Pell grant aid. Researchers have been attempting to determine if federal financial aid is contributing to inflation in the cost of college for a while now. The evidence is mixed but on balance seems to suggest that it depends on both the type of institution and the type of aid. Most strikingly, in a paper published in the American Economic Journal in 2014, economists Stephanie Riegg Cellini and Claudia Goldin compared tuition among for-profit institutions eligible for federal financial aid to tuition at institutions that are not eligible for such aid.

“We found very large differences in tuition,” Cellini tells me. “Specifically, tuition at eligible institutions was 78% higher for similar programs. Even within the same institutions, at programs that are barely eligible and not eligible, tuitions for programs that got aid were a little bit higher.”

Studies looking at higher education more broadly have found a great deal of variation in responses to federal aid. In a staff report published in 2015, researchers at the Federal Reserve Bank of New York analyzed how increases in federal student loan maximums affected tuition at a range of different institutions. The researchers found that increases in institution-specific subsidized loan maximums led to tuition increases of about 60 cents per dollar. Those researchers also found “abnormally large tuition increases” in the for-profit sector.

It’s not quite clear, however, what the lessons of either of those papers is for Warren’s Pell grant proposal. Warren proposes ultimately banning for-profit institutions from receiving any federal aid at all, and most researchers believe loans are much more likely to produce inflation than Pell grants. In fact, the most informative research for the purposes of evaluating the potentially inflationary effects of Warren’s proposal is a paper by Lesley Turner, an economics professor at the University of Maryland.

“Public and community colleges are under tremendous resource strain.”

Turner set out to study the related question of whether institutions are “capturing” Pell grant aid. She found that, on average, institutions capture about 15 cents of Pell grant aid that students receive. (At public institutions, Turner found no net response.) “The very bottom line here is outside of the for-profit sector, Pell grant aid is doing a good job of reaching the students that it’s targeting,” she says.

By and large, the economists I spoke to viewed the Pell grant as likely a good vehicle for delivering much-needed additional financial support to low-income students, particularly nontraditional students.

“I do think it’s important to have more support available to low-income students,” says Melissa Kearney, an economics professor at the University of Maryland. “This is going to be especially important when your typical college student is not an 18-to-22-year-old who is financially dependent on their parents. The share who are going to be middle-aged and have a family to support is increasing, and they’re going to need to have access to cash.”

“Letting students keep their Pell grants and making sure that Pell grants are generous enough is really important,” says the Urban Institute’s Baum. “This part of the proposal stands on its own.”

While Warren’s proposal to expand the Pell grant got high marks among the economists I spoke with, her free tuition proposal received a mixed reception. Kearney, the Maryland professor, worries that Warren’s proposal doesn’t address the biggest problem facing higher education right now: low completion rates, driven in part by under-resourced public institutions. Free tuition doesn’t solve the supply-side factors that are making it difficult for students to complete high-quality programs.

“Right now, the majority of college-ready high school graduates are going to college, and the completion rates are just really low,” Kearney says. “What we need to be doing is developing the capacity of the supply side. Public and community colleges are under tremendous resource strain. We really need to increase the capacity of these institutions.”

Scott-Clayton, the Columbia professor, agrees. “We would be using all of these resources to basically replace the amount that private individuals previously were spending on higher ed,” she explains. “That means at the end of the day, nothing has changed from the institution’s perspective. They’re not able to do anything more than they were able to do before.”

Scott-Clayton worries that an influx of students into public institutions, without additional resources for those institutions, could actually dilute resources for students, worsening completion rates.

“The consumer parallel is that basically all the investment is just going to lower the cost and none of it is going to improving quality,” Scott-Clayton says. “You’ve got free — but free what?”