Student loan expert: USC’s free tuition move is ‘a brilliant PR stunt’

The University of Southern California (USC) recently announced free tuition for new students from families with income of $80,000 or less, starting in the fall of 2020.

While praised by many, the new plan may not be enough to make a big difference for low-income students attending the university.

“Students are getting excited, because they think they're going to get extra money — and they’re not,” Dr. Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University, told Yahoo Money. “It’s a brilliant PR stunt on their side.”

Read more: How to repay student loans: The full breakdown

The tuition for attending USC is roughly $58,000 and living costs are approximately $18,000 for an academic year, according to data by the National Center for Education Statistics (NCES). The free tuition pledge will not cover room and board, food, or other secondary expenses. 

University of Southern California announced on Thursday free tuition for new students coming from families with income of $80,000 or less from the fall semester of 2020. (Photo by Michael Tullberg/Getty Images)

The average net price that USC students with income under $80,000 are currently paying is between $15,000 to $21,000, according to the NCES. This is approximately the room and board cost, meaning the new plan, which only covers tuition, won’t really help the students with their additional expenses.

“Low-income students have problems paying for the living costs, not the tuition,” said Dr. Goldrick-Rab said. “They already have significant financial aid for tuition but not for their living costs, so they’re not going to see a substantial change.”

USC undergraduate students are currently awarded a total of $640 million in financial aid annually, with $375 million coming from university resources and the rest from state and federal loans, a USC spokesperson told Yahoo Money. The university is now committing additional $30 million of aid, mostly from private philanthropy. This is a 4.7% increase of the overall financial aid USC undergraduate students will get.

USC Trojans fans celebrate in the USC student section during the fourth quarter of a college football game against the UCLA Bruins played on November 23, 2019 at the Los Angeles Memorial Coliseum in Los Angeles, CA. (Photo by John Cordes/Icon Sportswire via Getty Images)

The spokesperson noted that while many of USC’s low-income students already have their tuition partly or fully covered this policy will create consistency.

“About 20% of our current undergraduate population comes from families earning less than $80,000,” the spokesperson said. “Many may already have their tuition (full or part) covered by financial aid but certainly not all.”

‘This is a reaction to the admission scandal’

USC was involved in last year’s Operation Varsity Blues scandal, where wealthy parents were accused of bribing their’ children’s way into universities and, according to Dr. Goldrick-Rab, the new policies are influenced by this.

“This is a reaction to the admission scandal and all of their other scandals,” Dr. Goldrick-Rab said.

USC was one of the eight universities involved in the scandal and one of the cases that got most publicity was the allegation that actress Lori Laughlin spent $500,000 to get her daughter admitted to the school as a crew recruit.

This is not the only scandal that brought USC in the news. In the last decade, the school has been involved in other scandals, including sexual misconduct as well as allegations of drug use on campus.

Lori Loughlin, center, and her husband Mossimo Giannulli, behind her at right, leave the John Joseph Moakley United States Courthouse in Boston on Aug. 27, 2019. (Photo: John Tlumacki/The Boston Globe via Getty Images)

‘Can’t get this deal if they can't get in’

The announcement comes amid a push to make college more affordable and a discussion of how to deal with $1.6 trillion of U.S. student debt. On average, the class of 2018 students graduated with $29,800 in outstanding loans, according to Student Loan Hero.

Even with the free tuition option for low-income students, a bigger problem remains in the access to elite universities. The majority of low-income students don’t get admitted to those high-ranking colleges offering such options. The current number of low-income students at USC is not high enough compared to most of higher education, according to Dr. Goldrick-Rab.

“Low-income students can’t get this deal if they can't get in,” she said. “The first problem for the low-income student in that school is getting in, this (new policy) doesn’t change anything for them.”

The free tuition announcement comes amid a push to make college more affordable and the discussion of how to deal with the $1.6 trillion of student debt takes a central stage in the democratic debates. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)

The promise of free tuition is important

Even if the announced program by USC helps only a small fraction of its current students, it can actually encourage more low-income students to apply to elite universities with lower acceptance rates, experts say.

“In terms of how many people will help, it's a pretty limited amount,” Andrew Pentis, a student loan expert at Student Loan Hero, told Yahoo Money. “But this program could be adopted at other private and public colleges, and it could really start to affect a greater number of people.”

USC is not the first university to implement such a policy: Harvard, Stanford, U.C. Berkeley and Rice University have similar options for families with income below $150,000 to $65,000, depending on the university.

USC is not the first university to implement such a policy,  Harvard, Stanford, U.C. Berkley and Rice University have similar options.

The promise of four years of free tuition will encourage more low-income students to apply to those programs, according to a paper by the National Bureau of Economic Research.

When it comes to college choice, encouragement to apply combined with a promise of free tuition can substantially close the gap low-income students have when it comes to even choosing to apply to a highly-selective universities, the paper found.

“Schools like USC announcing a really broad program like this can give low-income students some hope that they can attend the school of their dreams and not have to go into major student loan debt,” Pentis said.

Denitsa is a writer for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.


Read more personal finance information, news, and tips on Cashay

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNewsLinkedInYouTube, and Reddit.