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The New College Try

Gritty Hammond, Ind., and 80 other cities in decline have a novel approach to economic development: They're attracting new residents by offering to pay for their children to attend college. But is a promise to pay tuition a growth strategy — or welfare for the middle class?

Coming in from Chicago, it’s not a pretty ride to Thomas M. McDermott Jr.’s office. A mile to the north, you roll down from an unlovely concrete overpass that spans a trio of railroad tracks, greeted by a blighted strip of U.S. 41 that leads past the formerly marvelous structure that used to house the State Bank of Hammond. A wooden eagle, painted feathers slowly flaking off, is perched on the neoclassic building between tree-sized columns and golden gryphons on the edge of decay. The remainder of the road to McDermott is littered with similarly disused buildings, many plastered with “For Sale” placards: first, an old body shop; next, the Calumet Theatre; and then a boarded-up fast-food joint with drive-thru signs ripped from their casings, unrecognizable as belonging to any particular chain. The empty buildings are symbols of a decline that’s cast its pall over the city for decades, as industrial plants were shuttered and the population, which peaked at well above 100,000 in the 1960s, trickled down near 77,000.

McDermott’s office at City Hall, an imposing, Depression-era structure still in prime condition, is separated from the blight by only a stairwell and a manicured lawn. Across the street stands Hammond High School, where the graduation rate has fallen to 36 percent.

This baby-faced mayor, though, thinks he can turn his city around. If he weren’t a true believer, he would not slave away most days from 7 in the morning until 9 at night, hoping to revive the city where he spent much of his youth and where his father, former Mayor Thomas M. McDermott Sr., struggled against the same interminable forces of corporate restructuring and globalization, machine politics and the cruel cycle of poverty that now confront his son.

Like all small-city mayors, McDermott attends parades, reshuffles budgets and glad-hands with local business leaders. But there’s one item on the 39-year-old’s political agenda that is different and might help lift the city from its plight: a program called College Bound, which pledges to pay college tuition for children of all Hammond homeowners. While it may seem an odd use of tax revenue, McDermott and his advisers insist the initiative will attract home buyers, raising property values and civic commitment even as it ups the education and skill levels of the city’s population.

Across the rust belt and the nation, dozens of cities are pursuing similar projects, betting millions of dollars that free college education can foster widespread social change. A handful, including Kalamazoo, Mich., which pioneered the concept, were instant beneficiaries of generous donations from wealthy benefactors. Most, like Hammond, have had to fight for public funds or beg citizens for small contributions. For all their nascent successes, it’s still not clear whether these massive civic investments are an innovative idea to aid ailing cities or a well-meaning misuse of money better spent elsewhere.

McDermott, whose parents divorced when he was young, split his childhood between Napa, Calif., where his mother relocated, and his father’s home in Hammond. In high school, he scored average grades. Public service intrigued him, but he didn’t think he’d ever have a shot at any office. “I wasn’t even college material, much less thinking about running for mayor,” McDermott says.

He enlisted in the Navy, where he worked as an electrician and developed a work ethic, got married and had two kids. (He and his wife, Marissa, now have four.) After six years, he returned to Northwest Indiana and took a job as a supervisor at a local power plant, spending nights in classes at Purdue University, Calumet, the huge Indiana school’s local campus. McDermott graduated with almost straight A’s and then quit his job in 1997 to attend law school at the University of Notre Dame. After practicing as an attorney for a few years, he ran in his first political campaign in 2004 and won, becoming the youngest mayor in Hammond’s history.

It’s a lovely redemption tale of the triumph of education and hard work over aimless, youthful laziness, and McDermott often shares it with students when he visits Hammond high schools to promote College Bound. But despite his precocious electoral success, the city McDermott presides over is nowhere near a happy ending.

Long gone are the days when young men could walk out the doors of high school on graduation day into an industrial plant desperate for workers, ready to offer head-of-household wages and benefits for life. Hammond was never fully a steel town like nearby Gary, Ind., but much of its economy relied on plants that fabricated products from the mills’ steel. The slow march of globalization brought consolidation and competition to the steel industry, and with the collapse of the mills in Gary and South Chicago came job cuts and plant closings in Hammond.


As the economy declined, crime rose and Hammond began to empty, like many industrial cities throughout the Midwest. Some residents left in search of new jobs; many who could afford it moved south to Dyer, Munster, Crown Point and other safer, cleaner Indiana suburbs, only to be replaced by low-income folks from nearby Chicago.

To be sure, some neighborhoods in Hammond are filled with beautiful, five-bedroom, $700,000 homes. But as a whole, the city’s statistics are embarrassing: One in 5 families lived below the poverty line as of the 2000 census. Barely half the freshmen who enter its public high schools graduate, and 1 in 4 adults is a high school dropout. Without the economic boon from the Horseshoe Casino, which opened in 1996 in the marina on the north edge of the city, Hammond might already be a ghost town.

“I have a city that’s challenged,” McDermott says, in the tender tone of a mother discussing a disabled child. “Schools are challenged; the population is changing; we’re getting poorer; we’re losing homeowners.”

Though McDermott enjoys significant support in the city, having won re-election last year, he’s often blamed for not fixing Hammond’s seemingly intractable problems. At Mayor’s Night Out, a monthly community forum, residents routinely savage him with tough questions and insults. “I’ve had people go in there and say, ‘You’re a horrible mayor; I think you’re dumb,’” McDermott says.

In five years, he’s made some progress: He’s helped bring in retailers (and employers) like The Home Depot, and the homicide rate has dropped by nearly half on his watch. But until he persuaded the city to create the College Bound program, McDermott had done little to undo the toll of decades of change for the worse.

On Thanksgiving Day 2005, McDermott was with his wife’s family in New York when his friend and attorney, Kevin Smith, called to tell him about a story he’d heard on National Public Radio. An anonymous group of donors in Kalamazoo, two hours’ drive northeast of Hammond, had created a multimillion-dollar endowment to pay for every child in the school district to attend college. By building a source of youthful human capital, they hoped to re-energize the city, which shares a parallel history with Hammond and battles similar social ills.

McDermott seized on the idea. He knew Hammond would have a tough time raising philanthropic funds, but maybe the town could use public money to support a program like the Kalamazoo Promise. He began running the numbers: How many students would use the program? Where would they go to college? What’s the tuition?

His back-of-the-envelope calculation reached a figure: $5 million. We can do this, he thought. Casino gaming revenue provided about $30 million per year for Hammond’s economic development and capital projects like road construction and police stations. Why not invest a slice of it in Hammond’s rising generation?

He called Tom Dabertin, a former government and schools bureaucrat who runs a consulting firm that often works for the city. “I have this idea,” McDermott began. Within months, an ordinance had gone before the City Council. Unlike dozens of other mayors who heard about the Kalamazoo Promise and tried to copy it but couldn’t raise enough money or win approval, McDermott would successfully launch College Bound before the 2006-2007 academic year.

Each of the so-called “promise” programs is different, and Hammond’s is tailored toward McDermott’s priorities. The city lost about 1,000 residents in the decade leading up to the 2000 census. When McDermott took office, its population was falling by almost that many every year. Fewer than 2 in 3 of Hammond’s 32,000 homes were owner-occupied (compared with 90 percent in nearby towns); many had been abandoned.

Video: Hammond, Ind. in the 1950s

So McDermott aimed one of College Bound’s few strict requirements squarely at the issue: Only children of Hammond homeowners would be eligible. If parents relocated to the city to take advantage of the program, their children younger than seventh-graders would receive full funding, with older kids eligible for lesser scholarships on a scale that slid down to 60 percent of tuition for current seniors in high school. Children of renters who purchased a home that year would be treated the same as those of established owners: with a full ride. In Hammond, where just 11 percent of residents have a bachelor’s degree, any education incentive might deepen the talent pool and attract employers — or some graduates might become entrepreneurs themselves. But when it comes to the program’s chief goal, McDermott doesn’t mince words.

“My primary concern is selling homes. That the mayor’s job,” he says. “But there’s also the fact that we can improve kids’ lives.”

McDermott unveiled College Bound in a speech at Hammond High in March 2006. After a series of hearings throughout the city and the addition of a 40-hours-per-summer community service requirement for students during years they received scholarships, the Hammond City Council unanimously approved it.

But the Indiana State Board of Accounts didn’t like the idea of using casino cash to send kids to college, as statutes required the money to be spent on economic development, and scholarship funds didn’t obviously fall into that category. McDermott, a Democrat, spent months crusading on the program’s behalf, eventually appealing to Gov. Mitch Daniels, a Republican, who assented.

“I believe if you’re right, regardless of what you hear and the feedback from people, if you believe you’re acting in their best interests, you gotta do it; you gotta be brave,” McDermott says. “At the end of the day, you look like the smart guy, but it’s hard to get there.”

Indeed, College Bound has since brought Hammond national attention, including a spot on the short list for the U.S. Conference of Mayors’ 2007 City Livability Award. It also helped generate support to re-elect McDermott last fall despite public disapproval of some of his policies — particularly his cutting all Health Department funding, ostensibly to reduce the high local tax rate. In its first two years, the scholarship initiative sent 241 Hammond kids to college, the majority from local public schools, where about 500 students graduate each year. (Well more than 300 applied for the coming academic year, though the final number of scholarships was not available when this article was written.) The program now costs about $2 million per year; that figure is projected to double eventually.

In Hammond and elsewhere, city-based scholarships have caught on with politicians and policy wonks because of their potential — at least, theoretically — as a catch-all method of revitalizing a community. For many citizens, though, the promises are often about one thing: cash.

The average cost of tuition at a four-year publicly supported university rose about 25 percent in the first years of this decade, according to the National Center for Education Statistics. Despite more scholarship money available than ever before (somewhere in the tens of billions of dollars annually, depending on who’s counting), grant and loan dollars targeted at low- and middle-income families haven’t kept pace with financial need. Back in the Nixon administration, federal Pell grants covered as much as 72 percent of the cost of four-year colleges; today, they cover less than one-third.

Merit-based financial aid, given to students whose higher academic achievement often indicates greater family financial resources, grew a whopping 250 percent between 1996 and 2006, according to the National Association of State Student Grant and Aid Programs. Need-based aid from state governments, aimed at lower-income students, grew just 58 percent during the same period.

It’s no wonder promise programs have garnered enthusiasm from citizens in places as disparate as El Dorado, Ark., where Murphy Oil Corp. pledged $50 million in scholarships over the next 20 years; Pittsburgh, where local medical center UPMC kicked in $10 million now and promised $90 million in challenge funds; and Denver, which boasts a highly educated professional class of migrants from other U.S. cities but an embarrassing public school system and where a K-12 revamp is moving in conjunction with a scholarship fundraising campaign anchored by a $50 million challenge grant from a wealthy couple.

The many promise communities that couldn’t find a big-dollar donor have been much slower to hand out scholarships; they’re too busy scrounging for cash and debating program details. Donald Plusquellic, the mayor of Akron, Ohio, hopes to raise $200 million for college tuition by leasing the city sewer system; dueling ballot measures on the issue will go before voters in November. Civic leaders in Newton, Iowa, launched a campaign to garner $5 million in donations for a public-private partnership after its City Council rebuffed a plan to rely solely on tax money for a program. Hammond’s College Bound is government-funded and overseen by the city — as opposed to a foundation, corporation or family — so it could be seen as a pilot program for many of these other cities. But not every struggling city has a gambling boat, and not everyone supports the promise program idea, even when gamblers are funding it.

From the beginning, College Bound has had prominent detractors. George Janiec, the retired manufacturing manager whom McDermott edged out in Hammond’s 2007 mayoral election, says the program is little more than “a great campaign idea” to improve the mayor’s image.


“If we’re graduating barely 30 percent of kids from some of our high schools, who’s the target audience it’s benefiting? It’s the kids who have the wherewithal to learn and meet minimum academic standards,” Janiec says. “Most are children of families well above the poverty line. If their parents can afford a house, lack of money probably isn’t keeping them from attending college. But the promise of free tuition might change parents’ opinion of the mayor.

“In essence, it’s turned into middle-class welfare.”

It’s the sort of unintended wealth transfer that education finance experts like University of Michigan professor Edward St. John have often seen in state scholarship programs. The oft-imitated Georgia HOPE, for instance, is a merit-based aid initiative aimed at keeping academically gifted students in-state. Since 1993, it has doled out $4.1 billion. The reward of free tuition in exchange for keeping a high grade-point average increased college attendance among middle- and high-income youth in Georgia, but it also widened the gap in attendance rates between blacks and whites and between rich and poor. Because it’s funded by the state lottery, which is patronized at a higher rate by less-educated black males, poor adults are effectively paying for wealthy kids to go to college.

If a government is going to fund citizens’ tuition, St. John says, it will receive double the return on its investment (in future tax revenue) if it focuses on need-based aid, targeting students who otherwise wouldn’t matriculate.
McDermott often hears complaints — especially from renters in Hammond — that College Bound won’t make a difference because it isn’t helping all city children. But in his plan, expanding access to college education, while a noble goal, is secondary to the broader changes that will come as a result of home sales.

“We’re trying to encourage behavior through policy,” he says. If McDermott can convince people to buy homes, the theory goes, higher property values will bring more taxes and investment into Hammond, and people who’ve sunk their life savings into a house will stay longer and contribute more to the community. (He also stresses that some homes in Hammond are available for $60,000, equal to the tuition benefits for two College Bound scholars.)

Hammond and Dabertin, the consultant who helped establish and now monitors College Bound, have yet to release data showing progress in Hammond’s economy due to the initiative. While Janiec calls this evidence of “a complete failure,” McDermott cautions patience regarding the 10-year program.

“Unfortunately, our economy is in shambles; that’s no secret,” the mayor says. “It’s hard to look at the real estate numbers and say whether it’s working.”

Nevertheless, McDermott and town leaders are encouraged by what they’ve seen since College Bound launched. Although the school district has only just begun collecting statistics on how many graduates are pursuing higher education, Superintendent Walter Watkins says its effects already appear in students’ attitudes. “We can see an increase in the number of kids who now say they want to go to college or are able to see college as a possibility. Before, we wouldn’t have heard those kinds of conversations,” he says.

It may be drawing more families into the district: Enrollment has risen slightly during the past several years, particularly at the high school level, though the trend began before College Bound was announced. After falling by more than 1 percent (or nearly 1,000 people) per year since 2000, Hammond’s population lost only half that many residents in the 12 months ending in June 2007, according to U.S. Census estimates. While this may be a statistical blip, it’s an encouraging sign for College Bound.

“Psychologically, it’s made a difference,” Peter Novak of the Greater Northwest Indiana Association of Realtors says of the scholarship initiative. “It’s tough to quantify, but I’ve heard a lot of positive stories from our Realtors.”

Diane and Dave Hein represent the sort of story McDermott craves. She’s in medical billing; he’s a union electrician. They’re the sort of people who are wary of discussing their middle-class salaries but proud of their “upper-class” morals. Two years ago, when their daughter was an eighth-grader, they went hunting for an upgrade to their 900 square-foot Hammond home, expecting to follow their many friends who’d moved south. Instead, they paid $138,000 for a house in a Hammond neighborhood called Woodmar that was three times the size of the old one. College Bound was one of the reasons they changed their mind.

Starting two years from now, the city may cover as much as $30,000 of their daughter’s tuition payments. “It’s like free money,” Dave Hein says.

For all the excitement, though, serious questions remain about how (and even if) programs like Hammond’s can catalyze real change.

Watkins acknowledges it’s a struggle for the district to meet student needs at current funding levels — teachers find it difficult just to get kids to graduate from high school, much less to get them college-ready. Even with massive public school improvement, McDermott isn’t certain he’ll be able to keep homeowners there for the long term. “There are no guarantees; there’s no string attached to this money,” he says. “You can send a kid to college, and as soon as the kid graduates, you can sell your home in Hammond and move out, and we can’t stop that.”

College Bound may connect students to their hometown, and every year that a family doesn’t leave for good is a minor triumph. But a reader comment on the local newspaper’s Web site typifies what McDermott faces:

Anyone who wants to take advantage of ridiculously high property taxes, a lousy public school system that barely graduates 50% of students, high sewage and garbage pick up costs, high gang infestations, continuously high and rising crime rates, failing infrastructure, and decreasing property values should move to Hammond. If your kids are lucky enough to graduate, they may get $7,500 for college, then they can move away because Hammond has no jobs unless you want to sell out door [sic] sporting goods or be a greeter at Wal-Mart.

On the employment issue, at least, McDermott can’t offer much. He’s trying to attract more white-collar employers to his blue-collar town, but, for now, the best he can say is that Chicago is within easy commuting distance.

Amid these concerns, several cities are having trouble convincing their own citizens that the promise investment is worth the cost. “The conversations you have, you get feedback of: ‘I put my kids through school. Why can’t somebody else?’” says Kim Didier, executive director of Newton (Iowa) Development Corporation and a driving force behind Newton’s nascent initiative.

Some have made progress by setting lower expectations. In Ventura, Calif., for instance, the Ventura College Foundation is now spending about $250,000 annually to pay for the first year of community college for all area high school graduates. Until recently, Ventura College’s typical students, often in their late 20s, would drop out amid struggles to balance parenting and a career with schoolwork. By luring in 18-year-olds with the promise of free tuition, administrators raised the number of students who continue on to a second year (often with the help of external scholarships).

The Kalamazoo Promise has been lionized by national reporters and leaders in other promise cities; Kalamazoo has been portrayed as a city that has transformed itself with the aid of hundreds of scholarships and a can-do community spirit. Residents’ attitudes have changed, especially in the schools, with many volunteering via mentoring programs and attendance rising at parent-teacher conferences. The Michigan Legislature is considering a “Promise Zones” program that would use state funds to shepherd other communities toward similar results. Yet the actual numbers coming out of Kalamazoo aren’t quite so dramatic.

After the program was announced, the school district reversed a decades-long enrollment slide, increasing the student population by almost 10 percent in 2006, bringing in $7 million in state per-pupil funding, yet enrollment barely rose in 2007.

In 2006, median home prices jumped, but the brief gains were soon wiped out by a flood in the supply of homes, as developers and families tried to take advantage of hoped-for higher housing values that haven’t arrived. A few companies have pledged to expand or relocate to the area during the past few years, committing to thousands of new jobs, but there’s not much evidence this has anything to do with the program. Kalamazoo County had lately seemed insulated from the economic problems affecting much of Michigan, but its unemployment rate hit a record-high 7.6 percent in July.

There are other risks, too — because half of the land within the Kalamazoo school district is outside the city (one-quarter of the population in the district is in the city), developers may expand there at the expense of downtown. And a combination of arcane state laws prohibits the city from raising property taxes even if property values rise.

“We have to be careful not to advertise falsely,” says Michelle Miller-Adams, a Grand Valley State University professor and W.E. Upjohn Institute researcher who’s writing a favorable book about the Kalamazoo Promise. “There’s the problem of raising expectations beyond what’s realistic or what’s going to be delivered. This program is extremely long term.”

On a sun-drenched Tuesday in July, McDermott sits in his office, touting the initiative that has become his political baby. College Bound is administered mostly by a single city employee, but the mayor remains its head salesperson and chief public relations man.

Summer dress is casual in his office, so instead of the standard mayor’s garb of suit and tie, he wears a bright-blue polo shirt and a wry frat-boy grin, which makes him seem less the big-shouldered politician than a modern-day, Babbittesque country-clubber. The walls are plastered with memorabilia: a photo of him mugging with Hillary Clinton; pictures from local casino events with country music singer Travis Tritt and cast members from The Sopranos; a framed apron signed by employees of The Home Depot he helped bring into town.

It was here, on a tough workday in the middle of the longest winter in recent memory, that McDermott received a greeting card from the Jasper family. College Bound was paying for Shalora Jasper, the family’s youngest daughter, to attend Purdue University, and her mother Sheila had sent the mayor a thank-you note. When the mayor saw the enclosed photo of a beaming Shalora and her parents, he teared up.

He wasn’t aware that the Jaspers put Shalora’s two brothers through college without College Bound, but that now seems beside the point. As McDermott waits for the vast changes the program may or may not bring, it’s letters like these, from Hammondites who believe a decision he made has changed their lives for the better, that provide comfort for his convictions. No matter what the early statistics show (or don’t), McDermott says, “This program is definitely making a difference.”

McDermott has staked his political reputation on that claim. At worst, he’ll be remembered as the foolhardy mayor who was generous to thousands of families. At best, he’ll prove something as simple as a scholarship can kick-start a community that has spent decades in reverse. He hopes Hammond will one day serve as a national model, even for cities that aren’t lucky enough to have an annual casino windfall or megarich donors. But for that to happen, McDermott and his city must now gamble with the casino’s cash, and wait.

“I guess,” he says, “we’re going to be the guinea pigs.”

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