Give ‘Pay it Forward’ a try
Tuition in exchange for a share of future earnings
An idea hatched by a group of Portland State University students drew nationwide attention last year: Let students attend public colleges tuition-free, and then repay the cost of their education with a fraction of their future earnings. Dubbed the “Pay it Forward” plan, the concept has several potential drawbacks — but a study group has fleshed out the details in a way that makes its proposal for a pilot program seem reasonable.
The “Pay it Forward” idea attempts to address the problem of student debt. Forty-eight percent of students graduating from the University of Oregon in 2012 had financed their educations by borrowing, and their debt load averaged $24,528. Nationwide, borrowers in the class of 2012 owed $29,400, up from $18,750 eight years earlier.
Debts of that size are a heavy burden for young college graduates at the beginning of their careers — they usually start on the bottom rungs of the salary ladder and confront a number of other expenses. The need to make big student loan payments soon after graduation steers young people away from experimenting with different career paths or choosing low-paying but socially beneficial jobs.
A “Pay it Forward” plan, with repayments pegged to a percentage of income, would allow graduates to make relatively small payments at first, with the amounts growing as they become established in their fields. Graduates’ increasing repayments would eventually cover the tuition for the next generation of students, creating a type of revolving fund.
The concept caught the nation’s imagination — news reports from around the country made it sound as though Oregon had discovered the key to college affordability. Thirty states have embarked upon some level of analysis, and Michigan has jumped into the lead with a “Pay it Forward” pilot program.
There are several practical problems with the idea. Repayments would not begin to flow for years, and would not reach full volume for decades — money to pay tuition would have to come from somewhere in the meantime. Tuition is not students’ only expense, or even their biggest one — room, board and other costs of living would still have to be covered somehow. Collecting a portion of income from graduates who leave the state or country might be difficult.
But the concept is still intriguing, and the 2013 Legislature appointed a work group to investigate the idea further. Last week, the group reported its findings to the Higher Education Coordinating Commission, and recommended that a “Pay it Forward” plan be tested in a pilot project in 2016.
The work group has calculated that tuition repayments would require 4 percent of university graduates’ income for 20 years — in line with the figures for Michigan’s pilot program. Community college graduates would need to pledge 1.48 percent of their income for the same period. The amounts would be lower than the initial percentages of salary required for repayment of standard student loans — even those that offer the option of lower early payments in exchange for longer terms or bigger payments later on.
The work group recommends selecting a number of Oregon high school graduates at random and offering them the option of a “Pay it Forward” plan — Michigan’s program is open to 200 students — or offering it to all graduates of a few Oregon high schools. The program would cover the cost of tuition, fees and books. Students who receive scholarships or other forms of financial aid would be able to use that money to help pay their living expenses. Start-up costs would appear to be the chief remaining problem, but the pilot program would require only a small initial investment.
The “Pay it Forward” idea would not end excessive student debt, much less rein in the college costs that lie at the root of the problem. But it could be a way of shifting the burden to make it easier to carry. An experiment would show whether an intriguing concept would work in practice.