An Oregon Trail to Paying for College

State Capital Notes …

Last July, the Oregon Legislature made national headlines when it unanimously passed a bill to develop a pilot project that would overhaul the way college students finance their education at the state’s public institutions. The proposal, known as “Pay It Forward, Pay It Back,” has quickly gained the attention of policymakers looking for ways to save college students money.

The Oregon bill calls for the study of a program in which college students are not charged a specific amount of tuition and fees upfront, but instead “pay forward” a fixed percentage of their earnings for a predetermined number of years to finance the education of future students. Under the proposed plan, for the 24 years following graduation, alumni of four-year institutions and community colleges would respectively pay 3% and 1.5% of their incomes back to the state. Some have characterized the plan as a kind of “reverse Social Security” in which participants receive the benefit first and then pay into the system over an extended period to benefit the next generation.

Lawmakers in New England have taken notice of Oregon’s plan and taken action to better understand its economic feasibility and effect. Terrance Adams and Alan Shepard of the Connecticut Office of Legislative Research have authored a research report that projects the fiscal impact of such a program for Connecticut public institutions. The report indicates that the program would run annual deficits through its first 15 years, totaling approximately $3.9 billion in the aggregate, and would not recoup these losses until year 27. The authors note that these projections do not take into account administrative costs, which they caution “will likely be substantial.” Proposed bills in Massachusetts (H.3631), Maine (LD 1702), Vermont (S.192), and Rhode Island (H 7201) have called for similar feasibility reports on the subject.

Although many see the implementation of such a plan as a step toward eliminating student debt and removing cost barriers to public higher education, others have taken a more skeptical view. Sara Goldrick-Rab of the University of Wisconsin-Madison warned that “the news coverage of the well-intentioned bill has dramatically overstated its promise.”An analysis by financial aid expert Mark Kantrowitz concludes that about half of students who earn bachelor’s degrees at Oregon public institutions would end up paying more through the proposed program than they would through traditional student loans. For example, in the proposed program a bachelor’s degree graduate who earns the national median salary of $56,000 would pay roughly $3,000 more than a traditional student loan over the course of the 24-year 3% repayment plan.

David Longanecker, president of the Western Interstate Commission for Higher Education (WICHE), has written that the plan “provides no obvious incentives for institutions to increase their productivity or reduce their costs” so would make college more expensive, not less. Furthermore, many questions remain about how “Pay It Forward, Pay It Back” will actually operate. Still to be determined: where the initial seed money will come from, how to collect the payments, and how to track alumni incomes across state lines.

Laura Hannemann and Matthew Hazenbush are master’s candidates at the Harvard Graduate School of Education and NEBHE policy interns.

Watch NEJHE’s State Capital Notes and @nebhe on Twitter for higher ed legislative and policy news from the state capitals.



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