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Oregon moving forward with 'Pay It Forward' to make college tuition-free | Deseret News National
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Rick Bowmer, Associated Press
Moneywise

Oregon moving forward with 'Pay It Forward' to make college tuition-free

The Oregon Legislature unanimously approved a plan in July 2013 that could make college tuition-free for students, provided they dedicate a percentage of their income after graduation to repaying the state.

The plan, called "Pay it Forward, Pay it Back," would create a fund that students would draw from to pay for their education at Oregon's state schools, and then pay back approximately 3 percent of their income over 24 years; the figure would be about 1.5 percent for those who attend community colleges. The plan would require up to $9 billion in seed money, according to the Wall Street Journal, but supporters believe the program would eventually be self-sustaining.

According to Insider Higher Ed, if Oregon's governor John Kitzhaber signs the bill, it will direct the state’s Higher Education Coordinating Commission to create a pilot program, which the Legislature would then approve or reject by 2015 — that is, the state will have to figure out whether or not the program is financially feasible and evaluate the pros and cons of implementation over the next few years before the final go-ahead is given.

The idea for the program was initially developed by the Economic Opportunity Institute, a left-leaning think tank, and has been explored by Washington, New York, Vermont, Pennsylvania and California. The institute's executive director, John Burbank, told the Wall Street Journal that if the plan was implemented correctly, "it's essentially creating a social insurance vehicle for enabling access to higher education."

"This is what thinking out of the box looks like," Mark Hass, D-Ore., told ABC News. "Somebody's got to come up with something. Look at what (the) U.S. Senate did. They couldn't even resurrect status quo, which wasn't working. If we don't do something dramatically different, we'll continue sticking kids in college who aren't able to pay for it."

As the Deseret News previously reported, one major financial problem young people are facing is limited access to credit because their debt-to-income ratios are too high due to high levels of student loan debt. The Oregon program would leave students without debt, potentially giving them a greater ability to obtain credit to buy houses, start businesses and save for retirement.

But some critics are skeptical that the plan might be a solution to the problem of escalating higher education costs. According to Inside Higher Ed, critics say that rather than addressing the root problem of escalating higher education costs, “Pay it Forward” simply shifts the burden of paying for college and disguises the true costs of a college degree.

Economist Tyler Cowen, who blogs at Marginal Revolution, worries that the program will suffer because it is most attractive to those who would provide the least into the system. "At the margin I would expect this to attract people who don’t have a vivid mental image of the distant future," he said. "Furthermore, the terms of the program discriminate against those who expect high earnings or, for that matter, those who expect to finish."

Similarly, Dave Girouard, CEO of Upstart, a company that seeks investors to provide capital to professionals for a guaranteed percentage of their future earnings, was also skeptical that students with high earning potential, who would theoretically keep the program self-sustaining, would choose the program over traditional student loans. He told the Wall Street Journal that what the program doesn't want is "people who don't intend to work as hard or have a bias toward earning less money."

EMAIL: dmerling@deseretnews.com