Instead of paying for school up front, students would owe the state a set percentage of their income after graduation. Here's why that could backfire.
The Wall Street Journal isn't quite as negative:
<p><em>The plan, called “Pay it Forward, Pay it Back," would create a fund that students would draw from and eventually pay into—potentially bypassing traditional education lenders and the interest rates they charge.</em></p><p>So how do others feel about this “novel" idea? Let's take a look.</p><p>First of all, <em>The Atlantic</em> gives us the nutshell:</p><p><em>Colleges would no longer charge their undergraduates tuition up front. Instead, students would promise to pay a fixed percentage of their income to the state for a set number of years after graduation.</em></p><p>Sounds very cool, right? Some think that it's <em>not</em> so cool.</p><p><a href="http://www.insidehighered.com/news/2013/07/09/oregon-plan-would-shift-tuition-payment-after-graduation" target="_blank"><em>Inside Higher Ed</em></a> leads off with this statement about the plan:</p><p><em>When an advertisement says </em>“No money down,"<em> an asterisk and some fine print typically follow. And it's probably wise to look for that.</em></p><p><em>That seems to be the case with an Oregon proposal that has generated headlines such as </em>“<a href="http://www.foxnews.com/us/2013/07/03/plan-would-make-tuition-free-at-oregon-colleges/" target="_blank">Plan would make tuition free at Oregon colleges</a>," “<a href="http://prospect.org/article/oregon-doing-free-higher-education-right-way" target="_blank">Oregon is doing free higher education the right way</a>," <em>and</em> “<a href="http://www.insidehighered.com/news/2013/07/09/Oregon%20looking%20to%20eliminate%20tuition%20and%20loans%20for%20higher%20education%20students" target="_blank">Oregon looking to eliminate tuition and loans for higher education students</a>."</p><p>Yet a fourth source of opinions comes from <a href="http://talk.collegeconfidential.com/financial-aid-scholarships/1523218-oregons-new-college-funding-idea-no-money-down.html" target="_blank">College Confidential</a>, where one insightful comment ponders:</p><p><em>One wonders about “adverse selection" – might music majors and teachers opt in, but future doctors, investment banker wannabes, etc., opt for financing that wouldn't involve open-ended payments? And what about grads who decide to drop out of the workforce if enabled by a high-earning spouse, inheritance, etc.? Still, it's an interesting concept that would avoid some of the problems with crushing debt loads for new grads.</em></p><p>Let's do a “review of the literature," as they say in college, and look a little deeper.</p><p><em>Inside Higher Ed</em>'s Kevin Kiley titles his article <em>No Such Thing as “Free Tuition</em><em>" </em>and goes on to observe, “Despite the headlines, the state didn't suddenly abandon all plans to charge tuition. Last week the Oregon legislature took the first steps toward possibly implementing a plan that would allow public college and university students to forgo upfront tuition payments in exchange for paying a portion of their wages back to their alma mater for about 25 years following graduation. While it may mean no money down, it could still add up to large tuition bills."</p><p>Jordan Weissmann, writing in <em>The Atlantic</em>, proffers a bit more aggressive title: <em>Oregon's Very Radical and Very Terrible Plan to Make College 'Tuition-Free'</em> (note that both Weissmann and Kiley both refer to “Free tuition" and “tuition free" with quotation marks, adding an edge to their doubtfulness) and supports that with this: “Colleges would no longer charge their undergraduates tuition up front. Instead, students would promise to pay a fixed percentage of their income to the state for a set number of years after graduation. You earn a lot, you pay a lot. You earn a little, you pay a little. But most importantly, nobody has to take out loans to cover the cost of classes. It's bold. It sounds progressive. And if implemented, it could be a boondoggle." High praise, indeed.</p><p><em>The Wall Street Journal</em>'s Douglas Belkin cites an expert's opinion: “Dave Girouard, chief executive of Upstart, a Palo Alto, Calif., company that seeks investors to provide capital to professionals for a guaranteed percentage of their future earnings, said the Oregon plan could suffer because it might turn off students with the biggest earning potential, for whom traditional interest rates would be preferable to promising a share of future income. What you don't want is a program filled with 'people who don't intend to work as hard or have a bias toward earning less money,' he said."</p><p>And finally, College Confidential's posters:</p><p><em>– If they increased it to 5-6% income and reduced duration to 12-15 years, I'm sure they'd see TONS of applications who'd otherwise go elsewhere.</em></p><p><em>– they need to put a cap…like 3% but no more than $6k per year or something like that. The person pays whatever is lower. Once the person moves out of the state of Oregon, how is Oregon know how much the person is earning?</em></p><p><em>– At 3% of my income, it'd take me only 5 years to pay off my current loans, not 24. This plan breeds teachers and social workers while killing engineers, bankers and consultants. It also encourages reckless loan taking. I had roughly 10k in debt upon graduation because I worked throughout college and constantly said “no" to myself.</em></p><p><em>– Bad idea because it's not enforceable. I'd rather collect the money from parents first then provide service to children later.</em></p><p><em>– If I knew I'd be getting a six figure salary, I would not do this program. It's a large amount if money that would be going down the drain. Say a person makes $120,000. I would have paid almos $100,000 to the university through this program. Not worth it. I could've done a lot more beneficial things with that amount if money.</em></p><p><em>– I still don't think it's a good idea, but if it's required, I don't think students will be saying “Oh, let me not go into a high-paying field because I'd pay more for my education; I'm just going to be a teacher instead." It still leaves them with more disposable income than a teacher or social worker could ever hope to make.</em></p><p>***</p><p>Okay, go ahead and blame me for skewing toward the downside because the dominant mood of the comments I culled from my review of the “literature" is negative. Unfortunately, having reviewed a number of opinion pieces about the <em>Pay It Forward, Pay It Back</em> plan, negativity and skepticism <em>were</em> the dominant moods.</p><p>However, that doesn't mean that the plan won't work, although some have said that the concept has been tried before and failed. Whenever I encounter a swell of naysayers confronting a “new" idea, I always think of those “learned" authorities who said that test pilot Chuck Yeager would be killed when he broke the sound barrier. Well, he wasn't, and there once was a day when you could buy a seat on the Concorde and fly a more than <em>twice</em> the speed of sound, defying death in comfort, while dining on champagne and fillet mignon.</p><p>Bottom line: Maybe <em>PIF,PIB</em>, like the Concorde, <em>will</em> fly.</p><p>**********</p><p>Be sure to check out all my college-related articles at <a href="http://www.collegeconfidential.com/" target="_blank">College Confidential</a>.</p></article></div></div></div><div class="sc-jKmXuR dQXchq"></div>
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