Republicans Sen. Marco Rubio of Florida and Rep. Tom Petri of Wisconsin introduced legislation Wednesday seeking to create a "pay it forward" model of education financing as an alternative to student loans.
The Investing in Student Success Act would allow individuals or organizations to give students money to attend college. In return, the students would pay back a portion of their income for a set amount of time after graduating. The proposal would be a risk for both the investor and the student, as neither would know the student's future income at the time of agreement.
"This concept is quite innovative in its approach to financing college," said Petri, who serves on the House Education and the Workforce Committee, in a statement. "Far too many students struggle to obtain enough financing through traditional sources to pay for college, and many others are saddled with unaffordable payments after graduation. These plans would help all students get the financing they need … but without the anxiety that comes with traditional loans."
Rubio first discussed the idea while speaking at Miami-Dade College in February, where he proposed an overhaul of America's higher education system that would encourage the wider use and acceptance of free online courses and freeing up student-level data – which is currently banned under federal law – by passing the Student Right to Know Before You Go Act.
"In the 21st century, higher education is no longer an option for Americans, it has become a necessity," said Rubio in a statement. "But a complex and confusing student loan system makes it increasingly difficult for millions of people trying to meet the challenges of our economy. Allowing private investment groups to invest directly in an individual student is an alternative to student loans that helps make higher education more affordable and more accessible."
Several companies – such as Upstart and Pave – already offer similar options for students, and at least 18 states have introduced legislation for "pay it forward" models. And in July, Oregon became the first state to pass legislation to consider a pilot program of the funding model.
Higher education groups have opposed the state-funded versions of the "pay it forward" plan, claiming they would increase the overall cost of higher education and force high startup costs upon taxpayers to initially fund the program.
"The Pay It Forward structure does nothing to address tuition levels or college costs for students, nor does it adequately address funding for the instruction, research, and robust student support services that are the hallmark of a high quality college education," said a coalition of higher education groups in an October statement. "Furthermore, it would diminish the power of middle- and working-class families’ to put pressure on politicians and colleges to keep costs down."
And unlike federal loans that treat students equally – regardless of their intended majors, the type of institution he or she is attending or the student's academic record – opponents have said private student investment plans could take those factors into account and may therefore be less available to students with more "high-risk" majors that are known to not be as lucrative.
Still, Rubio said such a plan would encourage a "free enterprise system" and allow "people to access the skills needed to take advantage of the opportunities created by the free market."
"Fostering more choice for students to fund their education guarantees opportunity and equips people with the tools needed to achieve the American dream," Rubio said.