As federal student loan interest rates doubled last week, the Oregon legislature unanimously approved a bill that would allow students to attend the state's public universities without paying tuition. They would instead pay for the cost of their education with 3 percent of their annual salary for 25 years after they graduate.
The "Pay it Forward" proposal, which would initially cost the state $9 billion, is the product of a course taught at Portland State University in 2012. The class aimed to address ballooning student debt, now nearly $1 trillion nationally, by rearranging tuition payments to occur after students are employed. Oregon high school graduates would be able to attend state schools for free, and would then finance the next generation by paying a percentage of their income back to the schools.
Proponents say this is a creative solution to the growing issue of student debt in a struggling economy. It also allows students, regardless of socioeconomic status, universal access to the state's public universities. They say this model could revolutionize the education system if adopted in Oregon and beyond:
This creates an incentive to choose a career based on personal fulfillment, rather than one that earns lots of money to pay down student debt. Income-based repayment exists at the federal level, but it's a higher percentage of income (capped at 10 percent of discretionary income) and it merely pays off individual student loan debt. It does not have Pay It Forward's element of universality, where everyone pays into the program and attends college tuition-free.
Opponents say the program is unworkable because it doesn't completely eliminate the large amount of money students will be required to pay, it just changes the timing. They also say that it won't actually eliminate the need for student loans, because tuition itself only makes up 40 percent of the cost of attending a public university. Students still need to pay for room and board, textbooks and other supplies. It also only covers the cost of four years, so students who take longer than that to graduate would have to assume debt regardless.
The repayment rate would be different for those who earn associates degrees rather than bachelors degrees, but those critical of the plan say it would unfairly target students who study subjects that will lead to more lucrative careers:
If Oregon makes the program mandatory, its colleges will in effect become the only ones in the U.S. that charge students with higher earnings potential more for their education, because they will contribute more over 25 years than everyone else. Motivated students wishing to major in engineering or finance will, quite rationally, opt for private colleges or out-of-state public colleges where they won't have to subsidize liberal arts majors.
The bill has yet to be signed by Oregon's governor, but if approved the state would create a pilot program by 2015. It would then have to decide whether to fully implement the plan.
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