Could This Be the Future of College Tuition?

Anna Williams
Posted

college tuitionWhile some student loan rates doubled this week, at least one state is considering a new plan to combat the growing student-debt crisis, The Wall Street Journal reports.

The tuition program, recently proposed in Oregon, would allow students to enroll in the state’s universities with no money down. Instead of taking out massive loans, the students would agree to divert 3% of their salaries after graduation to a designated fund, for a total of 24 years.

Thus the title for the plan: “Pay it Forward, Pay it Back.” New enrollees draw from the fund while attending school, but they’ll eventually “pay it back,” once they’ve earned a degree and enter the workforce. Perhaps most importantly, they will have avoided the usual lenders and hefty interest rates.

Those who don’t graduate would still be required to pay into the fund, but the exact amount would be based on how many years they had completed.

Oregon’s Senate and House of Representatives have both signed off on a bill to create a pilot program based on the idea. While the state would most likely have to borrow money to jump-start the $9 billion fund, it is designed to eventually become self-sustaining.

RELATED: Student Loan Debt Thwarts Grads’ Goals

The Drawbacks

There are, of course, other kinks that must be worked out.

Some point out that the program could actually create a negative incentive. Dave Girouard, chief executive of Upstart, a crowdfunding website for recent grads, told the WSJ that the program might alienate those with the highest earning potential, while remaining more attractive to “people who don’t intend to work as hard or have a bias toward earning less money.”

RELATED: Paying Student Loans 101

Oregon’s Program Could Come to Other States

Nevertheless, the concept—first conceived by the nonprofit think tank Economic Opportunity Institute—is also being considered in states like New York, California and Pennsylvania.

John Burbank, the think tank’s executive director, told the WSJ that the plan could possibly be a new route to a college degree in America. “If it’s done correctly,” he said, it will create “a social insurance vehicle for enabling access to higher education.”

  • Recent Grad Illinois

    What does “….have a bias toward earning less money” mean? Is this person afraid that more people would go into lower wage careers (like teaching) instead of higher wage careers (like finance)?

    • nkdeck07

      More like if someone who is looking at a low wage career is considering two schools one in this program and one outside of it they’d pick this one. Conversely someone in a high wage career would pick the school outside the program potentially leaving the program strapped for cash as more students are taking more then they are putting in.

  • JohnnyComeLately

    There actually adults in this world of all ages (and children) who don’t
    value themselves enough to even believe they are worth more than living
    check to check. Some of these people go through the motions of college but still choose low paying jobs when they could have a more comfortable life. Some of them have been told repeatedly that they cannot
    succeed and others just come to this conclusion on their own.
    Nevertheless, these are some of the people who may think earning more than
    $20,000 or $35,000 a year is “out of their league” and may go through a
    well intentioned program like this and have the opportunity to apply for
    or take a high paying job, but choose a low paying one instead because
    that’s what they are familiar and comfortable with. Sad but in some cases, it’s true.