Everything You Need To Know About Oregon’s “Pay It Forward” College Program

Oregon State University by air

Desperate times call for desperate measures, but sometimes desperation can lead to real legislative ingenuity. Oregon recently passed a bill that will afford students the ability to attend its state colleges for free if they agree to repay the state roughly 3 percent of their future earnings over an estimated 20 year period:

It began last fall in a class at Portland State University called “Student Debt: Economics, Policy and Advocacy,” taught by Barbara Dudley, a longtime political activist who teaches in the school of urban and public affairs, and Mary C. King, a professor of economics. Ms. Dudley was referred to John R. Burbank, executive director of the Economic Opportunity Institute, a liberal policy group based in Seattle, who had studied the no-tuition approach.

She, in turn, referred the students to him, and they adopted the idea as their group project for the semester.

The students and Ms. Dudley later made a presentation to state lawmakers, including state Representative Michael Dembrow, Democrat of Portland and chairman of the higher education committee. The Working Families Party of Oregon — of which Ms. Dudley was a co-founder — put the proposal at the top of its legislative agenda, and Mr. Dembrow and others ran with it.

Already, other states are taking notice, with Washington State, Vermont, NY, Penn and Wisconsin expressing interest in this “Pay it Forward” program.

Could this be the next step in financing college education? Would this alleviate the burgeoning and crippling state of student loan debt which threatens to cast the U.S. back into recession?

The program isn’t expected to kick in until 2015, but for the students currently taking out massive loans, or graduating with a mountain of debt and no job offers to speak of, its implementation can’t come soon enough. Expectedly, the program’s enforcement is getting a heck of a lot of resistance from Wall Street and Sallie Mae, who would effectively be cut out of the student loan business all together, assuming other states adopt this concept.

But the program is not without its share of faults, and one could/should expect some changes to be made before it goes into effect. Critics argue that it will unduly harm students with higher incomes after graduation, since it’s a flat tax of 3 percent. So a student with a more advanced degree earning $70,000 per year after college will have to repay more over a 20 year period than say a student graduating with a liberal arts degree pulling in $30,000 per year.

Also, the program is set to only cover tuition and fees, which usually accounts for less than half of the total cost necessary to attend college, meaning taking on student loans will still likely persist. And if students are expected to repay the school 3 percent of their earnings, universities may tighten their admissions standards based on future employability, thus having a negative impact on lower-income and/or minority students.

But even critics agree that the Oregon plan is a step in the right direction. It doesn’t eliminate debt, or student loan reliance, but it at least helps some students avoid over-burdening themselves in a job market which is less than stellar.

(photo by flickr user sami123)

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