Oregon Legislature Passes New Student Financing Plan
With all the tuition hikes, loans, grants, scholarships, and other seemingly endless financing options leading to obscenely high student debt figures, paying for college can seem like a nightmare, one that discourages many people from pursuing a degree. However, the state government of Oregon has just passed the “Pay it Forward, Pay it Back” plan, with the goal to make financing education at public universities a bit more doable.
This plan, according to Portland-based financial planning firm Mirador Wealth, will allow students to enroll in Oregon public universities with no money down as long as they agree to put 3% of their income (1.5% for graduates of two-year colleges) into a state fund for future students for 24 years after they leave, given that they are gainfully employed. The percentage and length of time would be adjusted for students who leave school without a degree based on their income and time spent there. This is intended to allow students to bypass traditional loans which see increases in interest rates every year. State legislature approved the bill in July almost unanimously after lobbying by Portland State University and the Oregon Working Families Party, and the plan is expected to be in place by 2015. Although the plan was pushed by Democrats, Republicans approved it because they regarded it as a “contract between the student and the state… a transaction, not as a grant “ as explained by student lobbyist Nathan E. Hunt. It’s unbelievable that it’s all happened so fast,” PSU student Ariel R. Gruver told the New York Times. “We never imagined that we would actually accomplish something like this, and definitely not in such a short time.” Similar legislation is on the table for Washington but state Democrats and Republicans have not been able to decide on new federal student loan policies.
Although the lobbying in Oregon began in a Portland State University classroom, The Economic Opportunity Institute, based in Seattle, developed this plan based on a model used in Australian schools since 1989. Andrew Norton, from the Grattan Institute of Australia observes that this program has eliminated defaults on student loans, contained subsidy costs to taxpayers, and reduced general student debt. The main difference between Oregon’s program and Australia’s is that while Oregon students must pay for a specified amount of time, Australian students only give their income up until their tuition costs are paid off, which takes an average of nine years. Also, people with an income below US $45,000 are not expected to pay, which means significant losses for the school if students with higher incomes cannot pick up the slack. Yale University briefly had an income-based payment plan in the 1960s, but could not make it sustainable, perhaps because a program like this takes a long time to fully reach its goals. However, results of the Australian tuition plans have been largely positive, so hopefully Oregon’s programs will mirror their success.
In any case, student debt and rising costs of education continue to be pressing nationwide issues. “Everybody is concerned about the problem of student debt load and the rising cost of tuition,” said Democratic Representative Michael Dembrow, chairman of the higher education committee. “Not everybody agrees on the causes, but everybody agrees on the effect. We all hear about it when we’re knocking on doors, running for office.” Only time will tell if Pay it Forward, Pay it Back will benefit Oregon students, and if it will serve as an example for other states to follow or reject.