Pay-later tuition proposed for Oregon colleges

This sounds interesting, I am not sure how I feel about this yet, I might have a better idea if they put it into practice for a few years.


http://www.registerguard.com/rg/news/local/30108810-75/pay-students-state-oregon-debt.html.csp


By Diane Dietz
The Register-Guard
PUBLISHED: 12:00 A.M., JULY 4





Oregon will take a look at a whole new way of funding its seven state universities if the governor signs a bill approved this week by the Legislature.

The plan would allow students to attend state colleges without paying tuition or taking out traditional loans. Instead, they would commit a small percentage of their future incomes to repaying the state; those who earn very little would pay very little.

Proponents are calling it the “pay it forward” model with new graduates effectively helping to cover college costs for the generation coming along behind them.

The evermore burdensome tuition and fees that Oregon students spend decades paying off after leaving school would be abolished.

“It’s empowering the state to actually do something about student debt; so many of the problems related to student debt are federal issues,” said Steve Hughes, state director of the 7,000-member Oregon Working Families Party.

House Bill 3472 — now on Gov. John Kitzhaber’s desk — directs the Higher Education Coordinating Commission to study the “pay it forward” model of funding, and, if it has merit, to design a pilot project for the 2015 Legislature to consider.

As an alternative to the pay-it-forward, no-tuition model, the bill also requires the commission to analyze whether the state could make a guarantee to students that their tuition wouldn’t go up during their four years at a state university.

The bill won approval of every lawmaker in both chambers in votes during the past week — with the singular exception of a lawmaker who had an excused absence for the day.

“It’s an indication of just how widespread the concern is about the problem of student debt,” said state Rep. Michael Dembrow, a Portland Democrat who championed the bill.

The measure arrives in a time of heightened worries about the enormity of the debt with which graduates begin their independent economic lives.

Oregon university students who take out federally backed loans leave school with an average of $24,616 in debt, according to the Oregon University System’s 2012 Factbook.


Oregon is ranked 17th among states with the highest level of student debt. New Hampshire is worst with $32,385 per university student; Utah is best with an average debt of $16,317.

Student loans, meanwhile, have gotten more costly in every state.

The interest rate on federal Stafford subsidized loans doubled to 6.8 percent this week, up from 3.4 percent. The change is expected to cost student borrowers an additional $2,600 in interest on their college loans, according to the congressional Joint Economic Committee.

Congress fumbled an attempt to block the increase for another year, although lawmakers plan to return next Wednesday with an attempt to reset the interest rates lower.

The spike affects 7.4 million students nationally.

The federal debt figures do not include a substantial sum of private loans taken out by parents on behalf of students — or borrowing by students through private lenders.

“We talk to students who have debt of $40,000 or $100,000. It’s pretty remarkable what’s going on,” Hughes said.

Under the bill, the higher education commission would design a “pay it forward” system.

That would allow university students to enter into a binding contract with the state to pay 3 percent of their income for 24 years into a higher education fund, according to Oregon Working Families estimates.

Graduates making $30,000 a year would pay $900 a year; graduates making $60,000 a year would pay $1,800 a year; and so on.

“It’s had a lot of success in Australia. They had a system like that in place for quite a while,” Dembrow said. “It’s a great notion.”

Now’s the time for education funding that’s completely different, Hughes said.

“We need to fundamentally alter how we think about education. This is the first step to doing it,” he said. “We need to start down the path because what we’re doing right now is absolutely crazy, and it’s not only bad for graduates and students, but it’s bad for the economy.”

Less would be spent overall in paying for education, Hughes said.

“The advantage is, all (payments are) going to the cost of the program. What we were really trying to get at is eliminate the role that banks are playing in charging interest and fees to students,” he said.

Some University of Oregon students have questioned whether the pay-it-forward plan would do any good if the state does nothing to control the cost of education. Soaring university costs would push the percentage of income that graduates pay to keep the program solvent ever higher.

“It just defers it to a later point in time,” said Sam Garner, a philosophy major and member of the League of Educators and Students Slashing Tuition. “Student debt would continue. It doesn’t adequately address the issue.”