Oregon's “Pay It Forward” Plan Is Making Its Way through the U.S. House

This past year, the Oregon state legislature passed into law the “Pay It Forward, Pay It Back” plan intended to lessen the burden of student debt. The plan calls for the tuition of college students who would otherwise have had to take out student loans to be covered out of a designated state fund. The seed revenue for the fund has to be provided by the state, but once participating students graduate and become employed, they will pay a percentage of their salaries back into the fund to sustain it. Specifically, “students who attended a state university would pay no more than 5 percent of their annual income, regional colleges 3.5 percent, and community and technical colleges no more than 2 percent. Repayment could continue for up to 25 years.” (News Tribune, Tacoma, Washington, 10 Feb. 2014).

The proponents of this plan have clearly been very well-intentioned in their attempt to find an innovative solution to a problem whose ballooning scale is making it increasingly intractable. Nonetheless, there are several concerns about this plan that have been delineated in previous posts to this blog by other contributors and in public statements issued by the AAUP leadership. The main concern is that the plan does little to reverse the long-declining state support for higher education. Although this plan may not be as burdensome on graduates as conventional student-loan debt, it does continue to make students largely responsible for the bulk of the cost of their educations. It, thus, undermines the concept of “public higher education” by relieving state governments of the responsibility for making the funding of public colleges and universities a priority in their state budgets.

But beyond that core concern, there are other concerns that have become more apparent as the plan has been put in place. There are various models that differ, sometimes significantly, on how long the state will need to fund the program until there are enough graduates paying back into it to make it self-sustaining. The funding being provided to students to cover two to four years of tuition is then being paid back in much smaller increments over a much longer period. So, for the plan to be self-sustaining the number of graduates paying back into it has to be some significant multiple of the number of current students whose tuition is being covered by the fund. Calculating what that significant multiple needs to be is complicated by the sliding scale in the repayment plans for graduates of several categories of institutions. So, there is considerable concern about the open-endedness of the state’s commitment because, on top of the other variables, there is no way of predicting with any degree of certainty how many students may enroll in the plan in any given year.

Although the leaders in the state government have insisted that funding the plan will not impact the funding for other student-aid programs, for K-12 school systems, or for any programs outside of education, advocates for other state programs and services have expressed concerns that the ongoing nature of the program will make it more likely that other spending will be cut first if the state faces a deficit caused by any sort of extended economic downturn.

So why is this state program now being considered in the U.S. House? Well, the lawmakers who have adopted the plan are proposing that the federal government should provide 90% of the initial seed money if a state agrees to provide the other 10%. To test the viability of this approach, if the proposed legislation is passed, a test program will be run at five public high schools selected by the Washington Student Achievement Council.

Although this approach seems very judicious, several areas of concern should be immediately apparent.

First and foremost, federal funding on this scale would essentially allow states to largely abdicate their traditional responsibility to fund public higher education.

Second, if the program is made available to all fifty states, the “seed” cost will increase exponentially, and it is hard to imagine that covering that cost will not be made provisional on making proportionate cuts to other programs providing funding for higher education, for K-12 education, and/or for other social services.

Third, given the GOP antipathy toward funding public education at all levels, it seems very unlikely that private colleges and universities will not be brought into the program, and, given the much more variable tuition costs at those institutions, it will become almost impossible to make the program self-sustaining in any sort of predictable way. Moreover, the program, as currently conceived, seems designed to serve the needs of middle-income and economically disadvantaged students. For students from much more affluent backgrounds, the very modest repayment schedule will be tantamount to another large financial advantage for people who don’t need it. So, some sort of means-testing seems called for, but that sort of provision almost always makes it much more difficult to secure support for any piece of legislation.

Lastly, although the bill is being introduced by Democrats from Oregon—Larry Seaquist in the House and Jeff Merkley in the Senate—who, again, seem clearly very well-intentioned, I will be very skeptical if Republicans support it, with or without major revisions. If they support it as is, their support will confirm to me that there is something fundamentally wrong-headed about this approach to addressing the student-loan crisis. And if they make major revisions to the program, I suspect that those revisions will only amplify the elements of the program that have already provoked concern.

Before any of you rush to accuse me of being closed-minded, of being determined to be a naysayer even if the program should somehow attract widespread support, I’d like to point out that the unprecedented partisanship that has made the 113th Congress the least productive in U.S. history should make everyone very skeptical of any sudden demonstration of bipartisanship, particularly on any bill involving funding for public education.

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