On Thursday, The Equity Line, a blog by The Education Trust, posted a critique of Pay It Forward (PIF) that discusses some of PIF’s major flaws. As a reminder, under PIF, instead of paying tuition and fees upfront, students would pay back a certain percent of their adjusted gross income for 25 years. For more information about PIF and how its supporters have applied PIF to the UW, please see the full OPB brief.
The Equity Line’s blog post highlights that although PIF is marketed as a “debt-free” way to pay for college, it is actually just another student loan program:
- It is estimated (by the author and the UW) that many students would pay more under PIF than they currently do to pay back student loans.
- Students with significant need – who currently receive federal, state, and institutional grants to cover tuition and fees – may have their grants (which do not need to be paid back) replaced with loans (which do).
- Students would not be able to cover these other education costs with federal or state need-based grants because by removing the cost of tuition and fees from a student’s budget, that student’s level of calculated need would fall as would their eligibility for federal and state need programs. Thus, students would have to take out more loans (or find a way to pay upfront) for these expenses.
As the author notes, rather than “Pay It Forward,” it’s really “Pay It Yourself and Pay More Than Ever.”
In anticipation of last Monday’s “Pay It Forward” working conference in Philadelphia, national education groups and nonprofit organizations released a joint statement opposing the proposal. The joint statement is available here. For more information about PIF, please review our post about Oregon legislation requiring “consideration” of a “Pay It Forward, Pay Back” pilot. A comprehensive brief about the proposal’s UW application is available here.
(This piece was originally posted on 07/11/2013, however it was lost due to technical issues and is therefore re-posted here.)
Last week, the Oregon legislature passed a bill that, if signed by the governor, will implement a pilot program to study the effects and feasibility of substituting upfront tuition payments with income-based, post-graduation payments. For 24 years after graduating, four-year college students would pay back 3 percent of their income and community college students would pay back 1.5 percent. Students who do not graduate would pay back a smaller percent determined by how long they were in school.
If, after several years of study, Oregon decides to adopt a plan (or some form of it), it would signify a major shift in the funding paradigm for public institutions. But that’s a big IF. The plan has received considerable criticism due to a multitude of unanswered questions that could pose significant logistical barriers. For example:
- How would institutions and/or the state pay for the plan’s implementation (i.e. the several years of foregone tuition revenue between when a student enters school and when they graduate and start earning pay)?
- How would the state efficiently collect accurate income data on students who move out-of-state?
- How would the state go about collecting and enforcing payments?
- How would the plan account for and apply to part-time students, transfer students, mid-career students, and other non-traditional students?
- How would the plan work with federal and state financial aid programs? Would low-income students be accommodated so as to avoid creating barriers to entry?
- How does one pilot a 24-year repayment program in just 2 or 3 years?
Even if Oregon’s higher education commission, which is tasked with implementing the pilot program, can find viable answers to those questions, the plan still has a number of possible (if not likely) negative consequences. For instance, the plan may:
- Magnify the public’s view of higher education as a private good (only benefiting the individual) rather than a public good (benefits for many) which, in turn, could spur the continuing and problematic trend of replacing state dollars with tuition revenue;
- Make institutions even more vulnerable to economic variations and recessions as their revenue would be tied to graduates’ earning and unemployment rates; and
- Create social and economic imbalance between Oregon and other states since students who expect to earn less—e.g. social science and humanities majors—would be incentivized to go to Oregon, and students expecting to earn more—e.g. engineering and medical students—would likely go elsewhere.
Granted, the idea of basing college payments on graduates’ income is not a new one. Some federal student loans are eligible for income-based repayment and a program similar to Oregon’s already exists in Australia. However, Australia’s version is administered at the federal level, meaning many problems inherent in Oregon’s plan (tracking students who move around the country, imbalance between states, etc.) are avoided.
The Economic Opportunity Institute, a liberal think tank in Seattle, proposed a version of the plan for Washington in October 2012; but, unlike Oregon’s version, it has yet to go anywhere. We’ll keep you posted.