Pay it Forward

Systemic underfunding of public higher education is causing huge increases in tuition costs. At the UW, the yearly undergraduate tuition rate for in-state students has increased fourfold, from approximately $3,000 in 1990 to $13,000 today (source, UW Office of Planning and Budgeting). The reason for the leap in tuition costs has been a dramatic decline in state funding – the state’s contribution over this period has fallen from 82% to only 30%. These tuition increases create significant financial and psychological barriers to high school graduates contemplating higher education and is leading to unprecedented student debt. Student debt is climbing and is disproportionately affecting families and students in the middle and low income brackets.

What is Pay It Forward?

Pay It Forward is a financing system for universities in which students pay no upfront tuition or fees to attend college. Instead, they contribute a small percentage of their adjusted gross income after college – for example, 0.75% per year of community college, or 1% per year of university, for 20 years. Contributions go to a public higher education trust fund that gives each new cohort the same opportunity to attend college. Much of the groundwork for Pay It Forward in its current form was undertaken by John Burbank and colleagues from the Economic Opportunity Institute (EOI), a Seattle-based public policy think tank.

Benefits of Pay It Forward

Students taking out federal student loans currently have large loan repayments. A student who required standard federal loans to cover their entire tuition at UW, would be expected to pay back $500 per month (for 10 years) if they are earning $60,000 per year. Graduated repayment plans are available, but the payback time is longer (25 years), the overall payment cost is larger, and the cheapest initial payback still constitutes a significant burden. Pay It Forward is progressive in that the overall payback amount increases with gross income in a way that the federal loan system does not.

Criticism of Pay It Forward

Pay It Forward consitutes a radical departure from a system whereby higher education is funded primarily by the state. Only those individuals attending higher education would pay under Pay It Forward, compared with all taxpayers under a system in which state funding is restored. Critics have argued that Pay It Forward disincentivizes attendance at public higher education institutions. The national organization of the AAUP has signed on to a statement opposing Pay It Forward, stating that it would not address the real causes of higher tuition costs, could end up costing students more, and would not do anything to reverse the trend of state divestment in higher education. A further concern is that colleges would have a strong incentive to promote academic programs likely to lead to high paying jobs, at the expense of less lucrative majors and departments.

The UW Office of Planning and Budgeting (OPB) have written a critical brief on Pay It Forward. The version here includes comments from John Burbank of the EOI.

Pilot Projects

The Oregon state legislature approved a plan that directs the Higher Education Coordinating Commission to consider proposing a Pay It Forward pilot program to replace current system of tuition and fees required to attend institutions of higher education and establish program criteria. US State senator Jeff Merkley (OR) is introducing a Pay It Forward bill at the federal level.

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