Oregon Rejects ‘Pay it Forward’ Proposal for Repaying College Tuition

Oregon’s tuition-free “Pay-it-forward” plan for higher education was denied by the state’s higher education board.

The proposal, created by students at Portland University in 2012, would offer students a tuition-free ride through college — so long as they repay the school they attend with a portion of their earnings for a number of years after graduation.  The money would be used to fund the higher education system.

The idea was denied, according to legislators, given the number of more important items the state needs to be focusing money on, including expanding its needs-based financial aid and giving a boost to the community college network.

According to the Higher Education Coordinating Commission, a small pilot program to test the proposal using 4,000 students would cost that state $5-20 million each year, for 20 years.

Pay it Forward, Pay it Back” suggests that students receive an education and pay their tuition later.  This leaves a financial gap in terms of paying the people who provide the education, who require payment in the present.  To fix this problem, the plan suggests that Oregon raise taxes, or borrow money by issuing bonds.  Both solutions offer a major cost to taxpayers.

While students would eventually pay the state back, it does nothing for the taxpayers who are losing money now and continue to be at a loss for the next 20 years, according to Jason Delisle for Forbes.

An review from ECONorthWest, an independent economics consulting firm, suggests the cost could be even higher, given the rising rate of tuition, stating “Even a small rate of increase in real (inflation-adjusted) tuition rates leads to large reductions in the financial feasibility of the program.”

The report did suggest that the program could work, calling it “reasonable and useful.”

However, according to a financial aid expert, neither other states nor the IRS could “tell it (Oregon) how much individuals outside Oregon earn,” making it difficult to assess the repayment program; although, the program designers do believe a rate of 3-5% over 20 years could sustain the program.

Despite the lack of support, the commission will recommend the state try a trial version of the program in its report next month, using 1,000 students for each school year from 2016-2019, “if it somehow finds the necessary millions.”

In 2013, a unanimous vote by lawmakers requested the commission to study the program and report on it this fall.

In a meeting last week, the commission suggested that 26,000 students receive a grant of more than  $4,000 for each of the first two years of their higher education, which would be 60% “above state financial aid for 2015-17 compared with the current two year budget.”