Last year, the students at Portland State University developed a plan to deal with rising student loan debt. We provided the details on “Pay It Forward, Pay It Back” in August. Since then, the state of Oregon has seen their student loan debt balloon to such a high level that even the amount of defaulted loans written off by the banks reached almost $14 billion. This was before the final loan default numbers for 2013 came in.
The original plan was to expand access to public colleges by eliminating tuition and fees as up front requirements. Graduates would then pay back the cost of both with a percentage of their salary over a period of time. Both would be determined by the amount owed when they completed their education.
Close But No Cigar
As noted previously, experts in higher education, financial aid and economic theory quickly pointed out the limitations of the plan; in particular that it depended on the Oregon State government and population being willing to fund everything up front and that every student would need to have a job waiting at graduation in the U.S. where their wages can be attached if they change their mind about paying.
The work group at Portland State who developed the idea has kept pressing forward. The group’s head, Director Rob Fullmer, believes they have worked through the major issues and now have a plan they want to push to the Oregon Legislature this year for a 2015 approval. Once they have that, then Fullmer wants to start running with a test group for the 2016-17 school year.
Better Plan, New Presentation
In a report to the Oregon Higher Education Coordinating Commission this year, Fullmer stated that his group has done the math this time and he believes they have produced a program that is ready to be tested with a test group of students pursuing a four-year degree at an Oregon public college or university. It should be noted, that Director Fullmer is a part of the Commission, but as a non-voting member.
The primary changes are to the percentage of income required for repayment and the repayment period itself. Students will be required to pay back between three-and-a-half to four percent of their annual income over a monthly basis, depending on how much they earn. This would be for a period of 20 years or until they have repaid their student debt (which has been changed to include books as well as tuition and fees), which ever comes first. Previously, the repayment period was open-ended and the income percentages were not defined. Fullmer’s group has also suggested now that the repayment period should begin two years after a student leaves school.
Fullmer’s group also has two suggestions for setting up a test group. The first is to select at random a group of Oregon high school seniors who would begin their higher education in the 2016 school year. They will be enrolled into the program regardless of which university, technical college or community college they choose to attend in Oregon. The second is to allow all students from a couple of randomly selected high schools to participate beginning in that same year.
Previously, any student debt was going to be held interest free. Now, the group does recommend a one percent interest rate for students who attended a four year program. Students who complete two year programs at a technical or community college will be charged an interest rate of 0.74 percent. Students will still need to fill out a FAFSA. Anyone that qualifies for Pell Grants and other financial aid or win scholarships can apply those monies against housing and food expenses if allowed.
The Next Steps
Fullmer’s presentation to the Commission was well received, but there has not been a recommendation made to the state legislature yet. In order to begin either test group suggestion, his group will need a positive recommendation and then the Oregon legislature will need to vote to fund one of them no later than in their 2015 legislative session.
To stay on top of what is happening in Oregon and in other states looking for a solution to relieving student debt, please visit us here at Student Debt Relief News regularly.