Despite Congress and the White House finally passing legislation to lower federal student loan interest rates, the underlying problem still has not been addressed. That is the $1.2 Trillion (and growing) amount in student loan debt. While both political parties are using this as another voter issue, the state of Oregon may have found a solution regarding tuition and fees for students at public colleges.
The Repayment Plan
Their program passed earlier this year is called “Pay It Forward, Pay It Back”. It provides students the opportunity to attend state public universities and community colleges tuition and fee free. In return, after graduation, students must sign up to repay their school at a rate of 0.75 percent for every year attended. If a student attends school, they would be responsible to pay 3% (.75 x 4) of their annual income for a fixed period between 20-25 years. Period of unemployment would see their payments waived.
This amount does not include interest rates, as there are none. The entire monthly repayment is principal. “Pay It Forward, Pay It Back” legislation projects that this would be repaid in a 20 – 25 year period, depending on the amount of tuition and fees owed and the graduate’s annual income. If the graduate finds him or herself unemployed, the monthly payments are suspended until new work is found.
Where It Began
The original idea for this program developed by students in the PortlandStateUniversity course “Student Debt, Economics, Policy and Advocacy”. This course is designed to teach students about what they will face post-graduation in terms of debt amounts, monthly payments and budgeting accordingly. It also encouraged students to work with faculty and community leaders to find better solutions to paying for school. The basic idea eventually attracted a number of Oregon state lawmakers who eventually came up with and passed Oregon House Bill 3472.
Michael Dembrow (D-Portland) was the original sponsor of “Pay It Forward, Pay It Back”. He is confident that the program will not only provide relief for graduates and their families, but eventually become a program that other states will adapt to their own public university and community college systems. The pilot program begins in 2015 and Oregon lawmakers will decide then to make it a permanent option for students.
Concerns Over The Program
There are still some concerns of course. The law is currently unclear about how students will be made to pay back tuition and fees if they leave school before graduating or receiving a certificate of course completion. Other lawmakers and concerned citizen groups have pointed out that if a student declares bankruptcy immediately after graduation; then the Oregon state university system is out a large amount of money with no legal recourse to getting it back.
Even for some supporters though, this new program does not go far enough. As of now, only tuition and fees are covered. Room and Board (off or on-campus) are still the responsibility of students and their families. For those students, Pell Grants are still available to provide assistance that does not need to be repaid. Although Rep. Dembrow and others realize how expensive these costs can be, they point out that for the first few years, there will be no money coming into the program, only going out.
This is actually a primary concern for groups such as the Center for College Affordability and Productivity. Their director, Richard Vedder, points out that the law (as currently written) does not encourage those students who will enroll in engineering programs or mathematics to enroll using “Pay It Forward, Pay It Back”. Instead, it is going to be popular with dance majors and future social workers. Neither of these fields is going to see the higher income jobs that will quickly put needed dollars back into Oregon’s university system. If this concern of Director Vedder and others isn’t addressed with serious thought, the lack of enough incoming money will either strangle the program in its crib or force Oregon taxpayers to foot the bills for it until enough revenue is generated from graduating students.
Regardless of the concerns, Oregon has invested more time to actually resolve the problem and not just cover it with a low-interest band-aid. Members of both parties at the federal level and in other states need to pay attention to “Pay It Forward, Pay It Back” as it rolls out to support their students and families. While this may not be an ideal solution for everyone, it may turn out to be the spark that overhauls the nation’s student loan program.
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