Oregon looking to eliminate tuition and loans for higher education students

Published: Friday, July 5 2013 5:41 p.m. MDT

Oregon lawmakers approved the study and development of a pilot program eliminating the need for students to pay tuition or take out loans to attend state schools. Instead, students would commit to pay a set percentage of their future earnings.

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SALT LAKE CITY — For most students, attending a college or university means choosing between increasingly steep tuition payments now or years of burdensome loan payments later, all with no guarantee of professional sucess.

But an innovative program proposed in the Oregon Legislature could give students another option to pay for continued education, and Utah education officials are paying attention.

Referred to as "Pay Forward, Pay Back," the new plan would provide funds for students to pay their school fees in return for committing to repay a set percentage of their future salary — however large or small that might be — to the state.

According to an article in the New York Times, the specifics of the repayment process have not been finalized, but proponents suggest participating students would pay roughly 3 percent of their salary for 20 years after graduation.

An exploratory bill, which unanimously cleared the Oregon Legislature on Monday, calls for the state's Higher Education Coordinating Commission to study the proposal and design a pilot program before returning to the Legislature for approval.

Pamela Silberman, spokeswoman for the Utah System of Higher Education, said Utah education officials do not currently have plans to follow in Oregon's footsteps but added that officials will be interested in studying the successes of the "Pay Forward, Pay Back" program.

"I think that it’s a really interesting idea and that we will be watching how it's implemented, the impact that it has and how it works out over time," Silberman said.

She said the plan raises questions of funding for schools. During the initial years of the program, while students are not paying tuition and repayments have not yet accumulated from graduates, some new state money would be required to avoid cuts at the school level.

"Is the state going to replace that money?" Silberman asked. "That would basically be a budget cut."

Oregon University System spokeswoman Diane Saunders said a pool of money would need to be established by the state to sustain the program until its first graduates begin making repayments.

Saunders emphasized that the bill that passed Monday merely calls for the study of the program's pros and cons, as the proposal itself raises several operational questions, such as what action would be taken with students who do not complete their degrees.

She also said the "Pay Forward, Pay Back" program raises a question of equity, as students who enter higher-earning fields would ultimately pay more for their degrees than their lower-earning peers.

"One student is underpaying for their degree, if you will, and the other is overpaying for their degree," Saunders said.

She said the Oregon University System considers the proposal worthwhile for study, particularly as state funding for higher education has decreased around the country, shifting more of the cost burden to students.

Twenty years ago, Saunders said, state funding in Oregon accounted for roughly 70 percent of a school's operating cost, with students picking up the remaining 30 percent.

Since then, she said, those numbers have flipped, with schools tasked with educating more students with less money and students asked to pay ever-increasing tuition.

"There’s a lot of complexity on the operations side, but it is something we need to take a look at," Saunders said of the "Pay Forward, Pay Back" plan. "We really believe that the traditional funding model is broken in the state. We don’t think there will be another golden age of state funding."

John Curl, director of financial aid and scholarships for the University of Utah, said he was interested in seeing how the pilot program goes, as it will likely answer many of the operational questions presented by the proposal.

But he also said the "Pay Forward, Pay Back" program has the potential, like all social programs, to reach a point where the money leaving the fund is greater than the money coming into it.

"I appreciate very much what they're trying to do to lower the debt of the students or the burden they feel over time," he said. "It just kind of makes me wonder if the numbers will work out."

The Oregon plan comes amid discord in Washington, D.C., on the subject of federally subsidized student loans. Interest rates for new student loans doubled Monday after lawmakers failed to reach an agreement on several proposals to either delay or diminish the schedule rate hike.

Email: benwood@deseretnews.com

Twitter: bjaminwood

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