“Pay-It-Forward” Is a Step Back

CascadeNewLogoBy Joel Grey

The Oregon Higher Education Coordinating Commission is considering a proposal called “Pay-It-Forward.” This pilot program would give free tuition at a state university to one thousand high school graduates each year, beginning in 2016. In exchange for free tuition, students would cede 3-5% of their paychecks over a twenty-year period. Although the program is intended to become self-sustaining, it would cost between $6.5 and $20 million each year for the first twenty years until that happened.

This is an example of a government proposal that is not well thought out. Yale tried a similar experiment in the 1970s and eventually forgave much of the debt years later. Many students overpaid for their education, while 20% defaulted. Oregon shouldn’t repeat Yale’s mistake.

Furthermore, having a third-party payer for college reduces students’ incentive to decide whether to attend college or to pursue other options, like technical schools. It also makes students less sensitive to the prices of institutions, likely increasing the cost of college over the long run.

Education should be an investment, but students and their families should invest and then reap the benefits. That way, talented students can succeed based on merit, rather than government funding students at great cost to taxpayers, with no guarantee a pilot program like “Pay-It-Forward” will work as intended.

Government simply can’t make decisions as well as the individuals who are affected by those decisions.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Learn more at cascadepolicy.org.

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Posted by at 05:00 | Posted in Education | Tagged , , , , , | 20 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Bob Clark

    I would be o.k. with Pay-it-forward if the program were financed with revenue bonds or other financial instrument in which the financial risk is borne by the bondholder or financial instrument holder. Colleges should be given the independence to issue such financial structures so the risks of Pay-it-forward are transferred from Oregon’s general fund. If Pay-it-forward is not attractive to investors, then Pay-it-forward shouldn’t move forward.

    • Joel Grey

      While I would still consider it unwise in most cases, I would not object to the existence of a private deal (between a student and a bank for example) or implementation by private colleges of this type of plan. The biggest problem with the proposal as it exists (as you pointed out) is that Oregon’s taxpayers would be responsible. This is really a gamble and it doesn’t solve the problem of students paying for their college for many years after they finish, which is allegedly what this is trying to prevent.

  • Paul

    I have been going to PSU now for 7 years. I use my college loan money to pay for my computer and cell phone and rent and other stuff, plus tuition. I know that I will NEVER have to pay this money back, so I just keep borrowing and taking the min class schedule my loan allows. This way I live for free! It is not a bad way to go, except for the classes. I now owe $63,500, but am not worried about it at all. I think I can keep this going for at least another 7 years. I most likely won’t even end up with a degree, because I keep taking whatever seems easiest, so am not really in any program. Plus, I get extra money from “working” on campus.

    • E.R.

      Quite frankly, I don’t think you exist, Paul.

  • mairez

    As soon as pay-back time came, people would start screaming about fairness and tuition forgiveness. Bad idea.

  • Jack Lord God

    Well this is certainly asinine. Does anyone in government own a calculator?

    Do the math.

    Go with the high figure – 5%

    You know what 5% is? It is one twentieth of something.

    Oh gee, so wait a second, what does twenty line up with? Oh yeah, the kid is on the hook for twenty years.

    So, if you multiply 20 by 1/20, you get what? That’s right, 1

    In other words, under this scheme, the kid gets a full college education for one years ( averaged over 20 years) salary.

    Gee, does that pencil out? Nope.

  • Mike in ±Mc±Minville

    OK this does not sound like the brainchild of Jonny Dogooder. It sounds like ONE year of tuiton for 1000 kids then one year next year for a different 1000 kids. So I am 18 and I take that deal: at 22/23 I graduate-can’t find a high paying job-end up making 30k a year ($15 per hour) yet I pay back an astonishing 18,000 dollars for that one year of “free education”??!! That’s right! 3% of 30k (=$900 a yr) for the next 20 years is………you got it $18,000 for one year. (5% WOULD BE $30K OVER 20 YEARS!) That assumes no increase in your salary. If after 10 years you make $45000 k a year then you pay $13500 for those 10 years for a total of $9000 + $13500 for $22,500 for that one year. Same senerio at 5% would total $37,500 for one year of free school.

    Sounds like some bank did the math here

    • .

      Phone banks of overseas solicitors in general see senility flaws in student loan programs that swill never be repaid. That’s why they LOL at the numb-skilled prevalent initiative.

      • Randy

        STILL ON YOUR PERIOD?

        • .

          Randy Woodfield, who’s arse did you kiss to get to the Mahonia Hall plateau to send smoke signals from dearth row?

          • Master

            You liked me better as Mike in Mac than as Randy. Use my real name from on. As in your…..

          • .

            Best pseudonym suiting you, d’oh ‘masterful’ blogwan: “A. Michael Mooreon” – concierge at pleasure attending what’s Left of US.

    • Joel Grey

      It is not entirely clear because it is not a completed idea yet, but I believe they would be adding 1,000 students each year so the 3-5% would be for all four years of college. It is not quite as bad a plan as what you were calculating, but I still don’t think it’s a good plan.

  • .

    OEA! PAC if forward as they sashay – and, DEMand it be so.

    Don’t like such ilk? So SEIU our assets dotted with AFCSME, butt don’t act surprised when dour brooder’s and sinister’s appear on your doorstep with torches and pitchforks to Krystallnacht your spirit their way.

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