Oregon’s state legislature made news this summer when it passed a measure that was dubbed a plan for “tuition-free” public higher education. Coverage by The New York Times, Associated Press and other news outlets was followed by an
enthusiastic response in much of the progressive press. “Oregon Students Fight Back Against Debt, And Win,” read a headline on Alternet, while The Nation called the plan “a progressive victory and a common-sense national model.”
But the plan, popularly known as “Pay It Forward,” has drawn plenty of critics, including the American Federation of Teachers (AFT), the American Association of University Professors (AAUP), the National Education Association (NEA), and the PSC. They warn that Pay It Forward (PIF) is not really “tuition-free,” and that it does not address the basic cause of escalating student debt: the massive withdrawal of state funding from public higher education. Pay It Forward would “continue the shift of financing higher education from the state to the private individual,” contends a policy paper by the AFT, and would make it harder to reverse this trend.
The basic idea of the Pay It Forward plan is that students at the University of Oregon would no longer pay tuition while enrolled. Instead, they would commit to pay a fixed percentage of their income into a common fund for a long period after graduation. The Oregon bill contains no specific numbers, but analysis by the Seattle-based Economic Opportunity Institute, which helped inspire the Oregon plan, suggests that those who earn a bachelor’s degree in four years would pay about 4% of their income over 24 years. Oregon PIF supporters put the repayment rate at 3%; critics say both figures are underestimates.
A Plan to Make a Plan
What is certain is that Pay It Forward is a long way from becoming reality. The bill passed in Oregon is essentially a plan for a plan for a pilot study. It directs Oregon’s higher education commission to consider developing a plan for a pilot program that the Legislature would consider in 2015. The pilot program would include “one or more public institutions of higher education,” and is described as lasting at least 15 or 20 years. “For now,” reports The New York Times, “only the broadest outlines of Pay It Forward are clear.”
Australia and some other countries have similar systems, known as income-based repayment (IBR). In the US, the Obama administration offers IBR plans for federal student loans to students with high debt relative to income. The Pay It Forward plan is different in that it involves a fixed rate of repayment into a common fund for a set number of years: the basic idea is that those who have completed a degree or worked toward one in the past would cover the educational costs of students who are currently enrolled.
That model, however, means that there is no way for PIF to be self-sustaining until the pool of graduates and former students making payments is very large. Since it would take many years to reach that point, some other source would have to cover the program’s costs in the meantime. PIF supporters estimate that Oregon’s start-up costs for PIF could add up to $9 billion; other analysts say the amount would be far larger. The bill passed in Oregon is mute on where those funds would come from.
Proponents of Pay It Forward insist that it can be made to work, and they tick off a list of the plan’s advantages. Most obviously, there would be no up-front costs for cash-strapped students and their families. With a fixed rate of repayment for a set number of years in place of interest-accruing loans, PIF supporters say that graduates would not have to worry about carrying a mountain of debt they can never pay off. Currently 57% of public senior college graduates leave school with significant student debt, with an average burden of about $25,000, according to the College Board.
“Debt-Free”?
While headlines describing PIF as a “debt-free degree” are something of an exaggeration for a program that envisions decades of annual payments, the promise of predictability has clear appeal. Advocates say this would expand college access: “Fear of debt keeps many people out of college, particularly among low-income and minority populations,” wrote a group of students who worked to pass the Oregon bill.
PIF advocates also say their plan would make it more possible for graduates to enter socially valuable but lower-paying professions. Graduates who want to go into careers such as early childhood education, public-interest law or the arts would feel less pressure to give up such plans in order to pay off their student debt, they contend.
But critics of the Pay It Forward proposal say that it promises far more than it can deliver – that it would not actually solve the problem of student debt, and that costs would be greater and its benefits smaller than proponents project.
Sara Goldrick-Rab, a professor at the University of Wisconsin who studies educational policy, notes that the Pay It Forward plan would cover only tuition and fees – not room and board, transportation, books, etc., which make up an average of 60% of college costs. At the University of Oregon, says Goldrick-Rab, tuition and fees are currently $9,800, but room and board average $10,000, while books and other expenses add another $3,000. “Students often borrow” to cover these other costs, she writes.
“Moreover, the plan is for students attending up to four years of schooling, yet barely 50% of Oregon students complete a four-year degree in six years,” Goldrick-Rab writes in a report for The Century Fund. “Thus, it is highly likely that many, if not most students, will leave college with loans in addition to this [PIF] repayment obligation.” Pay It Forward “may reduce student debt slightly, but will not eliminate it,” she concludes. A similar Pay It Forward plan advanced by Seattle’s Economic Opportunity Institute for Washington State envisions that students who take longer than four years to graduate would pay an additional 1% per year. This model would significantly increase repayment costs for students whose life circumstances create obstacles to rapid graduation.
The figure of $9 billion in start-up costs “is very likely a significant underestimate,” since it appears to be an estimate “an estimate based on high four-year graduation rates,” writes Goldrick-Rab, and this does not reflect Oregon’s reality.
Poor students could find that Pay It Forward makes college more expensive. “For many low-income students, need-based financial aid will cover the entire cost of attending a community college,” says the AFT. “Pay It Forward would replace this free education…[with an] income deduction for 25 years.” Need-based financial aid resources may also be “raided” to cover PIF’s start-up costs, the union warns. The Economic Opportunity Institute’s Pay It Forward proposal for the Washington State “explicitly turns Washington State’s Husky Promise program – which guarantees free tuition for low-income undergraduates (about 25% of the undergraduate population), into seed money for PIF,” the AFT points out.
The Rich Opt Out
Critics of PIF emphasize that students who can afford to pay up-front tuition costs may well “opt out” of the repayment scheme altogether. Instead of repaying more than the current cost of a four-year education over time, or using their future earnings to subsidize others, they’ll head for private colleges or out of state. Both options allow them to transfer the cost of college to their parents. Goldrick-Rab fears that PIF will further segregate public and private higher education systems by class.
Such self-selection poses a problem for PIF’s viability, writes Eric Kelderman, a reporter at The Chronicle of Higher Education. Students who expect to earn higher than average salaries after graduation are less likely to participate, he says, and “without high earners paying into the system, the program would probably be unable to cover the tuition costs.”
While PIF would function much like a tax, it is a tax that would be paid only by graduates of Oregon’s public colleges and those who worked toward, but did not complete, their degrees. Oregon’s other taxpayers, who draw community benefits from the presence of public higher education institutions and from living in a better-educated state, would not contribute.
Proponents contend that because higher-earners would pay more and lower-earners less, PIF is in effect a type of social insurance. But since only those who attend college would contribute, the AFT says that PIF “more closely resembles a fee-for-service [arrangement] than a social insurance program.”
A Public Good?
At a practical level, a “tax” that is easily avoided by the wealthiest families will raise less of the revenue that public higher education so badly needs, the AFT points out. In addition, the union emphasizes, Pay It Forward would “exacerbate the ongoing trend of envisioning higher education as a private transaction that accrues benefits to the individual rather than as a public good that brings economic and civic benefits to communities.”
Supporters of PIF dismiss such talk as as politically unrealistic. Portland State University professor Barbara Dudley, whose students worked on designing the Oregon bill, insists that PIF “is the only solution that you could implement on a state level, besides just standing their hollering, ‘You have to raise taxes.’ We’ve been trying to raise taxes for 40 years now,” she told the American Prospect.
“That kind of defeatism about taxes and public revenue is just inaccurate,” commented Steve London, the PSC’s first vice president, “and it’s at odds with what’s really possible. If progressives had believed this, we would never have won the extension of New York’s millionaire’s tax, or last year’s California ballot referendum, and Bill de Blasio would not have won his landslide victory to become mayor of NYC. If we fight to increase revenue, there’s no guarantee that we will win. But if we don’t wage that fight, we are guaranteed to lose.”
The AFT says that Pay It Forward not only fails to reverse the last two decades of state disinvestment from public higher education: it would, over time, accelerate it.
Goldrick-Rab agrees, and points out that the long-term trend in Oregon has been toward privatization of public higher education. “The share of general fund monies going to higher education in Oregon declined from 17% in 1997 to 5.8% in 2009,” she writes. While this can be resisted, there is nothing in PIF that challenges this trend. While Oregon PIF advocates say that their plan “assumes…that the State appropriations for higher education do not sink below their current level,” they do not spell out how this would be guaranteed.
More likely, says the AFT, is that with PIF in place, “given the ongoing pressures to cut state budgets, future state legislatures could vote to reduce the minimum state funding for higher education and raise the [repayment rate] for Pay It Forward.” In fact, the union warns, PIF “lays the institutional and bureaucratic foundation by which the state can stop using tax revenues to fund higher education altogether.”
It is worth noting, in this connection, that the Oregon bill on Pay It Forward won unanimous support in the state legislature: conservatives said they liked its emphasis on individual repayment rather than tax-based funding. Both supporters and critics of PIF have pointed out that the conservative economist Milton Friedman backed a plan that was similar in many ways.
But those who are organizing for Pay It Forward in Oregon are not Friedmanites. As Goldrick-Rab acknowledges, they include longtime progressive activists and student organizers “intimately acquainted with the near-impossibility of financing college today.” They are, she writes, “remarkable people who should be thanked for trying to change the status quo.”
The lead sponsor of the Oregon bill says that the explosion of interest in PIF is “a sign of people’s desperation” – and that’s something that both supporters and opponents of PIF agree on. The status quo is imposing a crushing burden on college students – and if Pay It Forward won’t provide a solution, other answers must be found.
