The cost of a college education is rising more rapidly than any other expense category in the country, including the cost of health care. In the last 30 years, median wages have increased by a mere 16%, while the cost of college is up over 250%.
America's college students are graduating into an economy with the lowest job-market participation rate since the early 1980s, when women first began entering the job market en mass, and the highest unemployment rate since the 1970s. Many college graduates will find themselves taking jobs that are far below their education level and what they had hoped to be paid, simply to be able to claim a job at all.
Additionally, these same graduates are waking up to the real world, buried under a mountain of student loan debt. Total outstanding student debt has exceeded $1 trillion, and currently accounts for more debt than credit cards or car loans. It is the only kind of debt that has continued to increase since the Great Recession, and it currently stands second only to mortgage debt.
Graduate average wages have actually dropped by over 5% since 2000, while typical student loan monthly payments have increased by 300%. The delinquency rate on student loans is increasing rapidly, exceeding 11% in August 2013.
Fortunately, some states are starting to recognize the importance of an educated workforce and the critical need to assist students with the cost of that education.
Pay-It-Forward Debt-Free Plan
In February 2013, John Burbank, President of the Economic Opportunity Institute, presented the “Pay It Forward” plan to the Washington State Higher Education Task Force.
The plan essentially consisted of a straightforward trade: students could attend certain 2 or 4-year colleges tuition- and fee-free, in return for a small percentage of their income to be paid back over 25 years. The repayments would be income-appropriate, but would not be paying down a specific “debt”; the student would be considered debt-free, and would merely be repaying into the system in order to fund the tuition of future students.
Federally funded loans and grants could then be used to cover a student's housing and other living expenses, thus potentially eliminating the entire cost of the education.
Burbank subsequently gave the “Pay It Forward” presentation to committees and tasks forces in several other states, including Oregon and Vermont.
Oregon Bill 3472
Oregon, generally one of the more progressive states, has already begun working on the complicated issue of student loan debt. Last summer the legislators unanimously passed House Bill 3472, which instructs the Higher Education Coordination Commission to develop a Pilot Plan for implementation by 2015. Students from Portland University coordinated with the Oregon Working Families party to successfully present the proposal to the legislators, and consider it a huge step forward for the students of Oregon.
However, supporters must keep on top of the commission to be sure it develops a workable pilot program that can gain the approval of the 2015 legislature. One sticking point is how to fund the initial years of the program, since it is not expected to become self-supporting for approximately 25 years.
Washington State Bill 2720
Oregon's close neighbor both physically and politically, Washington has also proposed legislation regarding the “Pay It Forward” program. House Bill 2720 was introduced in January, and passed out of the House Committee on Higher Education with bipartisan support. It currently resides with the Appropriations Committee.
If passed, the “Pay It Forward” program would begin modestly, with the Washington Student Achievement Council tasked with developing the program for a 2015 start for up to five high schools in different parts of Washington that serve high proportions of low-income students.
In Washington, the start-up funding would be drawn from the same money as is currently used for need-based grants, but eventually the Fund would become self-supporting and would eliminate the need for state funding for college.
Australian University HELP Program
The “free” tuition idea is partially modeled after the Australian HELP (Higher Education Loan Programme), in which a student does actually incur a debt. The loan repayments are based on a varying percent (from 4 to 8%) of the graduate's HRI (HELP Repayment Income), which is calculated each year and is administered by the federal Taxation Office. The repayments are subject to a minimum HRI, which reduces the financial burden for lower-income graduates.
Pay It Forward Promise to All Students
Clearly, alternatives must be found to the current, unsustainable college funding system. The country cannot continue to permit qualified students to miss out on opportunities for higher education because of budgetary considerations, nor can we continue to graduate students with such vast debt burdens that they may never be able to dig themselves out.
"If a student is accepted into a college, they should have no tuition barrier toward attending," said John Burbank. Finding a solution to the cost of higher education is critical to the growth of this country.
