Fact and Fancy in Oregon

The State of Oregon made a big splash in the higher ed world last week. Like a game of Telephone, though, the substance of what actually occurred was reported as more and more fantastic until this post that went viral on social media proclaimed that the “Oregon Legislature Unanimously Passes Tuition Free Higher Education”.

Well… no.

Let’s divide up the news from Oregon into two pieces. First – what did the Oregon legislature unanimously pass? In part, the bill that was passed sets up a commission to propose a pilot program to provide debt-free education at two higher education institutions in Oregon – a four-year school and a two-year school. The pilot proposal would then need the subsequent approval of the legislature. Now, this is big news – a state legislature is taking seriously the problem of skyrocketing tuition and exploding student debt and is examining ways to ease that burden to expand accessibility to public higher education. The Oregon legislature is to be commended for taking the concerns of students and their families seriously.

Which leads us to the second piece of news – the “tuition free higher education.” So, about that “tuition free” bit – the proposal around which the bill was formed is something called Pay It Forward and basically works like this: students would be able to attend a public community college or university in Oregon with no up-front tuition in exchange for signing a contract that would obligate the student to pay a certain percentage of their income over a period of time (the numbers being bandied about are 1.5% for a communtiy college student and 3% for four-year college student to be paid over 20-24 years)  into a social insurance fund that would go to fund the higher education system. The contract would essentially function as a tax on public higher education graduates (and would thus be treated differently than as debt, for the purposes of, say, buying a home). Far from being a “tuition free” plan, it’s a plan where everyone pays tuition, albeit in a deferred plan that’s contingent on one’s post-graduation income.

The proposal bears a resemblance to higher education finance plans used in both Australia and England, as well as to a plan proposed by University of Chicago economist Milton Friedman:

The device adopted to meet the corresponding problem for other risky investments is equity investment plus limited liability on the part of shareholders. The counterpart for education would be to “buy” a share in an individual’s earning prospects: to advance him the funds needed to finance his training on condition that he agree to pay the lender a specified fraction of his future earnings. In this way, a lender would get back more than his initial investment from relatively successful individuals, which would compensate for the failure to recoup his original investment from the unsuccessful.

We can understand the surface appeal of the plan – many graduates, especially from four year institutions, would be better off than under the enormous debt-loads they suffer under now. But we also have many concerns about the proposal, which we have put forward in this document. David Robinson of the Canadian Association of University Teachers has also written a critical piece more generally about income-contingent repayment funding plans. In a nutshell, we are concerned that:

  • Access to needs-based financial aid, such as the Pell Grant, could disappear under this plan, and low-income students who may not otherwise have one will be on the hook for a repayment obligation upon completing their education;
  • The burden for the financing of higher education will fall further on to the student, and the state will have an out for getting out of funding higher education from general funds altogether – essentially, this plan seems to give up on the idea of higher education as a public good, as the other members of the community who benefit from an educated populace and the institutions in their community will not have to contribute. A corrolary concern is that the “graduate tax” might be seen as a form of discriminatory taxation; and
  • It further incentivizes a cost-benefit approach to the recruitment of students and the funding of academic programs, where institutions will select students and programs based on their prospects for higher levels of repayment upon graduation.

There are other logistical concerns about the mechanisms for enforcement of the contract and how funds would be distributed that you can read in the linked pieces.

That said, Pay It Forward does not have to be the pilot proposal that ultimately comes out of the commission for legislative approval. The Oregon legislature has given advocates for affordable and accessible higher education an enormous opportunity to tackle the problem of rising tuition and student debt, and we hope the commission will examine a wide range of options to keep the promise of higher education within reach for all students. We look forward to working with students, their families, and community members in crafting a plan to reinvest in Oregon’s students and its institutions of higher education.

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