'Pay It Forward' Loans: Can Oregon's Plan Make College Affordable

'Pay It Forward' Loans: Can Oregon's Plan Make College AffordableGive it an “A” for creativity. Oregon’s just-approved “Pay It Forward, Pay It Back” plan allows students to go to a public university or community college without paying tuition.
The catch: students sign a contract to pay a small, fixed percentage of their annual adjusted gross incomes for 20 years after they graduate and find a job.
The average amount of college loan debt from the class of 2013 was $35,200, according to Fidelity.
The proponents say it eliminates heavier debt burdens and ruined credit profiles. And the percentage is fixed, so there are no worries about changing interest rates tied to U.S. Treasuries, as Congress is proposing to do with some student loans.
Oregon’s Higher Education Coordinating Commission plans to develop a pilot program and in 2015 lawmakers will decide whether to implement the program.
For now, it has gotten national press and maybe could be looked upon positively by other states.
One of the proposals under the “Pay It Forward” strategy calls for all community college students to pay 1.5 percent of their incomes for 20 years, and all four-year public university students to pay 3 percent for 20 years.
The plan’s biggest obstacle is how to fund start-up costs, estimated at a whopping $9 billion. That’s because initial students who attend tuition-free would be years away from entering the labor force.
The “Pay It Forward” concept was originated by the Economic Opportunity Institute, a nonprofit policy group in Seattle. It is based in part on a model used in Australia.

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