How Oregon's "Pay It Forward" Bill Tackles Student Debt

The rain had just stopped briefly in Eugene, Oregon, and the sun made a rare appearance from behind the clouds. A young woman wearing a backpack standing next to me on the crosswalk, who identified herself as Lauren, looked up and smiled as the sun lit up the wet pavement around us.

“Gotta enjoy a few minutes in the fall with no rain, right?” I said.

“Now if only someone can make it rain on my student debt,” Lauren responded. “It’s out of control.”

“Free” Education Isn’t Free

In today’s hyper-partisan political climate, it isn’t often that an entire legislative body passes a bill unanimously. But Oregon’s legislature did just that by approving HB 3472, the “Pay It Forward” tuition bill directly crowdsourced from Oregon’s students to address student debt.

On its surface, the bill looks sound. It delays tuition being paid by any student attending any state school until after s/he graduates and gets a job. Then, three percent of each paycheck is deducted for those deferred tuition payments until all the tuition is paid off. HB 3472 was modeled after legislation drafted by the Washington State-based Economic Opportunity Institute.

“It’s good for me now, since I’m just living my life and working toward my degree,” said sophomore Hunter Ruud at the University of Oregon campus in Eugene. “But I’m more worried about when they start pulling money out of my paycheck. Will it come anywhere close to being paid off before I’m 40? And will I still have enough left to get by, assuming I’m lucky enough to get a job after college?”

Ruud, who is currently undeclared but is considering majoring in Business, said he’s taking out dispersed loans of at least $7,000 to $8,000 per term for tuition. By the time everything housing, books and everything else adds up, Ruud figures he’ll be taking on roughly $22,000 more debt each year he’s in college.

“I just bought a $130 textbook for an accounting class that I’ll maybe look at 10 or 12 times,” Ruud said. “I’m aiming to graduate by 2016, but with all the debt I’m taking on, will it be worth it?”

Student loan debt is now $1.2 trillion, according to a July report by the federal Consumer Financial Protection Bureau. And as a result of congressional inaction on federally-subsidized loans, interest payments on those loans doubled from 3.4% to 6.8%.

In the meantime, 90% of new jobs created since 2009 have been part-time jobs in the fast food and retail industries. Of the few jobs available for students graduating with new degrees and tens of thousands of dollars in debt, very few of those jobs will pay enough for students to pay off their loans, much less provide for a family in a meaningful way.

Pay It Forward will cost approximately $9 billion to implement, since those first benefiting from the bill won’t enter the labor force for at least several more years. The initial $9 billion will likely come from state funding for need-based grants, in order to put students on the 3% plan when they graduate. This essentially means that money reserved to provide free education for low-income students will instead go toward a plan tailored for middle-class students.

This statement opposing HB 3472, issued by the American Federation of Teachers, noted that state appropriations for higher education has fallen to a 25-year low, causing tuition for the average student to skyrocket in recent years. The AFT explained their opposition based on the bill's underlying notion that education is a commodity, which comes at a cost that only the privileged can afford, rather than a basic human right.

“IBR-based [income-based repayment] funding of higher education exacerbates the on-going 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, as well as the individual…Indeed, this shifting of costs from the public to the private individual is a central piece of IBR-based funding plans proposed by Milton Friedman in the 1950s, which are the provenance of Pay It Forward.” –AFT statement on HB 3472

Free Education Corrupted

Cooper Union, in the East Village of Manhattan, was founded by industrialist Peter Cooper in 1859 with the expressed intent of providing higher education that was “free and open to all.” Cooper ensured the financial solvency of his institution by ensuring that taxes paid on the land owned by the college would go to the college, instead of to the city, where it would boom and bust with economic cycles. Cooper also mandated that members of the board personally take on any school debt over $5,000 to ensure that administrations were held accountable for how they spent the school’s endowment. Cooper Union was even recently ranked #1 by U.S. News and World Report as the best college in the North.

In early 2013, the Cooper Union board announced that in Spring 2014, for the first time in its history, the roughly 800 students admitted to the school would be charged $38,500 per year in tuition costs. Nearly 100 students and faculty ended up occupying the president’s officeuntil a tentative agreement was reached. A workgroup between administrators, students and faculty was created to find a solution for a sustainable financial path forward.

The Cooper Union occupation was indicative of the problem that differentiates American college students with students at public universities in other parts of the world, where education is seen as a human right and a public good. Cooper Union’s financial status had nothing to do with free education. Rather, the administration actually wrote Peter Cooper’s requirement -- that board members personally take on debt greater than $5,000 -- out of the school’s code altogether several years ago.

One key issue the Cooper Union occupants protested was the accumulation of $175 million in debt, using the land they owned as collateral, for a new Engineering building that cost the university $2,000 per square foot – similar to a luxury hotel.

In this report, board member and Cooper Union graduate Kevin Slavin mentioned that when he turned in copies of Cooper Union’s books to professional accountants, he was told, "The only books we’ve ever seen that were more fucked up than this were when people were being deliberately obstructive."

Solutions

Oregon obviously made a step in the right direction by declaring a state of emergency on student debt and passing a bill they thought was the right plan -- and they did it by listening to organized student power. Now that the legislators have the ear of the students, they can revise the bill and fund a better higher education program that makes education truly free for all students, including 39 million others who have already graduated and still have years of debt to pay off.

One solution is a higher education tax on businesses that have degree requirements for new hires. If a company operates in the state and depends on the state’s college graduates for its labor force, that company should be taxed according to how many employees are working in positions that required a college degree. Proponents of the Pay It Forward plan call it a “social insurance” plan for students, even though other social insurance programs like Social Security are paid for by everyone.

Why not do the same for higher education, making a similar investment by all people in the next generation? Free K-thru-college education for all would cost roughly $130 billion a year. We could easily take 20 percent of the US military budget, which already surpasses thecombined military budgets of the next 10 biggest militaries, and put it toward free college education for all Americans.

Oregon had it right in listening to the students. Now the student movement needs to come together and mobilize toward free higher education as the fundamental right that it is.