Lose The Loans: Rethinking How Students Pay For College

Oregon is proposing a radical rethink on paying for college: Free while you’re there, maybe 3 percent of your income for 24 years after. We discuss one state's stab at a national crisis.

The country needs a new way to structure and pay for college.

Just ask the graduates now carrying a trillion dollars in college debt.  Just ask the new high school grads and their families, struggling right now to figure out where to go, how to pay, without taking on a crushing burden.

And here comes a news flash from Oregon:  New plan.  No money down to attend its state schools.  Tuition-free while you’re there, then pay maybe 3 percent of your earnings for 24 years.

Sounds radical.  Sounds manageable.  Would it actually work?

This hour, On Point: Radically rethinking college and how we pay.
--Tom Ashbrook

Nathan Hunt, senior at Portland State University Student. He was in the seminar that originally presented the idea to Oregon state legislators, "Student Debt: Economics, Policy and Advocacy."

John Burbank, executive director and founder of the Economic Opportunity Institute (@eoionline).

Sara Goldrick-Rab, professor of educational policy studies and sociology at University of Wisconsin-Madison, senior scholar at the Wisconsin Center for the Advancement of Postsecondary Education and co-author of "Putting Poor People To Work: How The Work-First Idea Eroded College Access For The Poor." (@saragoldrickrab)

Jeff Selingo, editor at large at The Chronicle of Higher Education and author of "College Unbound: The Future Of Higher Education And What It Means For Students." (@jselingo)

John Burbank on how "Pay It Forward" isn't about paying back individual debt:

Our program is not really a debt instrument. You get access to higher education, and then after graduation, you contribute 3 percent of your income for 24 years in Oregon's case. The point is that with our program you're developing a higher education trust fund that enables the next cohort of students the same access. So you're not paying off your individual debt; you're paying forward to enable the next generational cohor the same educational access that you had when you went to college through "Pay It Forward."

Nathan Hunt on the ultimate goal being access to education:

The idea is access. Even when kids are approaching college, when they're in high school, they see that the doors are wide open. You do well in high school, you cross the road, you got to college. There's no more mystique, there's no more mystery, you just go. There's not interest that's going to be accruing on a principle amount, so it never runs away from you. If you have trouble finding a high-paying job, you can manage your payment to the state. If you have a high-paying job, you have no problems managing your payment to the state.

Burbank on the importance of avoiding crushing student debt:

If you come out of school, and your first job you're making $30,000, 3 percent of that is $900. So you're looking at something that is less than your cell phone bill per month. And that is the point; we want to make this manageable so graduates and new graduates can get on with their lives in terms of taking on responsibilities such as paying for their own rent or buying a house or paying childcare for their children or establishing their own 401K accounts for their own retirement. Right now debt is impinging on all those other factors, and so it is a real ball and chain around the ankles of recent graduates.

Burbank on rising tuition costs:

States have been underfunding and defunding public education over the last 15 years, so that tuition has replaced that funding now. So tuition is essentially a tax that replaces what should have come from general funds from state government.

Sara Goldrick-Rab on the problem with the "Pay It Forward" approach:

The reason that we're in this mess has to do with the behavior and states and institutions of higher education and how they have failed to support the federal government's efforts over the last 40 years to make college affordable. They have undermined our efforts with federal financial aid in many, many ways. And what this program does is, rather than address that issue really head on, essentially it charges students with the task of paying for future students. It asks the state to be nice and continue to contribute, but it does nothing to ensure that that will happen.

Goldrick-Rab on the real cost of college:

The first thing we have to return to is ... about the other costs of attendance. Tuition and fees are only 40 percent of the total bill these students are facing. That's the first thing you have to know. The vast majority of them do not receive Pell grants and therefore borrow to cover those other costs. They will very likely continue to borrow. They will therefore graduate with debt on top of this repayment.

Goldrick-Rab on college being more focused on the social:

A lot of university education, frankly, has gotten really far away from the educational experiences of our parents and grandparents. The education today focuses enormously on the social rather than the academic. And that may sound odd from a professor, but I live this, and I watch it everyday, and I study it. And if you look at where the allocations are going today, they're not actually going very often to support students' academic success. We can do more to focus our efforts so we can provide a high-quality post-secondary education to more people without asking them to repay for 24 years.

Jeff Selingo on low-income students:

I am a little worried about who we are trying to solve the problem for here. Sara talks a lot about low-income students, and I'm like her, most worried about them because that's going to be increasingly the number of students coming to college in the next 10 years. We're becoming a much more diverse nation ... we are going to have more students of color coming to college campuses in the next 10 years, given the demographic shifts in this country, and there are going to be first-generation students and there are going to be poorer students.

What we should really be focused on is lowering the net cost for those students in the lowest income brackets, and I'm not quite sure that by just pushing off the paying of college 10, 20 years down the road that we're necessarily going to help those students where we can in other ways.

Goldrick-Rab on taking longer to finish college and its effect on payment:

The fact is that the college completion rate in Oregon is 50 percent over six years. This will not be 3 percent for a bachelor's degree recipients. It will be at minimum 4.5 percent because they take about six years, as I said, to finish. So there's a bit of deceit here.

The Wall Street Journal: Oregon Explores Novel Way To Fund College — "As lawmakers in Washington remain at loggerheads over the student-debt crisis, Oregon's legislature is moving ahead with a plan to enable students to attend state schools with no money down. In return, under one proposal, the students would agree to pay into a special fund 3% of their salaries annually for 24 years."

The Los Angeles Times: Looking For A Solution To The Jump In Student Loan Interest Rates — "Interest rates on federal student loans double to 6.8%, but Congress could pass a retroactive fix. Democrats want a short-term rate extension while a bipartisan group seeks a long-term solution."

PolicyMic: Is Oregon The State To Save Us From Crushing Student Loan Debt? — "The architects of the plan hope to get the pilot program up and running by 2015. One of the problems that they still need to solve is how to fund the program up until students educated under it graduate and begin to pay the 3 percent back. The state government would likely borrow the seed money, which could top $9 billion."