Two days after interest rates doubled for federal student loans, making an increased amount of debt for future graduates inevitable, one state is looking to make them completely obsolete. According to Wall Street Journal reporter Douglas Belkin, the state of Oregon, along with plans that would allow students to attend state-funded colleges for free, is considering a proposal that would let students experience higher education with no money down in exchange for 3% of graduates' yearly income for 24 years.
With the national amount of student loan-based debt now toping a staggering $1 trillion, a figure higher than that of the nation's amount of credit debt, Oregon's offer could appear mouth-watering for students who head into each semester with worries of how they'll be able to fund their education expenses.
According to the report, the plan, titled "Pay it Forward, Pay it Back," would likely be funded by the government initially, with a subsidy that is expected to exceed $9 billion, eventually moving to self-sustainability. The transition would presumably occur after the yearly payments of future graduates reach an amount sufficient enough to fund the future incoming students.
"We have to get way out of the box if we're going to get serious about getting young people into college and out of college without burdening them with a lifetime of debt," said Mark Hass, a Democratic state senator who campaigned for the bill.
The Oregon state senate has passed a bill that has already been approved by the house, which will create a committee tasked with devising an early version of the program. That version can then be decided on and implemented in the state as early as 2015.
"If it's done correctly it's essentially creating a social insurance vehicle for enabling access to higher education," said John Burbank, executive director of the Economic Opportunity Institute.
No one knows for sure how payments under the "Pay it forward, Pay it back" plan will compare to payments that students would pay according to their current loan agreements (if they required loans at all), but future graduates will be guaranteed an opportunity to repay schools with amounts that are proportional to their salaries.
Furthermore, if the proposed plan is approved, there will be students in Oregon who will have a chance to go to school without the burden of finances distracting their focus in classes and detracting from their study time.
If the system works, it could become an attractive proposition for other states (California has already shown interest in such a program) and, ultimately, that will be a win for all students.
Via Wall Street Journal, Photo Courtesy: Tumblr