05 July 2013

Testing a new way to fund a college education

I have thought for years that the most logical way for students to pay for college would be to have them commit to repaying a certain % of the future income.  Such a plan has now been proposed for the state of Oregon:
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...

Oregon's plan has parallels to income-based repayment models used for decades in the U.K. and Australia, and more recently in the U.S., in which borrowers pay government lenders a share of their incomes to cover education loans...

In the 2010-11 school year, there were about 21,000 first-year students in public state colleges and universities in Oregon paying $171 million in tuition. To move them, and the next 23 classes behind them, into this program would cost the state more than $9 billion over 24 years until enough students had graduated and were paying into the system to cover its outlays...

The idea was first presented to Oregon legislators by students from Portland State University last year. Tracy Gibbs, one of the students, said that by freeing graduates from the steep overhang of debt many now face, the plan would allow young people to buy houses and contribute to their retirement accounts.
What the plan doesn't address, of course, is the inordinate cost of college.  That's a whole different problem.


  1. A great deal for students, a bad deal for colleges and universities. Salaries have been flat at best for a long time now and college tuitions haven't been.

  2. It would sure motivate colleges to promote their graduates to make more money after graduation.

  3. Might motivate colleges and universities to lose much of the administrative positions that cost lots and contribute little.

  4. Works well here in Australia... Most domestic university students (including myself) have used the scheme to pay for their university. The money comes straight out of income tax when you earn over a certain amount, so you don't really miss it.

    1. Agreed, was happy to pay off my Uni this way. But glad I didn't have to pay at such a low rate, for so long! Twenty-four years! When I was deciding (at age 22), I might've been silly enough to choose that slow option had it been available. Instead, I went from low-income earner to a pretty decent income, which seemed enormous compared to my waitress wages. Paid off in four years, and was debt-free by the time I wanted to buy a house. But as I understand, it costs a lot more to go to college than we pay? (I think I paid around $7000 per annum for my Bachelor of Applied Science - 1992-1995)

  5. In the UK you don't really pay a % of your salary. You pay the full amount that you borrowed, but it is linked to your salary, so you only pay if you earn above a certain amount, etc. Speaking for my peer group (graduating in the 1990s), you paid less than you borrowed, since the interest rates were below inflation, and the government didn't crack down too hard on people who didn't pay.

    Seems like a great deal to me, especially since it's all optional (i.e. no one forces you to go to university), but people still complain.

  6. This needs its own comment:

    There is a new FREE education to be had online. I am beginning by re-taking some courses I had taken long ago, and I intend to proceed upward for the indefinite future.

    It is called Khan Academy, and it doesn't cost a DIME. All the classes are YouTube, with access on the academy's web site being a means of tracking progress. It also uses a completely different paradigm, one that has shown its worth in coordination with schools around the country. It does it by letting the student set the pace, and NOT going forward until the student has the last lesson down pat.

    That is a method that has been used in the past, then called "Programmed Learning". I know. I did it when in school, and it did AMAZING things for me 50 years ago - literally. I've been looking for someone to pick up the ball and run with it. Apparently, Salmon Khan had to reinvent it in order for it to come around again.

    If interested, I'd suggest googling "Khan Academy TED Talks".

    THIS is the new education system of the future. How it will translate into degrees, I don't know for sure, but the Universities are going to have to coordinate with it, sooner rather than later. It now has a million or so students. It just might come to pass the Kan Academy ends up issuing degrees itself.


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