Ohio’s college students are among the most indebted in the nation by the time they graduate. But what if they no longer had to pay tuition and fees upfront?
Two Ohio Democrats are proposing just that: Instead of taking out loans to pay for classes, students would sign a binding contract stating they will contribute a certain percent of their income for a certain number of years.
They’re calling it “Pay Forward, Pay Back” and, if their bill passed, it would be a step toward completely overhauling the way students pay for college — although many people question the ultimate impact on students, the financial sustainability of the program and the feasibility of collecting the money if graduates leave the state. The idea is also being explored in California, Colorado, Maryland, Massachusetts, Michigan, New Jersey, Oregon, Pennsylvania, Texas and Washington, said John Burbank, whose group developed the model.
“The whole concept of the bill is to make college more affordable,” said Rep. Mike Foley, D-Cleveland, who sponsored HB 242 with Robert Hagan, D-Youngstown, and nine other Democratic co-sponsors. Foley, a University of Dayton alumnus, said he was inspired to write the bill by his four children, who will all be in college in 2014, and their friends who were taking on large amounts of debt.
Although Ohio’s bill does not spell out the details (which would be determined later by the chancellor of the Board of Regents) the model in Washington calls for students to pay a percent of their adjusted gross income for 25 years — 0.75 percent for each year of community college or 1 percent of each year at a university. The money is placed in a trust fund that pays for future students, who would then contribute part of their income, according to the Economic Opportunity Institute.
The plan would put a stop to students getting “shackled” by debt or avoiding college all together because of the costs, said Burbank, director of the institute.
“I think everyone recognizes that we have a broken system in terms of funding and financing higher education,” Burbank said.
“It’s a solution that involves the individual student. But it also is a societal solution,” he said.
For instance, a graduate with a four-year degree earning $30,000 would pay $1,200 a year, or $100 a month (less than the average cable bill.) At that income level, the graduate would pay $30,000 for their education over 25 years.
Ohio students currently graduate with an average $28,683 in student loans, ranking Ohio seventh in the nation, according to the Project on Student Debt. The interest rate on federal loans is just under 4 percent now.
The proposed program would essentially spread student debt different and “creates an unknown tuition model tied to personal financial success,” said Sean Creighton, executive director of the Southwestern Ohio Council for Higher Education. “Plus, tuition only accounts for about 40 percent of the cost of college.”
Creighton, a father of five, said he is intrigued with the idea, and “impressed with Ohio’s willingness to consider innovative thinking, even if “Pay It Forward, Pay It Back,” is not the right program.
“While there has been strong interest by progressives in other states to embrace this model, not enough is known. There would be serious hurdles around implementation and collection that could make the program unsustainable,” he said.
Ohio’s bill would only require that Chancellor John Carey consider piloting the program at one or more state schools, if he deems it warranted. He would need to submit a plan by January 2015 to the legislature.
Rep. Jim Butler, R-Oakwood, said he agrees with the idea of matching at least some funding colleges receive with results, but questioned the details of this program.
“You could have potential problems, because students after graduation who are successful are paying disproportionately more,” he said.
Local students supported and questioned the program at the same time.
Wright State University junior Christine Tran, who is studying nursing, questioned how an unemployed graduate would be treated under the program.
“You never know when you graduate if you’re going to get a job or how much you’re going to be making,” said Tran, who expects to graduate with about $30,000 in student loans.
Scott Stephens, who graduated from Cedarville University in 2012 and now works at the university, said the program is an innovative solution that could be good for some students. But Stephens, who graduated with $28,000 in debt that he expects to pay off within two years, said he was personally motivated to attain scholarships to pay for his education.
“I could see there being some advantages. Especially for majors that would require a lot of schooling but that wouldn’t give a high paying job afterward,” he said.
Student loan debt in Ohio
Average debt: $ 28,683
Ohio’s rank: 7th
Proportion with debt: 68%
Ohio’s rank: 9th
Average debt nationwide: $26,600
Source: Project on Student Debt
Graphic: How did Ohio’s public colleges and universities fare in the state’s $1.7 billion budget?