Oregon's new free-ish college tuition plan

With college tuition costs skyrocketing much faster than the rate of inflation, and with massive student loan debt pummeling young graduates, Oregon lawmakers are looking at a novel approach to spare students form higher education's hefty financial burden: Free tuition.

Sort of.

The state legislature unanimously passed a bill this month that would allow students to attend public universities without paying anything up front. Instead, the proposal, called Pay It Forward, would require students to pay back a set percentage of their post-graduation income for around two decades. The bill does not specify an exact percent or duration, but supporters say it would likely be 3 percent of a student's income — or 1.5 percent for graduates of a two-year college — for 20-25 years.

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That money would then go toward supporting the next class of students, allowing future generations to attend college without needing to take on burdensome high-interest loans.

"The Pay It Forward solution offers students access to higher education without debt," says an explainer from the Oregon Working Families Party, which proposed the legislation. "Pay It Forward is a social insurance program, not a loan. Students would have no debt, no interest, and their percentage would never change."

The plan would effectively scale retroactive tuition rates based on a student's given income. The next Silicon Valley genius would pay back many thousands of dollars more over time than would someone who winds up working at, say, McDonald's.

The bill does not automatically create such a system. If Gov. John Kitzhaber (D) signs the bill, as he is expected to do, it would only direct the Oregon Higher Education Coordination Commission to come up with a viable way of implementing the system over the next two years. The legislature would then have to vote on the specific plan before it becomes a reality.

"Pay It Forward" is not without its hurdles. It would need considerable funding, in the ballpark of $9 billion, to get off the ground until the first wave of students graduate. There's also a concern that such a payment plan could result in "adverse selection," as the Washington Post's Dylan Matthews points out, meaning that students who expect to earn a ton in their careers would be less inclined to enroll in Oregon's school, and vice versa.

The state could try to circumvent that problem by offering varying rates, with higher ones for degrees with typically higher salaries. Yet "that assumes that investors can accurately predict students' future income," Matthews says.

Still, the very idea that the plan has a shot at implementation represents "a progressive victory and a common-sense national model on an issue where Congress has recently been derelict at best," says The Nation's Katrina vanden Heuvel.

With outstanding college loan debt nearing $1 trillion, Congress recently failed to reach a deal to prevent the interest rates on federal student loans from doubling on July 1 to 6.8 percent, from 3.4 percent. A compromise deal that would have retroactively fixed the problem failed to pass the Senate on Wednesday, leaving the higher rate still intact.