pay it forward: the debt-free degree plan for oregon...presentation to the oregon house higher...
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Pay It Forward:yThe Debt-Free Degree Plan for Oregon
John Burbank Economic Opportunity Institute, Seattle, Washington
Presentation to the Oregon House Higher Education Committee, February 25, 2013
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Pay It Forward is a Pay It Forward is a pragmatic p g
business model f f di for funding
higher higher education.
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How does it work?
• Replaces tuition with post-graduate contributions into a graduate contributions into a state trust fund
• Funds future students from this trust fund
• Future students will also participate in Pay It Forwardpa t c pate ay t o wa d
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Increases in Tuition and Fees at Oregon State UniversityIncreases in Tuition and Fees at Oregon State University
49%49%
31%
4 5%
14%
4.5%
2011-12 - 2012-13 2010-11 - 2012-13 2008-09 -20 12-13 2005-06 - 2012-13
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The Pay It Forward Solution
Go to college without upfront costs
y
costs
Contribute a fixed percent of income
for a pre-determined number pof years.
to a higher education trust to a higher education trust fund after graduation
h f d bl fThe fund enables access for future students
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No upfront costs.• Abolishes and replaces
tuition• Free and open access to
all qualified studentsall qualified students• Increases career choice
at college and after at college and after graduation
• Zeroes out student debt • Zeroes out student debt
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C ib i i l Contributions proportional to income. income.
Amount based on market • Amount based on market income; it is a rough estimate of human capital estimate of human capital development gained through higher education.
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Hailey is a high school senior. If she goes to a four year college she will pay 4% of to a four year college, she will pay 4% of AGI for 25 years.
$300
$221 $231
$200
$250
$91 $100
$150
$-
$50
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Years After Graduation
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If she had paid with student loans, Hailey would be charged about Hailey would be charged about $350 a month.
Years (post-
graduation)
Median AGI (Annual)
Standard Loan Repayment(Monthly)
Income-based Repayment (Monthly)
Pay It Forward Contribution
(Monthly)
1 $36,000.00 $348.00 $240.56 $120.00
15 $50 000 00 - - $166 6715 $50,000.00 $166.67
25 $55,000.00 - - $183.33
Total Paid $46,080.01 $53,903.79 $46,900.00
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If she goes to a community college, she will pay 1 5% of AGI for 25 years
$52$60
she will pay 1.5% of AGI for 25 years.
$47 $52
$40
$50
$15 $20
$30
$
$10
$20
$-1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Years After Graduation
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If she had paid with student loans If she had paid with student loans, Hailey would be charged about $125 a month.
Years (post-graduation)
Median AGI (Annual)
Standard Loan Repayment(Monthly)
Income-based Repayment (Monthly)
Pay It Forward Contribution
(Monthly)
1 $33,000.00 $127.23 $127.23 $ 41.25
15 $40,000.00 - - $ 50.00
25 $45,000.00 - - $ 56.25
Total Paid $15,268.08 $15,267.94 $ 14,625
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Statewide Implementation
• Transition to PIF in all public colleges and public colleges and universities
• $600 million in Year 1$600 million in Year 1• $1.4 billion in Year 4• Year 25: Net Revenue5
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Pilot Programs• Smaller universities or community colleges• State Need Grant eligible students who did not g
receive the grant• STEM majors• Medical professions• Parental participation: pre-funding PIF
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OSU Promise 1000P F d R i tPay Forward Receipts
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
YEAR
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4,138Students on OSU Promise 1000
YEAR
3,239
4, 38Students on OSU Promise 1000
2,417
1,800
1,0001,093
1,371
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
YEAR
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PAY IT FORWARD AT GREEN RIVER COMMUNITY COLLEGE: PAY IT FORWARD AT GREEN RIVER COMMUNITY COLLEGE: ANNUAL ADDED REVENUE
)en
ue (2
011
dolla
rs)
Ann
ual a
dded
rev
e
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
A
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Years after Green River Promise implementation
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PAY IT FORWARD AT GREEN RIVER COMMUNITY COLLEGE: PAY IT FORWARD AT GREEN RIVER COMMUNITY COLLEGE: GROWTH IN NUMBER OF STUDENTS
10,000
7 000
8,000
9,0008,170: Current FTE at Green River Community College
5,000
6,000
7,000
ents
(FTE
)
3,000
4,000
Stud
e
1,000
2,000
01 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Year(s) after Green River Promise implementation
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16,582
14,739
Students on Green River Promisecalculated with various tuition alternatives
13,265
12,060
11 055
Number of Students on Green River Promise11,055
9,212Tuition: $2,000
8,170: current FTE at Green River $ ,
Tuition: $2,250
Tuition: $2,500
T iti
3,108
1,727
Tuition: $2,750
Tuition: $3,000
Tuition: $3 600,7 7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
$3,600
Year From Inception of
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PAY IT FORWARD STEM EDUCATION: GROWTH IN NUMBER OFSSTUDENTS
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Year(s) after implementation
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Partnering with other states would increase students’ options and pmobility.
• Pennsylvania• New York
V t• Vermont• Oregon
California• California
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Right now, we are:
• Consulting with legislators• Consulting with legislators• Working with stakeholders• Figuring out how to start pilot programsg g p p g• Developing tighter actuarial calculations• Developing interactive spreadsheets
W ki i h h US T• Working with the US Treasury• Working with other states about their
effortsefforts