Editor’s note: This is the eighth in a multi-part series on the budget for the State of Oregon and where possible efficiencies can be found.

It's rare that an opportunity presents itself to save money while at the same time making a policy decision that makes sense.

In 2013, the State of Oregon passed a first-in-the-nation "Pay it Forward" describing a pilot for this kind of higher education tuition plan. They way the plan works is described in the bill itself:

"[I]n lieu of paying tuition or fees, students must sign binding contracts to pay to the State of Oregon or the institution a certain percentage of the student’s annual adjusted gross income upon graduation from the institution for a specified number of years."

The dollar amounts are dizzying. In the 2019-21 biennium, State of Oregon general and lottery fund support for four year colleges was over $1.3 billion and that represents about 18% of the budget for Oregon University programs. The state could rescind the general fund money, and back a bond to create a startup fund for pay-it-forward scholarships. Since the money gets paid back into the fund, the fund is self-sustaining -- or even expanding, if the university manages it well. Ultimately, the fund could be required to do the service on the debt that was taken on to create the fund.

There are several positive aspects of the program:

• It virtually solves the student debt problem, at least for new students who participate in the program going forward
• Universities are incentivized to get the student through their programs. Currently, Universities are incentivezed to allow students to drink beer, languish and keep paying tuition. A pay-it-forward scholar who is still attending school is tying up money that could be used for the next scholar, and the university will take more steps to help students move along.
• It will have a tendency to direct support toward students and degree programs that have value in the marketplace. Conversely, it will focus support away from programs that are tempting to students, but don't create great earning potential.
• Scholarships can be easily directed to students who are deserving based on merit, as well as need.
• Universities crave more autonomy. In 2011 the legislature moved to make Oregon's universities more accountable to their own boards and less accountable to the state This program would free them from the bonds of state funding and the strings attached to those.

This program seems to have little downside while at the same time holds great potential for revolutionizing four-year higher education in Oregon. It can also deliver some great budget cuts.

Savings: Up to $1.3 billion biennially


--Staff Reports

Post Date: 2020-07-20 08:00:00

Last Update: 2020-07-06 22:31:14