Oregon Lawmakers Pioneer Tuition-Free 'Pay it Forward, Pay it Back' College Plan

July 5, 2013 — -- The Oregon state legislature unanimously approved a plan to provide free tuition to students while they attend community college and public university. In return, they'll pay back the state with a percentage of their incomes after graduation.

Called "Pay it Forward, Pay it Back," the plan passed unanimously in Oregon's Senate on Monday and in the House the previous week. The state's Higher Education Coordinating Commission will next develop a pilot program and in 2015 lawmakers will decide whether to implement the program.

The bill was approved on the same day that interest rates on federally subsidized Stafford loans doubled to 6.8 percent after Congress failed to pass legislation preventing the automatic rate hike.

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"It was both ironic and lovely for the state of Oregon to take a different approach," said Barbara Dudley, professor with Portland State University's College of Urban and Public Affairs: Hatfield School of Government.

Though the pilot will determine the specifics, the premise is that it will allow students to go to a public university or community college tuition-free with a binding contract that they will pay a small, fixed percentage of their annual adjusted gross incomes after they graduate.

The average amount of college loan debt from the class of 2013 was $35,200, according to Fidelity.

Dudley's Portland State University students conceived of "Pay it Forward, Pay it Back" and presented the idea to state legislators, including Rep. Michael Dembrow, a Democrat. It was developed with other organizations, like the Oregon Students Association, and supported by the Working Families Party, of which Dudley is a founder. Then Dembrow presented a House bill with the idea.

Democratic state senator Mark Hass, chair of the senate education committee, was the sponsor of the bill in the senate.

"This is what thinking out of the box looks like," Hass said. "Somebody's got to come up with something. Look at what U.S. Senate did. They couldn't even resurrect status quo, which wasn't working. If we don't do something dramatically different, we'll continue sticking kids in college who aren't able to pay for it."

The impact to the state's budget and education expenses have yet to be finalized, though the state constitution requires lawmakers to balance the budget each year.

In the 2010-11 school year, there were about 21,000 first-year students in public state colleges and universities in Oregon, the Wall Street Journal reported.

Tuition at Portland State University for undergraduate state residents is $2,125 for 12 credits, which meets the requirement of a full-time student per quarter. For non-state residents, it is $6,181.

In one of their financial models, Dudley's students proposed all community college students pay 1.5 percent of their incomes while all four-year public university students pay 3 percent -- both for the duration of 20 years after graduation. The pilot program committee will likely choose one university and one community college to experiment with the details, Dudley said.

"Essentially what it does is allows you not to carry a debt load," Dudley said. "It's not a debt that you graduate with -- your debt-to-credit ratio is not mucked up and you can participate in the economy, which is a novel thought."