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

Pay It Forward is a Pay It Forward is a pragmatic p g

business model f f di for funding

higher higher education.

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

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

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

Partnering with other states would increase students’ options and pmobility.

• Pennsylvania• New York

V t• Vermont• Oregon

California• California

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