It would be nice if a proposal to solve the higher education student debt crisis would be based on something other than a fantasy that perverse incentives will not produce perverse results.
But that is the case with “Pay It Forward, Pay It Back,” now on the table in Oregon and getting an energetic sales pitch throughout the country.
The pitch is that it will relieve students of the crushing burden of debt that many of them receive along with their diplomas, by letting them go to college without paying any tuition at the time, and then paying it back with 3 percent of their adjusted gross income over 24 years. Some versions of the still-developing plan call for the payback to start at age 25, when most graduates will presumably be established in their working lives.
It sounds both simple and seductive. No financial pressure on the student or on mom and dad during the college years, allowing the kid to focus on getting a world-class education without the distraction of booze, parties … uh, I mean, slaving away at a part-time job.
Then, a graduate who takes a job at $30,000 a year would have to make an annual payment of just $900. As some of the proposal’s backers note, that’s less than most of them spend on their phone bill.
According to the math presented to various media outlets, an average former student’s income would grow to the point where he or she would be paying about $2,000 by the 20th year, at which point the net cost of about $32,000 in tuition would be paid off. Over the final four years they would pay about another $7,400, which would cover financing costs and also help to build the trust fund for the coming generations of students.
Simple, right? Sure – as long as all of those unique and special human beings conform to the expected averages so that all the mathematical projections hold.