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
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