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OREGON AND “PAY IT FORWARD” Rep. Michael Dembrow (HD-45) CSG-West, August 2, 2013 Rep.michaeldembrow@state.or.us

OREGON AND “PAY IT FORWARD” Rep. Michael Dembrow (HD-45) CSG-West, August 2, 2013 Rep.michaeldembrow@state.or.us. What Is Pay It Forward ? A Deferred Tuition Payment Program Reverse of Social Security: Benefit first, payments later Income-based repayment after graduation

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OREGON AND “PAY IT FORWARD” Rep. Michael Dembrow (HD-45) CSG-West, August 2, 2013 Rep.michaeldembrow@state.or.us

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  1. OREGON AND “PAY IT FORWARD”Rep. Michael Dembrow (HD-45)CSG-West, August 2, 2013Rep.michaeldembrow@state.or.us What Is Pay It Forward? • A Deferred Tuition Payment Program • Reverse of Social Security: Benefit first, payments later • Income-based repayment after graduation • Similar to program in Australia • See Economic Opportunity Institute Slides for details

  2. HB 3472 (2013) Passes on July 1 • Directs Higher Education Coordinating Committee to study and design a potential pilot Pay It Forward program for consideration by the Legislature in 2015. • Passage of SJR 1 provides potential start-up funding for pilot, • A constitutional referral (November 2014) • Will allow state to bond for “human infrastructure” • Also directs the HECC to study the expansion of the “Western Oregon Promise” to other universities. • Tuition at WOU frozen at (somewhat higher) first-year rate for four years.

  3. EXTENSIVE (and surprising) INTEREST • Starting with The New York Times, Wall Street Journal, and AP, spread to hundreds of print and online sources • NPR, local radioand television • Congress, other legislatures, and the Obama administration • Why? • appeal of the story behind the bill’s genesis (student authors) • some misunderstanding of the bill’s scope and exaggeration of its effects • bill passed on same day as deadline for extending current federal student loan interest rate • unanimous approval in both chambers • general recognition of the severity of the student loan crisis

  4. Some Inevitable Pushback/Criticism in Media • Concern that it won’t work • Concern that we won’t be able to collect from graduates • Concern that potentially high income students won’t want to participate • Concern that tuition only one part of cost of higher ed • Concern that it will exacerbate shift of funding operating costs from state to student • Concern that it’s a distraction from what we really need to do: find a way to increase funding for public higher education

  5. Responses to Criticism • The study/pilot will determine whether or not we proceed. • Conversations underway with Oregon Dept. of Revenue and IRS for collection process. • Many potentially high-income graduates do not start off as high income; they will be attracted to this. • This is only intended to help students and families with their share of tuition. Need-based aid, federal aid, institutional, other aid still needed to help with other costs. • Agree that this cannot be used to further reduce Oregon’s share of state support to higher education. • Side-boards must include state support targets.

  6. Pay It Forward:The Debt-Free Degree Plan for Oregon John Burbank Economic Opportunity Institute, Seattle, Washington Presentation to the Oregon House Higher Education Committee, February 25, 2013

  7. How does it work? • Replaces tuition with post-graduate contributions into a state trust fund • Funds future students from this trust fund • Future students will also participate in Pay It Forward

  8. Increases in Tuition and Fees at Oregon State University

  9. Go to college without upfront costs Contribute a fixed percent of income for a pre-determined number of years. to a higher education trust fund after graduation The fund enables access for future students The Pay It Forward Solution

  10. No upfront costs. • Abolishes and replaces tuition • Free and open access to all qualified students • Increases career choice at college and after graduation • Zeroes out student debt

  11. Contributions proportional to income. • Amount based on market income; it is a rough estimate of human capital development gained through higher education.

  12. Hailey is a high school senior. If she goes to a four year college, she will pay 4% of AGI for 25 years.

  13. If she goes to a community college, she will pay 1.5% of AGI for 25 years.

  14. Statewide Implementation • Transition to PIF in all public colleges and universities • $600 million in Year 1 • $1.4 billion in Year 4 • Year 25: Net Revenue

  15. Pilot Programs • Smaller universities or community colleges • State Need Grant eligible students who did not receive the grant • STEM majors • Medical professions • Parental participation: pre-funding PIF

  16. YEAR

  17. Pay It Forward at Green River Community College: Growth in Number of Students

  18. Partnering with other states would increase students’ options and mobility. • Pennsylvania • New York • Vermont • Oregon • California

  19. Right now, we are: • Consulting with legislators • Working with stakeholders • Figuring out how to start pilot programs • Developing tighter actuarial calculations • Developing interactive spreadsheets • Working with the US Treasury • Working with other states about their efforts

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