Oregon Explores Novel Way to Fund College

This is a terrible idea.<p>Malinvestment starts the same every, single, time. Over extending credit to unworthy investments. Usually this is done through the government because their primary objective is not to make money, but to appease voters. Sometimes this is done by financial institutions that offload the risk to someone else and make their profit on fees, or commissions (but never negative commissions).<p>Here is why this is a bad idea: There are no price signals to the potential students to help guide them to the correct career choice. In Ontario the things you can get bank loans for are the following: STEM, Medical fields, Economics, Accounting (both of which are kinda STEM-y).<p>The government interferes here, by paying the first 75% of the cost and by creating loans for the poor and almost middle class, but at the very least a good number of us have to work some amount to pay for degrees that don&#x27;t pay for themselves.<p>Another reason it is a bad idea: It means that universities no longer have to compete on price, they compete on marketing.<p>As an aside: There is this general trend that I&#x27;ve noticed. The baby boomers load up the country or state with debt or equivalent (like defined benefits, or entitlements) but because the state can no longer handle increased debt loads they do not afford the same ponzi scheme to Gen-[x-z]. They load us up with 3% for 24 years on your income on top of the debt that we&#x27;re going to have to pay for. Also, how the hell does the majority of the western world go into debt during a period where the largest bubble of the population is at their peak earning potential? This is crazy, we couldn&#x27;t afford largesses then, and we certainly won&#x27;t be able to when they retire, and we also have to service the debt, and we also have to deal with longer lifespans, and we also have to deal with 3% on our malinvested education subsidies.<p>What&#x27;s going to compel this generation to stay saddled with this debt? If we don&#x27;t vote it (or spending on seniors) out we&#x27;ll just move out of the country. Have Macbook, will travel.

They make reference to the Australian scheme in the article. Student loans in Aus are indexed by inflation (consumer price index) so they maintain their real value so as long as wages keep up with inflation it is effectively interest free and a graduate salary really should do better than just keep up. The money is collected via the tax system beyond a typical graduate salary. You hit hard times and drop below the threshold it just accumulates. Just about the next best thing to actual free government education. This is the historical indexation for the Australian scheme <a href="http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&amp;page=1" rel="nofollow">http:&#x2F;&#x2F;www.ato.gov.au&#x2F;Rates&#x2F;HELP-indexation-rates&#x2F;?default=&amp;...</a> and <a href="http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&amp;page=2#HECS_indexation_rates" rel="nofollow">http:&#x2F;&#x2F;www.ato.gov.au&#x2F;Rates&#x2F;HELP-indexation-rates&#x2F;?default=&amp;...</a>

This would be a great idea <i>if</i> the schools had some skin in the game too. I would adjust the plan to have schools not get paid right away. The schools income will also depend on future earnings of the student.<p>As govt makes it easier for students to attend school, though guaranteed loans and plans such as these, schools raise their prices to suck up the benefit instead of allowing the benefit to go to the student. Also, some schools lower their qualifications for attending and graduating. They dont care if you&#x27;re educated because they have a guarenteed payment from you and the govt, regardless of how well they educated you.<p>With a fix percentage of salary, the school has an interest in getting you educated so you can pay them back with a good high paying job. They can only earn more money if they make you a better educated student.

One of the key parts of this is extending it across 24 years. To simplify the math, let&#x27;s assume a graduate gets a job paying $30,000&#x2F;yr, and annual payraises of 3%:<p><pre><code> Year Pay Tuition Payback 1 $30,000.00 $900.00 2 $30,900.00 $927.00 3 $31,827.00 $954.81 4 $32,781.81 $983.45 5 $33,765.26 $1,012.96 6 $34,778.22 $1,043.35 7 $35,821.57 $1,074.65 8 $36,896.22 $1,106.89 9 $38,003.10 $1,140.09 10 $39,143.20 $1,174.30 11 $40,317.49 $1,209.52 12 $41,527.02 $1,245.81 13 $42,772.83 $1,283.18 14 $44,056.01 $1,321.68 15 $45,377.69 $1,361.33 16 $46,739.02 $1,402.17 17 $48,141.19 $1,444.24 18 $49,585.43 $1,487.56 19 $51,072.99 $1,532.19 20 $52,605.18 $1,578.16 21 $54,183.34 $1,625.50 22 $55,808.84 $1,674.27 23 $57,483.10 $1,724.49 24 $59,207.60 $1,776.23 Total Payback $30,983.82</code></pre>

The thing i like about this the most is that worthless degrees are free and usefull are expensive. So it&#x27;s in the college&#x27;s best interest to offer quality.

This whole thing feels wrong to me. The market for education seems upside down. Education is fastly becoming less about just getting a general education, and more as a step to achieving a career. I think a very solid case can be made that a more educated workforce benefits industry as much if not more than it benefits the employees themselves. I also think we&#x27;re missing out on the benefits of well placed pricing dynamics.<p>Today, most of the decisions are made by the students themselves. By definition a student does not know anything about the future of the industry they&#x27;re entering other than possibly an article they read in a news paper. What you end up getting are disproportionate classes of students in programs. On the surface it sounds great. In America I can go to school for whatever I want. Of course when you graduate there&#x27;s only demand for 10% of the people in the program, and if you aren&#x27;t in the top 10% of people in your program IN THE COUNTRY, you&#x27;re not going to get a job in that industry anyways. Plus you now have a boatload of debt, which you took on for essentially the privilege of knowing how to do work to benefit your future employer.<p>I think things would be improved with a few small changes. Break up the private and public sectors into specific industry categories. Create non profit organizations to help with predicting future demand, and curriculum, then have colleges bid on fulfilling it. I think it does two things. It allows for consistent standards to evolve (so if for-profit institutions bid, they have to prove they are providing a quality education... today they don&#x27;t for the most part) second I would assume these organizations would be better at negotiating then individual students would be, which I think would become a big deal as businesses are usually pretty smart at finding ways to pay less taxes... and if they&#x27;re paying 100% of the bill for education, they&#x27;re going to look out for bad pricing.

If one was to pay 3% of ones salaries annually for 24 years how is &quot;salary&quot; defined in the US?<p>Wouldn&#x27;t a lot of people start demanding &quot;perks&quot; like free cars, food and housing in exchange for lover monetary pay? Wouldn&#x27;t this possibly undermine the fund as the ones with the higher salaries are in a better position of negotiating these deals?

What happens if the graduate moves out of Oregon? Who enforces collection?<p>Frankly I think this idea is silly. The primary reason that the cost of education is out of control is that so many people are not using their own money to pay for it. In trying to make education affordable to everyone, we&#x27;ve achieved just the opposite. Universities are bloated, top-heavy with highly paid administrators and staff who actually do very little work, and they can afford it because they can just increase tuition by near double-digit percentages every few years and get no market pushback.

Welcome to Australia for the last 73 years: <a href="https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Tertiary_education_fees_in_Aus...</a><p>Look at the &quot;Repayment&quot; section. Essentially until you&#x27;re earning money, you don&#x27;t need to worry about the loan and it only goes up by the current inflation rate. Good incentive for the government to ensure there are jobs and means people don&#x27;t just take the first crappy position that is thrown their way when they finish their degree.

It&#x27;s interesting to compare this to the pre-paid fixed-price education plans that several states did ~20 years ago, with mixed results. You buy in when your kids are children, and are guaranteed tuition will be covered when they are college aged. Some programs have had trouble staying balanced though.<p><a href="http://www.michigandaily.com/content/michigans-education-trust-doing-ok" rel="nofollow">http:&#x2F;&#x2F;www.michigandaily.com&#x2F;content&#x2F;michigans-education-tru...</a>

At some point the generation that we are currently screwing over for higher education is going to get into power. If they cancel all social security payments and tell old people (e.g. the boomers) to pay their own way or eat dog food, they will be complete justified.

I do not think &quot;free&quot; means what you think it means.

Am I the only one reading most of these comments and thinking that everyone has completely missed the point? That paying back student loans as a percentage of income instantly relieves the crushing burden of paying back a fixed dollar amount per month?<p>Hasn&#x27;t anyone else put off starting their own business because even a few hundred dollars a month severely impacted their burn rate? I still owe over $8000 even though I graduated from college in 1999. I could write a check for that today, but there was a period in the early 2000s where I was so destitute that my student loan payment was more than my rent! I would literally be living a different life today if the proposed repayment plan had been mainstream when I graduated. I can&#x27;t even imagine the ramifications of that, times a million other entrepreneurs. Where has our vision gone?

This is how it should have been done all along.<p>The &quot;higher education&quot; system as it exists now is just pure exploitation, and decimating the middle class.<p>Allow current student loan holders to enter bankruptcy like normal human beings, and have all future financing be a small set cut of future earnings.<p>Focus much more energy on apprenticing programs like in Germany, where kids actually get real job experience instead of sitting in a classroom with 150 other kids while some 28 year old associate professor walks through a powerpoint presentation.<p>I mean, the basic problem is that corporate America doesn&#x27;t really need as much labor input anymore. But we have an entire generation of young Americans who pay more on the &quot;education&quot; loans than their rents. That&#x27;s a complete injustice.

Overall, as a person who has enjoyed the generational advantages provided by accessible college educations, I think this plan is a Rawlsian good.<p>Of course, it has its flaws, such as repayment being tied to salary rather than income - and how does this work for a married couple from a tax perspective? Expect the percentages to increase and repayment to become increasingly regressive. I doubt it will curb the administrative bloat and sports subsidies and student amenities which have driven costs upward.<p>But at least it is a start. Schools are our greatest incubators and replicators of beneficial memes.

Oregonians will be pay for college until their late 40s?<p>What about the next tech billionaire. Will he pay USD 30 million for every billion he makes?

If you have the option of paying a percentage or a flat fee, it would seem like those with an expectation of high future earnings would always take the up-front cost, leaving you with a much smaller pool of students. Once you near the end of that 24 year period, I&#x27;d also expect to see a lot of deferred compensation schemes amongst high earners.

This is the kind of idea that sounds great to everyone but the type of student you need in the your system to remain solvent.

Or, more or less equivalently, one could tax the population at 3% of income, and fund a free education system. It slightly disadvantages those without degrees, but I&#x27;d argue there are enough positive externalities that they still come out ahead.

Huh - it looks like Oregon&#x27;s government has designed a rather nice hedge against inflation.<p>As long as fixed-rate loans are still available, this smells like a bad deal.

3% is quite low isn&#x27;t it? In the UK I believe it is 9% of your salary for as many years as it takes to pay off the debt.

It would be pretty ironic if you used funds from this plan to pay for a degree in economics.

This is a horrible idea. Removing the financial barriers to college will get kids who shouldn&#x27;t be going to go anyway without thinking about it.<p>I don&#x27;t think education should cost an arm and a leg but you should have to think about it as your money. Which, IME, a lot of kids going to uni don&#x27;t under a deferred payment system (a similar thing is currently operating in the UK - though there it&#x27;s based on repayment of the loan against the ... I believe... consumer prices index.)<p>Honestly, I almost think that university is a bad idea altogether for many people these days. If a company wants a trained workforce they should be the ones paying. Seems the wrong way around at the moment. The kids have to take on all the financial risk themselves - but at a significant information and power disadvantage.

Better way to solve this problem: <a href="http://michaelochurch.wordpress.com/2013/05/07/fixing-employment-with-consulting-call-options/" rel="nofollow">http:&#x2F;&#x2F;michaelochurch.wordpress.com&#x2F;2013&#x2F;05&#x2F;07&#x2F;fixing-employ...</a><p>A state government is actually diverse enough in needs to create a full market for these options; it wouldn&#x27;t have to sell&#x2F;transfer them on a secondary market to profit.

This is a good idea in general. It is really what the market should be correcting for already.<p>I don&#x27;t understand why the <i>college</i> doesn&#x27;t lend you the money to attend their courses already.