7 ms·

Oregon Explores Novel Way to Fund College

51 points by ahsteele 13y ago

stephengillie 13y ago
One of the key parts of this is extending it across 24 years. To simplify the math, let's assume a graduate gets a job paying $30,000/yr, and annual payraises of 3%: 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
- bryanlarsen 13y ago
  But we want the present value, the value in 2013 dollars. That calculation is much easier, because you can assume inflation = pay raise and it cancels out. PV = $900*24 = 21600.
  - clarky07 13y ago
    This is the calculation for someone who got a bad job and never advances at all in 24 years. It might be a good deal for them. On the other hand, they could make that without going to college. Someone successful would make significantly more, and pay significantly more. This program will get a lot of stay at home moms out of paying for their psych degrees.
    - bryanlarsen 13y ago
      Inflation is an average. Some do better than the average, some do worse.
      - clarky07 13y ago
        Inflation, or cost of living raise imply's that you are simply doing the same entry level job for 24 years and you never ever got a real raise. Never got a single promotion, or moved companies to a better job. And started at a below average wage. Of course this is a good deal for that person. If you want to be that person, you should totally support this plan or one like it. However, if you'd prefer to be even a little bit successful, this plan doesn't turn out as good. The math works quite differently if you start out at a better wage, as I imagine most people on HN did. It also works differently if you ever get a promotion in 24 years.
- sehrope 13y ago
  This does not factor in interest on the original loan. $1,776 in year 24 is not worth $1,776 today, it's worth considerably less[1]. Here's a breakdown at a couple of different interest rates of $1,776 in year 24 in today's dollars using annual compounding (it'd be a bit more lopsided using monthly): %0 $1,776 %1 $1,398 %2 $1,104 %3 $ 873 %4 $ 692 %5 $ 550 %6 $ 438 To do this calculation correctly either the future payments need to be converted into today's dollars or interest on the original loan needs to added to it (i.e. calc in future dollars). [1]: http://en.wikipedia.org/wiki/Net_present_value http://en.wikipedia.org/wiki/Net_present_value
  - stephengillie 13y ago
    The embarrassing part about these posts is that my major focused on Business Finance... (...and Information Systems, which I rolled into System Administration.)
- michaelochurch 13y ago
  It will lose money on the median student but what matters is mean performance (expectancy). That's not to say that I think this is a good idea, but there's plenty of precedent (including VC) for investments where the median loses but the mean is positive, because the big wins cancel out the losses.
pdq 13y ago
I do not think "free" means what you think it means.
- runarb 13y ago
  > I do not think "free" means what you think it means. Unsure if anyone can define "free" this days. It must be the most misused word in the English language.
  - stephengillie 13y ago
    "Free" as in: Beer? Pizza? Range? For all?
    - runarb 13y ago
      "Oregon free". You get four free beers now, but most pay 3% of you salary next mount in return. You need a minimum of 2 000 monthly pay to qualify :)
    - lesslaw 13y ago
      How about "Free" as in "in exchange for a valid email address"
runarb 13y ago
If one was to pay 3% of ones salaries annually for 24 years how is "salary" defined in the US? Wouldn't a lot of people start demanding "perks" like free cars, food and housing in exchange for lover monetary pay? Wouldn't this possibly undermine the fund as the ones with the higher salaries are in a better position of negotiating these deals?
- nawitus 13y ago
  >Wouldn't a lot of people start demanding "perks" like free cars, food and housing in exchange for lover monetary pay? Wouldn't this possibly undermine the fund as the ones with the higher salaries are in a better position of negotiating these deals? This is already happening to avoid the income tax.
  - danielweber 13y ago
    > This is already happening to avoid the income tax. That's tax fraud. Call the IRS and turn in whoever is doing this; you will get a portion of the misreported funds as a bounty. It used to be that stuff like company cars didn't count as income. That was back when we had income tax rates of 70% and 90%. It was trivial to avoid those taxes for a dozen reasons, once being that compensation that wasn't cash was not taxed. Now, any kind of compensation [1] is taxed as income. [1] except health care, for no good economic reason.
    - nawitus 13y ago
      This article[1] states that food, for example, is a tax free perk. Additionally, I didn't specifically talk about the American tax code. It's a global phenomenon. 1. http://www.mercurynews.com/business/ci_22982220/irs-is-looking-into-whether-free-meals-at http://www.mercurynews.com/business/ci_22982220/irs-is-looki...
- 727374 13y ago
  The IRS is already thinking about including those perks as part of your taxable salary anyway...
jrochkind1 13y ago
It'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. http://www.michigandaily.com/content/michigans-education-trust-doing-ok http://www.michigandaily.com/content/michigans-education-tru...
fosap 13y ago
The thing i like about this the most is that worthless degrees are free and usefull are expensive. So it's in the college's best interest to offer quality.
- yummyfajitas 13y ago
  Most likely the way this will work in practice is that the Oregon government pays colleges up front on a per-student basis, and then calls the program "revenue neutral" based on predictions of what they will later pay.
reader5000 13y ago
This is how it should have been done all along. The "higher education" system as it exists now is just pure exploitation, and decimating the middle class. 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. 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. I mean, the basic problem is that corporate America doesn't really need as much labor input anymore. But we have an entire generation of young Americans who pay more on the "education" loans than their rents. That's a complete injustice.
- ksherlock 13y ago
  There's a reason bankruptcy doesn't discharge government student loans: congress amended the bankruptcy laws in 1978. Why? Reports of abuse from doctors, lawyers, and other high earners that racked up massive debts and declared bankruptcy immediately after graduation. People with $100,000+ in student loans are the 3%.
- danielweber 13y ago
  What makes you think the rate will stay at 3%? Why not bump it up to 5%? 10%? This new system will be even worse. We need to address the real problem: the price.
lesslaw 13y ago
This is a good idea in general. It is really what the market should be correcting for already. I don't understand why the college doesn't lend you the money to attend their courses already.
verelo 13y ago
Welcome to Australia for the last 73 years: https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Aus... Look at the "Repayment" section. Essentially until you're earning money, you don'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't just take the first crappy position that is thrown their way when they finish their degree.
- tigroferoce 13y ago
  Hey, we have that in Europe too. Great step americans. Now join us also on health-care ;-).
  - shadowfox 13y ago
    Judging by the strong negative opinions expressed in the top comments, I am not sure that is going to be the case :)
  - verelo 13y ago
    I honestly dont think the structure at has been generated in the US will work as it stands today. There are a lot of edge cases they're not discussing, i.e. if people move to another state how do they track it? If people leave the country? I know a bunch of issues like these, that took a while to iron out in Australia that will likely take a while in the US too. I hope it doesn't get thrown away before it gets the chance to settle in.
- jacques_chester 13y ago
  HECS isn't 73 years old. It was introduced in 1989.
Ensorceled 13y ago
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.
gyardley 13y ago
Huh - it looks like Oregon's government has designed a rather nice hedge against inflation. As long as fixed-rate loans are still available, this smells like a bad deal.
MichaelApproved 13y ago
This would be a great idea if 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. 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're educated because they have a guarenteed payment from you and the govt, regardless of how well they educated you. 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.
3pt14159 13y ago
This is a terrible idea. 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). 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). 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't pay for themselves. Another reason it is a bad idea: It means that universities no longer have to compete on price, they compete on marketing. As an aside: There is this general trend that I'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'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't afford largesses then, and we certainly won'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. What's going to compel this generation to stay saddled with this debt? If we don't vote it (or spending on seniors) out we'll just move out of the country. Have Macbook, will travel.
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- stefan_kendall 13y ago
  It feels good, but you're exactly right. It takes away competition on price among universities, and it makes it even easier to get an incredibly expensive and useless anthropology degree.
shirro 13y ago
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 http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&page=1 http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&... and http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&page=2#HECS_indexation_rates http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&...
- grecy 13y ago
  > The money is collected via the tax system beyond a typical graduate salary. It's worth noting if you are not earning over a certain threshold (currently $51,309), you don't have to pay anything. If you want to go travelling, you simply don't pay anything. If you never earn that much (because, say, you work for a non-profit or are a struggling artist), you are never required pay it back. Also, if you leave Australia, you never have to pay it back. If you do earn over that threshold, you just pay slightly higher income tax in those years [1] If you make a voluntary payment of $500 or more, they take your payment plus another 5% off. [2] I personally have found it to be a phenomenal system, and I've never met anyone in Australia that didn't go to University because they couldn't afford it. (We also get paid a "living wage" to go to University, of around $400 every two weeks, depending on circumstances. [3] ) [1] http://studyassist.gov.au/sites/studyassist/payingbackmyloan/loan-repayment#HowMuchWillMyRepaymentsBe http://studyassist.gov.au/sites/studyassist/payingbackmyloan... [2] http://studyassist.gov.au/sites/studyassist/payingbackmyloan/loan-repayment#CanIPayOffMyDebtSooner http://studyassist.gov.au/sites/studyassist/payingbackmyloan... [3] http://www.humanservices.gov.au/customer/services/centrelink/youth-allowance http://www.humanservices.gov.au/customer/services/centrelink...
  - shirro 13y ago
    If you can make the entrance requirements everyone has a chance to study without the penalty of crippling debt, most of us reach legal drinking age during our first year of study and our campuses rarely get shot up by gun toting crazies. Freedom is a relative concept I guess.
eertami 13y ago
3% is quite low isn'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.
- mstrem 13y ago
  In the UK you only pay 9% of what is over 21k pa though, so its not that bad (note, this is different than 9% of the total wage). There are also a few more benefits. Technically if you never find a job you will never have to pay for your tuition.
- ronaldx 13y ago
  3% of salary is broadly very similar to the UK's version which is 9% on earnings above £21,000.
fiatmoney 13y ago
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'd argue there are enough positive externalities that they still come out ahead.
ams6110 13y ago
What happens if the graduate moves out of Oregon? Who enforces collection? 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'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.
- JonFish85 13y ago
  I very much agree with you. As much as I appreciate the idea of everyone going to college, I think the idea of making loans easy for anyone to go to college has been a huge disservice to a lot of people. Students don't view the money as "real", they simply view it as a free pass to go to the "best" (i.e. most expensive) college. Universities know that students can get loans to cover their costs, so they raise the costs as fast as they can. Also deserving some blame are parents who don't spend enough time really working with their kids to remind them that a $50k/yr loan, WITH INTEREST, is going to be insanely hard to pay back. But ultimately universities are going to raise tuition as high as they can because they know that students can get loans very, very easily.
  - tzs 13y ago
    So how do you explain wait lists? If your theories about how tuition is set were correct, wouldn't we expect universities to set the price high enough to eliminate wait lists?
    - zaccus 13y ago
      Wait lists are great for marketing; they increase a school's "prestige" in the eyes of potential students. A university doesn't want fewer applicants because that would mean a higher acceptance rate, which is bad.
flexie 13y ago
Oregonians will be pay for college until their late 40s? What about the next tech billionaire. Will he pay USD 30 million for every billion he makes?
- alex-g 13y ago
  My heart bleeds.
- arethuza 13y ago
  I would have thought that something like this would be based on income, not capital gains.
  - fosap 13y ago
    In my understanding of the word capital gains are a subset of income.
    - arethuza 13y ago
      Probably my UK bias showing - we have separate income and capital-gains taxes so I am used to thinking of them as different things although, as you point out, they are both "income".
    - jlal 13y ago
      But capital gains aren't taxed as income. http://blogs.reuters.com/felix-salmon/2013/06/05/why-capital-gains-should-be-taxed-as-income/ http://blogs.reuters.com/felix-salmon/2013/06/05/why-capital...
- pessimizer 13y ago
  Why not? The state is gambling, shouldn't it be allowed to win?
fiatmoney 13y ago
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'd also expect to see a lot of deferred compensation schemes amongst high earners.
- refurb 13y ago
  "Adverse selection" was mentioned in the article. Going into a lucrative career? Self-fund. Want to learn something that will never pay you a decent wage? Sign up! What you end up with is a bankrupt system program in a decade or so.
peterjancelis 13y ago
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.
swalsh 13y ago
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're missing out on the benefits of well placed pricing dynamics. 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'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's only demand for 10% of the people in the program, and if you aren't in the top 10% of people in your program IN THE COUNTRY, you'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. 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'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're paying 100% of the bill for education, they're going to look out for bad pricing.
mgraczyk 13y ago
It would be pretty ironic if you used funds from this plan to pay for a degree in economics.
6d0debc071 13y ago
This is a horrible idea. Removing the financial barriers to college will get kids who shouldn't be going to go anyway without thinking about it. I don'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't under a deferred payment system (a similar thing is currently operating in the UK - though there it's based on repayment of the loan against the ... I believe... consumer prices index.) 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.
- mertd 13y ago
  That's only valid if you see university as purely vocational training.
  - 6d0debc071 13y ago
    No, I think university fails in numerous areas and business is the strongest remaining one - in effect its ties to certificates that industry might value is what university has left. Few would be able to justify to themselves going there otherwise. If you want a well rounded general education, you're - by and large - best off providing it for yourself if you don't need someone to stick a rubber stamp on it for you.
- kalms 13y ago
  In Denmark all education is free. All. You'll even receive a small check every month for your trouble. Admission is based solely on grades, not money. On of the few things we actually got right, imo.
michaelochurch 13y ago
Better way to solve this problem: http://michaelochurch.wordpress.com/2013/05/07/fixing-employment-with-consulting-call-options/ http://michaelochurch.wordpress.com/2013/05/07/fixing-employ... A state government is actually diverse enough in needs to create a full market for these options; it wouldn't have to sell/transfer them on a secondary market to profit.
brudgers 13y ago
Overall, as a person who has enjoyed the generational advantages provided by accessible college educations, I think this plan is a Rawlsian good. 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. But at least it is a start. Schools are our greatest incubators and replicators of beneficial memes.
zackmorris 13y ago
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? Hasn'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't even imagine the ramifications of that, times a million other entrepreneurs. Where has our vision gone?

51 points by ahsteele 13y ago

One of the key parts of this is extending it across 24 years. To simplify the math, let's assume a graduate gets a job paying $30,000/yr, and annual payraises of 3%: 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

bryanlarsen 13y ago
But we want the present value, the value in 2013 dollars. That calculation is much easier, because you can assume inflation = pay raise and it cancels out. PV = $900*24 = 21600.
- clarky07 13y ago
  This is the calculation for someone who got a bad job and never advances at all in 24 years. It might be a good deal for them. On the other hand, they could make that without going to college. Someone successful would make significantly more, and pay significantly more. This program will get a lot of stay at home moms out of paying for their psych degrees.
  - bryanlarsen 13y ago
    Inflation is an average. Some do better than the average, some do worse.
    - clarky07 13y ago
      Inflation, or cost of living raise imply's that you are simply doing the same entry level job for 24 years and you never ever got a real raise. Never got a single promotion, or moved companies to a better job. And started at a below average wage. Of course this is a good deal for that person. If you want to be that person, you should totally support this plan or one like it. However, if you'd prefer to be even a little bit successful, this plan doesn't turn out as good. The math works quite differently if you start out at a better wage, as I imagine most people on HN did. It also works differently if you ever get a promotion in 24 years.
sehrope 13y ago
This does not factor in interest on the original loan. $1,776 in year 24 is not worth $1,776 today, it's worth considerably less[1]. Here's a breakdown at a couple of different interest rates of $1,776 in year 24 in today's dollars using annual compounding (it'd be a bit more lopsided using monthly): %0 $1,776 %1 $1,398 %2 $1,104 %3 $ 873 %4 $ 692 %5 $ 550 %6 $ 438 To do this calculation correctly either the future payments need to be converted into today's dollars or interest on the original loan needs to added to it (i.e. calc in future dollars). [1]: http://en.wikipedia.org/wiki/Net_present_value http://en.wikipedia.org/wiki/Net_present_value
- stephengillie 13y ago
  The embarrassing part about these posts is that my major focused on Business Finance... (...and Information Systems, which I rolled into System Administration.)
michaelochurch 13y ago
It will lose money on the median student but what matters is mean performance (expectancy). That's not to say that I think this is a good idea, but there's plenty of precedent (including VC) for investments where the median loses but the mean is positive, because the big wins cancel out the losses.

pdq 13y ago

I do not think "free" means what you think it means.

runarb 13y ago
> I do not think "free" means what you think it means. Unsure if anyone can define "free" this days. It must be the most misused word in the English language.
- stephengillie 13y ago
  "Free" as in: Beer? Pizza? Range? For all?
  - runarb 13y ago
    "Oregon free". You get four free beers now, but most pay 3% of you salary next mount in return. You need a minimum of 2 000 monthly pay to qualify :)
  - lesslaw 13y ago
    How about "Free" as in "in exchange for a valid email address"

runarb 13y ago

If one was to pay 3% of ones salaries annually for 24 years how is "salary" defined in the US? Wouldn't a lot of people start demanding "perks" like free cars, food and housing in exchange for lover monetary pay? Wouldn't this possibly undermine the fund as the ones with the higher salaries are in a better position of negotiating these deals?

nawitus 13y ago
>Wouldn't a lot of people start demanding "perks" like free cars, food and housing in exchange for lover monetary pay? Wouldn't this possibly undermine the fund as the ones with the higher salaries are in a better position of negotiating these deals? This is already happening to avoid the income tax.
- danielweber 13y ago
  > This is already happening to avoid the income tax. That's tax fraud. Call the IRS and turn in whoever is doing this; you will get a portion of the misreported funds as a bounty. It used to be that stuff like company cars didn't count as income. That was back when we had income tax rates of 70% and 90%. It was trivial to avoid those taxes for a dozen reasons, once being that compensation that wasn't cash was not taxed. Now, any kind of compensation [1] is taxed as income. [1] except health care, for no good economic reason.
  - nawitus 13y ago
    This article[1] states that food, for example, is a tax free perk. Additionally, I didn't specifically talk about the American tax code. It's a global phenomenon. 1. http://www.mercurynews.com/business/ci_22982220/irs-is-looking-into-whether-free-meals-at http://www.mercurynews.com/business/ci_22982220/irs-is-looki...
727374 13y ago
The IRS is already thinking about including those perks as part of your taxable salary anyway...

jrochkind1 13y ago

It'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. http://www.michigandaily.com/content/michigans-education-trust-doing-ok http://www.michigandaily.com/content/michigans-education-tru...

fosap 13y ago

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

yummyfajitas 13y ago
Most likely the way this will work in practice is that the Oregon government pays colleges up front on a per-student basis, and then calls the program "revenue neutral" based on predictions of what they will later pay.

reader5000 13y ago

This is how it should have been done all along. The "higher education" system as it exists now is just pure exploitation, and decimating the middle class. 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. 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. I mean, the basic problem is that corporate America doesn't really need as much labor input anymore. But we have an entire generation of young Americans who pay more on the "education" loans than their rents. That's a complete injustice.

ksherlock 13y ago
There's a reason bankruptcy doesn't discharge government student loans: congress amended the bankruptcy laws in 1978. Why? Reports of abuse from doctors, lawyers, and other high earners that racked up massive debts and declared bankruptcy immediately after graduation. People with $100,000+ in student loans are the 3%.
danielweber 13y ago
What makes you think the rate will stay at 3%? Why not bump it up to 5%? 10%? This new system will be even worse. We need to address the real problem: the price.

lesslaw 13y ago

This is a good idea in general. It is really what the market should be correcting for already. I don't understand why the college doesn't lend you the money to attend their courses already.

verelo 13y ago

Welcome to Australia for the last 73 years: https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Aus... Look at the "Repayment" section. Essentially until you're earning money, you don'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't just take the first crappy position that is thrown their way when they finish their degree.

tigroferoce 13y ago
Hey, we have that in Europe too. Great step americans. Now join us also on health-care ;-).
- shadowfox 13y ago
  Judging by the strong negative opinions expressed in the top comments, I am not sure that is going to be the case :)
- verelo 13y ago
  I honestly dont think the structure at has been generated in the US will work as it stands today. There are a lot of edge cases they're not discussing, i.e. if people move to another state how do they track it? If people leave the country? I know a bunch of issues like these, that took a while to iron out in Australia that will likely take a while in the US too. I hope it doesn't get thrown away before it gets the chance to settle in.
jacques_chester 13y ago
HECS isn't 73 years old. It was introduced in 1989.

Ensorceled 13y ago

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.

gyardley 13y ago

Huh - it looks like Oregon's government has designed a rather nice hedge against inflation. As long as fixed-rate loans are still available, this smells like a bad deal.

MichaelApproved 13y ago

This would be a great idea if 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. 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're educated because they have a guarenteed payment from you and the govt, regardless of how well they educated you. 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.

3pt14159 13y ago

This is a terrible idea. 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). 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). 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't pay for themselves. Another reason it is a bad idea: It means that universities no longer have to compete on price, they compete on marketing. As an aside: There is this general trend that I'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'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't afford largesses then, and we certainly won'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. What's going to compel this generation to stay saddled with this debt? If we don't vote it (or spending on seniors) out we'll just move out of the country. Have Macbook, will travel.

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stefan_kendall 13y ago
It feels good, but you're exactly right. It takes away competition on price among universities, and it makes it even easier to get an incredibly expensive and useless anthropology degree.

shirro 13y ago

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 http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&page=1 http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&... and http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&page=2#HECS_indexation_rates http://www.ato.gov.au/Rates/HELP-indexation-rates/?default=&...

grecy 13y ago
> The money is collected via the tax system beyond a typical graduate salary. It's worth noting if you are not earning over a certain threshold (currently $51,309), you don't have to pay anything. If you want to go travelling, you simply don't pay anything. If you never earn that much (because, say, you work for a non-profit or are a struggling artist), you are never required pay it back. Also, if you leave Australia, you never have to pay it back. If you do earn over that threshold, you just pay slightly higher income tax in those years [1] If you make a voluntary payment of $500 or more, they take your payment plus another 5% off. [2] I personally have found it to be a phenomenal system, and I've never met anyone in Australia that didn't go to University because they couldn't afford it. (We also get paid a "living wage" to go to University, of around $400 every two weeks, depending on circumstances. [3] ) [1] http://studyassist.gov.au/sites/studyassist/payingbackmyloan/loan-repayment#HowMuchWillMyRepaymentsBe http://studyassist.gov.au/sites/studyassist/payingbackmyloan... [2] http://studyassist.gov.au/sites/studyassist/payingbackmyloan/loan-repayment#CanIPayOffMyDebtSooner http://studyassist.gov.au/sites/studyassist/payingbackmyloan... [3] http://www.humanservices.gov.au/customer/services/centrelink/youth-allowance http://www.humanservices.gov.au/customer/services/centrelink...
- shirro 13y ago
  If you can make the entrance requirements everyone has a chance to study without the penalty of crippling debt, most of us reach legal drinking age during our first year of study and our campuses rarely get shot up by gun toting crazies. Freedom is a relative concept I guess.

eertami 13y ago

3% is quite low isn'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.

mstrem 13y ago
In the UK you only pay 9% of what is over 21k pa though, so its not that bad (note, this is different than 9% of the total wage). There are also a few more benefits. Technically if you never find a job you will never have to pay for your tuition.
ronaldx 13y ago
3% of salary is broadly very similar to the UK's version which is 9% on earnings above £21,000.

fiatmoney 13y ago

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'd argue there are enough positive externalities that they still come out ahead.

ams6110 13y ago

What happens if the graduate moves out of Oregon? Who enforces collection? 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'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.

JonFish85 13y ago
I very much agree with you. As much as I appreciate the idea of everyone going to college, I think the idea of making loans easy for anyone to go to college has been a huge disservice to a lot of people. Students don't view the money as "real", they simply view it as a free pass to go to the "best" (i.e. most expensive) college. Universities know that students can get loans to cover their costs, so they raise the costs as fast as they can. Also deserving some blame are parents who don't spend enough time really working with their kids to remind them that a $50k/yr loan, WITH INTEREST, is going to be insanely hard to pay back. But ultimately universities are going to raise tuition as high as they can because they know that students can get loans very, very easily.
- tzs 13y ago
  So how do you explain wait lists? If your theories about how tuition is set were correct, wouldn't we expect universities to set the price high enough to eliminate wait lists?
  - zaccus 13y ago
    Wait lists are great for marketing; they increase a school's "prestige" in the eyes of potential students. A university doesn't want fewer applicants because that would mean a higher acceptance rate, which is bad.

flexie 13y ago

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

alex-g 13y ago
My heart bleeds.
arethuza 13y ago
I would have thought that something like this would be based on income, not capital gains.
- fosap 13y ago
  In my understanding of the word capital gains are a subset of income.
  - arethuza 13y ago
    Probably my UK bias showing - we have separate income and capital-gains taxes so I am used to thinking of them as different things although, as you point out, they are both "income".
  - jlal 13y ago
    But capital gains aren't taxed as income. http://blogs.reuters.com/felix-salmon/2013/06/05/why-capital-gains-should-be-taxed-as-income/ http://blogs.reuters.com/felix-salmon/2013/06/05/why-capital...
pessimizer 13y ago
Why not? The state is gambling, shouldn't it be allowed to win?

fiatmoney 13y ago

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'd also expect to see a lot of deferred compensation schemes amongst high earners.

refurb 13y ago
"Adverse selection" was mentioned in the article. Going into a lucrative career? Self-fund. Want to learn something that will never pay you a decent wage? Sign up! What you end up with is a bankrupt system program in a decade or so.

peterjancelis 13y ago

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.

swalsh 13y ago

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're missing out on the benefits of well placed pricing dynamics. 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'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's only demand for 10% of the people in the program, and if you aren't in the top 10% of people in your program IN THE COUNTRY, you'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. 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'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're paying 100% of the bill for education, they're going to look out for bad pricing.

mgraczyk 13y ago

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

6d0debc071 13y ago

This is a horrible idea. Removing the financial barriers to college will get kids who shouldn't be going to go anyway without thinking about it. I don'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't under a deferred payment system (a similar thing is currently operating in the UK - though there it's based on repayment of the loan against the ... I believe... consumer prices index.) 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.

mertd 13y ago
That's only valid if you see university as purely vocational training.
- 6d0debc071 13y ago
  No, I think university fails in numerous areas and business is the strongest remaining one - in effect its ties to certificates that industry might value is what university has left. Few would be able to justify to themselves going there otherwise. If you want a well rounded general education, you're - by and large - best off providing it for yourself if you don't need someone to stick a rubber stamp on it for you.
kalms 13y ago
In Denmark all education is free. All. You'll even receive a small check every month for your trouble. Admission is based solely on grades, not money. On of the few things we actually got right, imo.

michaelochurch 13y ago

Better way to solve this problem: http://michaelochurch.wordpress.com/2013/05/07/fixing-employment-with-consulting-call-options/ http://michaelochurch.wordpress.com/2013/05/07/fixing-employ... A state government is actually diverse enough in needs to create a full market for these options; it wouldn't have to sell/transfer them on a secondary market to profit.

brudgers 13y ago

Overall, as a person who has enjoyed the generational advantages provided by accessible college educations, I think this plan is a Rawlsian good. 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. But at least it is a start. Schools are our greatest incubators and replicators of beneficial memes.

zackmorris 13y ago

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? Hasn'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't even imagine the ramifications of that, times a million other entrepreneurs. Where has our vision gone?