OUR OPINION: In Oregon, a novel -- and welcome -- way to fund collegeThe state's income-based repayment plan is an exciting proposal with lots of potential.
America, 1776. America, 2013. When you compare those periods, you see that our country's greatest strength is "continuous improvement" -- that is, our ability to solve problems within our constitutional framework.
And just in time for the July 4 weekend comes news of another problem that's starting to yield -- namely, the problem of student loan debt.
"As lawmakers in Washington remain at loggerheads over the student-debt crisis, Oregon's legislature is moving ahead with a plan to enable students to attend state schools with no money down," The Wall Street Journal reported.
"In return, under one proposal, the students would agree to pay into a special fund 3 percent of their salaries annually for 24 years.
"The plan, called 'Pay it Forward, Pay it Back,' would create a fund that students would draw from and eventually pay into — potentially bypassing traditional education lenders and the interest rates they charge."
And besides its promise of easing the pressure on 18-year-olds to borrow enormous sums, Oregon's proposal is good news in other ways. For example:
** It's starting small -- very small. "The bill instructs the state’s Higher Education Coordinating Commission to design a pilot program, which would then require the Legislature’s approval," The New York Times reports.
"For now, only the broadest outlines are clear."
** It has been tried in other countries, and it works. Australia is the most notable example: In Australia, college students can either pay their tuition upfront and get a 10 percent discount, or borrow the money upfront and agree to an income-based repayment plan.
That plan has students repay at the rate of 4 percent to 8 percent of their incomes until the loan is paid back.
Does it work? Well, you could ask someone from Australia, and he or she would be happy to tell you. After all, the plan has been in place there for 25 years.
** It passed the Oregon Legislature with bipartisan support. And that's an understatement: "The Legislature’s majorities are Democratic — as is the governor, John Kitzhaber — but the vote in both houses was unanimous," The New York Times reported.
" 'When we talked to legislators, conservatives said it appealed to them because it’s a contract between the student and the state, so they see it as a transaction, not as a grant,' said Nathan E. Hunt, one of the students who proposed the plan."
** Importantly, Oregon's proposal is a realistic attempt to find a balanced solution -- that is, a solution that recognizes rather than jettisons America's strengths.
For example, our country's colleges have been one of two great institutions -- the other being the military -- that have offered low-income Americans a way out of poverty. But one extreme "solution" -- namely, "get the government out of higher education" -- would close and lock that gate.
The result, predictably, would be higher education that only the rich could afford. And to their great credit, Americans so far have rejected this creation of separate and permanently unequal castes.
Then there's the other extreme, which calls for college to be "free." Of course, nothing on the scale of college is free, and pretending otherwise is just a recipe for runaway taxpayer costs.
Luckily, the United States routinely rejects such extremes, and most of modern politics is an effort to bring the trade-offs into better balance.
The Oregon plan is a solid effort to do just that.
Would students routinely choose lower-paying work or even unemployment to avoid paying back the state? Not in Australia's experience. College graduates, it turns out, are plenty determined to make good livings, and Australia's income-based repayments don't come close to pushing graduates away from high-paying careers.
On balance, Oregon's proposal falls into a great American tradition -- the tradition of refusing to throw up our hands in despair. Student loan debt is a challenge, but not an impossible one in a country that reformed the national welfare system and brought New York City's murder rate back down to the level where it had been in the 1950s. Oregon's effort is a step in the direction of that success.
-- Tom Dennis for the Herald