Testimony of Jason Gettel in Support of Pay It Forward Bill

February 25, 2013 Download PDF

We all know that education is important. A college education can mean greater earnings over a lifetime and greater economic opportunity.

Unfortunately, the cost of higher education is out of reach for many. Over the past couple of decades, the cost of attending college has risen sharply, while family income has stagnated. This is true throughout the country, as it is here in Oregon. In 1990, a year’s worth of tuition and fees at the University of Oregon accounted for 10 percent of the typical Oregon taxpayer's income. By 2010, that had jumped to 25 percent.

As a result, students have been piling on debt in order to pay for college.

“Pay It Forward” attempts to increase access to higher education by eliminating student debt. It would do so by transforming the funding mechanism for higher education.

The way it works is that the student receives the benefit of higher education at the beginning of her adult life and pays a small fixed portion of her income into a system that will fund the education of future students for a fixed number of years. OCPP’s analysis shows that Pay It Forward can pay for itself in the long run.

Our analysis builds on the work of John Burbank and the Economic Opportunity Institute in Washington state. OCPP crunched some numbers for how the program could work here in Oregon. For our analysis we relied on current enrollment levels, the value of a college degree over the last generation and the share of total education expenses per student covered by the state in 2009-10.

If after completing her education, each student were to pay 3 percent of her annual income into the Pay It Forward fund for 24 years, it would, on average, be more than enough to cover the cost of her education. It would also contribute an additional $7,400 into the fund to help pay for the cost of educating subsequent students.

Some may question that our analysis assumes that education expenses rise roughly in step with inflation. This question is understandable, given the skyrocketing tuition costs in recent years. It is true that tuition and fees have been rising rapidly, but the total revenue expended per student has been remarkably flat after adjusting for inflation. It has been the state shifting this cost to the student that has accounted for the rise in tuition.

According to the most recent Oregon University System Fact Book, after adjusting for inflation, total revenue per OUS student increased only about 12 percent from 1989-90 through 2011-12, By contrast, tuition and fees have nearly tripled in inflation-adjusted terms over the same time period.

Pay It Forward may not completely alleviate the problems of educational inequality (we still need to increase public investment in higher education), but it does eliminate a daunting barrier of eye-popping up-front cost. Each student would simply pay in proportion to what they actually gain from their education in terms of income. And it turns out, the program can be self-sustaining, and actually generate revenue, in the long run.

Posted in Education.

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