Tuesday, July 16, 2013

Here's an idea...

They upfront note it's a "gamble," but I think this is an interesting concept:

Oregon to let college-bound choose: pay up-front, or pay over the course of your career. Either students can pay the roughly $25K per year upfront, or they can "mortgage" the first 24 years of their career at 3% of their earnings per year.

It's an interesting concept, though now that I read it, there are some problems:

1. Apparently the IRS would have to administer it. I don't want the IRS involved in more things; I want them involved in fewer things.

2. The higher-earning-potential students will opt to pay up front, so the university system won't "win" off of them - if you're going to be an engineer or architect or lawyer potentially making six figures a year, you're not going to opt for 3% of that to go for half or more of your career. Lower-earning-potential students will opt in, and some will "win" whereas others - say, someone who goes into writing and strikes it big with a couple novels that get optioned by Hollywood - will "lose" and the university system will "win." But I suspect most in the humanities, and many in the so-called "helping professions" (outside of, maybe, nursing) would be money ahead to take the 3% deal.

3. It will probably come back to bite state taxpayers somehow, or else the school will find itself needing to cut corners when it has unexpected shortfalls.

On the other hand, I like the idea of a tuition plan where no student can come back and sue the school because they "aren't making enough money." (There have been a few cases of graduates trying to sue their alma maters, either because said graduates believed they were "guaranteed" a job upon graduation, or that they weren't makign the big bucks the brochures implied they would).

Would it be a reasonable deal for someone like me? As an out-of-state student at a Public Ivy back some 20 years ago, I was probably paying close to $20K a year (Well, *I* wasn't, per se....I was one of those evil trust-fund kids - when my grandparents' estate was sold, the money went into an eduction trust for my brother and me, and we wrote our tuition checks out of that. But $20K seems reasonable including room, cheap board (I ate a lot of beans and rice) and textbooks).

So. I'm making roughly $65K a year (let's not count capital gains on investments, though I'm sure Oregon would like to do that). Three percent of $65K is $1950. So, presuming my entire undergrad costs were on the order of $60K (I graduated in 3 years: APs and taking summer classes at a local commuter community college helped), and assuming my earnings remained constant.....it would take 30.7 years to pay off my cost of education at my current income. (Of course, with experience, ones income goes up, and in some years at least, we've gotten inflation-indexed pay raises).

Of course, if they included everything the IRS likes to look at - capital gains (yes, I do have some investments), interest, dividends, income from stuff like textbook reviewing (it's small, but it's something).....they'd probably get at least their money back out of me, likely more. Of course, at today's prices for Oregon, it would be a little longer for the payoff, but still. (I don't even want to know what a four-year degree at my alma mater would cost these days. If I were doing it again I'd go to a smaller school, possibly a private one, maybe even a church-affiliated one. The culture at my alma mater did not always agree with me.)

I don't think it would work in practice but it's an interesting idea in theory. I also wonder if a university's various committees would be so eager to approve new majors in less-marketable fields (e.g., Peace Studies) if they thought a large number of those majors would opt for the "3% of my income for the next 24 years" option.

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