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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jul 29, 2013

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A college education in modern America is one of the most expensive things a person can pay for. With soaring tuition costs and the average student loan debt now over $30,000, there is just no end in sight to the expensive endeavor that obtaining a degree has become.

In order to halt this trend, it was only a matter of time before someone pushed forward legislation that would make college attendance tuition-free, much like the universities of many foreign countries.

Just this month, Oregon passed legislation that would roll out a new program to make college’s within the state a more affordable endeavor .

Oregon’s new college funding program has been hailed as a solution to the Student Loan Bubble and the Student Debt Crisis.

The program will allow students to attend college tuition-free provided that they agree to pay 3 percent of their post-graduation income back to the school for a full 20 years.

In theory, this means that Oregon college students won’t need to borrow student loans from federal and private lenders, such as those found through, in order to pay tuition for their college educations. As expected, current student loan borrowers voiced praise for the program. However, several unanswered questions remain.

Footing the Bill

For example, what will happen to graduates that refuse to pay 3 percent of their income?

If the program automatically deducts 3 percent of graduates’ income, what will happen if a graduate decides to close their bank account that was given to the program for repayment purposes?

It would be far from efficient if the state of Oregon had to track graduates down and have them fill out new forms whenever they moved residences or banks. Worse still would be if the state had to send out debt collection agents to take care of this service on the state’s behalf.

While Oregon may have an easier time finding former graduates within state borders, adults from other states may prove more difficult to find and pindown.

On a similar note, the Oregon plan hasn’t addressed how Pay It Forward would work with immigrant and foreign students. Many foreign nationals come to the United States in order to obtain quality university educations. For all the repetitive critique of the American schooling system, and cries of outrage over how far behind American students are compared to other countries, the US still attracts untold amounts of foreign students who are eager to learn from its educational institutions.

Naturally, if these foreign students who study in Oregon on a visa return to their home countries, do they have 3 percent deducted from their income for the same amount of time as domestic graduates? How can Oregon enforce repayment if these students leave our borders, leave Oregon’s jurisdiction, and reside overseas? Will Oregon simply deny Pay It Forward for foreign students?

It would be reasonable to expect the state of Oregon to garnish the wages of any delinquent graduates that attempt to avoid repayment into the Pay It Forward program. However, how will Oregon garnish the wages of unemployed and underemployed graduates?

Also, without the protections of federal student loans, such as deferment and forbearance options, what will happen to Oregon’s graduates when they fall upon hard times? Will their income still be subjected to deductions or will the program permit temporary pauses in repayment?

Under the Oregon plan, universities would no longer receive tuition paid for by student loans, a key source of income.

This raises the question of how universities can compensate for this loss of income. It is possible that professors’ salaries may take a hit, or that services and products sold on campus will see a price spike. Even higher prices on already expensive textbooks are likely to anger new and existing students.

What is currently known, however, is that proposals to move “Pay it Forward” plans forward on a national scale are likely waiting to see how the situation in Oregon will play out. It is, after all, a pilot program at this stage.

Waiting for Final Rules

Pay It Forward is the brainchild of the Economic Opportunity Institute.

Maggie Humphreys, Communications Manager for Economic Opportunity Institute, said that parties in support of Oregon’s plan and parties against it must remember that Oregon’s legislation simply directs various Oregon agencies to develop a pilot Pay It Forward program.

“Oregon has begun studying how they could potentially implement Pay It Forward – a debt-free financing mechanism for students pursuing higher education,” said Humphreys.

She said that the controlling bill — formally known as HB 3472 — required four of the state’s educational entities to come up with a test program. Those entities were the Higher Education Coordinating Commission, Oregon Student Access Commission, Oregon University System, and Department of Community Colleges.

Since it’s just a pilot program, a lot of the aforementioned questions haven’t even been thought about. We may not have those answers until the program moves to the next stage.

“If the state moves forward with the pilot program proposal, the legislature will work with higher education stakeholders to develop the program’s final governance design,” said Humphreys.

Humphreys also said that the Oregon program has caught the attention of students and legislators nationwide. In fact, the EOI has been contacted by a number of leaders in other states who are seeking to implement similar legislation. EOI intends to continue the national conversation on how the government can provide students with debt-free access to higher education.

Despite lingering questions over Pay It Forward, Humphreys told that it is still premature to speculate on what kind of enforcement mechanisms will be created.

Only once the program’s unanswered questions are answered, and its flaws addressed will the nation see if Pay It Forward can be viable on a federal scale. Many eager student loan borrowers and soon-to-be college attendees certainly hope that it will be.