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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2013

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Oregon just passed a revolutionary, almost market-disruptive bill that would effectively make tuition free at colleges across the state.

The Oregon program is fairly straightforward. In fact, House Bill 3472, or “Pay it Forward, Pay it Back,” is so straightforward it has been called the solution to the Student Loan Debt Crisis.

Under the program, students wouldn’t pay tuition fees upfront. Instead, they will pay a small percentage of their adjusted gross income for a number of years after college. These payments are placed into a trust fund that will cover the cost for future students so that those future generations will also be able to attend college under the same program. The program is expected to require college students to pay 3 percent of their income for 20 years. 

While the program isn’t officially implemented yet, and it has yet to be seen if it will truly be a silver bullet against the Student Debt Bubble, it has gathered praise and support from around the country.

Naturally, students themselves have voiced jubilation over the program and would ideally like to see the Oregon program spread across the country. spoke with several student loan borrowers to hear just why they support the Oregon program so much and how such a program would affect their heavily indebted lives.

Fear of College Debt

Erica Paul, an incoming senior to the University of Maine at Farmington, has $45,000 in student loan debt.

While she is not a resident of Oregon, nor a student at any of Oregon’s colleges, she is intrigued by House Bill 3472. She says that if a federal plan that mirrors Oregon’s student loan program were ever implemented, she would definitely be a supporter.  Her current student loan burden is overwhelming and she is concerned about her future repayments once she graduates.

“I pay the monthly interest on both government and private loans with help from my family, but I worry about the reality of repayment after graduation,” she said. “Oregon’s proposed model of tuition free college education with percentage-based payments taken out of a student’s income after graduation makes more sense.”

Paul thinks that the current system of taking out a student loan to pay for a degree is backwards. Instead, Oregon’s tuition plan is how should have been all along.

“Instead of using money you don’t have to pay for school, you can go to school for whichever degree you are most interested in without needing to worry about your future job prospects and salary.”

Shouting Support for Student Loan Reform

Lissette Hall owes $60,000 in student loans. No stranger to transferring, she has moved between Columbia University, the University of Illinois at Chicago and Illinois State University.

She would much rather have gone to college tuition free with the understanding that she would be paying back a percentage of her income for several years after graduation rather than getting into $60,000 worth of college loan debt.

Having spent much of her time fighting for financial aid at UIC, Hall knows that the ability to focus on coursework and building a community in college is much easier without financial stress — which is something that would be granted by the Oregon program.

While Hall has had to borrow money for school out of necessity, she sees that investment as being equal to the price of a small house, condo or expensive car. She also thinks that the program wouldn’t rob universities and colleges of income, making it a win-win for both students and institutions.

“My logical analysis doesn’t currently foresee an issue with this besides where the university might get money for certain resources or services,” said Hall.

Possible Problems with Oregon’s Tuition Plan

But not everybody’s logical analysis produces the same results.

Distinguished Professor of Economics Emeritus Richard Vedder of Ohio University told that the Oregon program may actually be unfair.

“Students in high paying fields, for example electrical engineering, economics or accounting, would end up typically paying dramatically more for college than those majoring in, say, theater, anthropology, and ethnic studies,” said Vedder.

The idea of free tuition can also unleash unforeseen ramifications.

“The bias towards favoring those majors in fields where potential future compensation is low might lead to unanticipated enrollment shifts not in keeping with the objectives of policy-makers,” he said. “Engineering enrollments might stagnate while theater enrollments boom, not in keeping with much public rhetoric about the need to promote the STEM disciplines.”

Since the Oregon plan’s interest and terms are very accommodating, it may not actually prove too problematic for most college students. As a result, Vedder thinks that the program wouldn’t be seen as unfair by the bulk of students, despite rivalry between majors.

He does predict, however, that the student loan industry would still be needed by borrowers looking to pay for room, board, book expenses, and other costs that come with getting a college education. He predicts that at least a few students will favor the certainty of a student loan, rather than the uncertainty that comes with paying a proportion of a highly-unpredictable future income stream for two decades.

Generation versus Generation

Alexandrea Bowman, a graduate student studying Environmental Science at the University of Rhode Island, told that she owes $78,000 in student loan debt. 

Just like the other student loan borrowers that spoke with, Bowman would join into the Oregon program in a heartbeat. She wouldn’t need to work four part-time jobs in addition to borrowing student loans just to pay for college if the Oregon program was nationally mandated.

She would like to see American colleges eventually be as free as European colleges, but she is willing to accept the Oregon program as a substitute.

Despite trying to get off on the right foot, Bowman has been unsuccessful in finding a full-time job in her field as her graduation date approaches. She’s been forced to apply for any job she can just to try and start earning income that would let her pay off her credit card debt, her rent and other bills.

The Student Loan Debt Crisis has been weighing heavily on her mind from the moment she took out her first student loan. She blames the poor economy and the lack of Baby Boomer retirement for her inability to find a job or internship.

“I am starting to feel that forced retirement should be mandatory in order to stabilize the economy,” said Bowman.

The Maximum to Borrow

For those outside of Oregon’s jurisdiction, these current students and recent graduates have some advice.

Having landed themselves into a serious level of student loan debt, Paul and Hall both agree that $20,000 should be the student loan debt ceiling that future borrowers agree not to exceed. But unfortunately, not everybody can meet such a ceiling.

“In today’s world, high school graduates are forced to choose between entering debt to get degrees and find stable careers or to abandon their dreams of college and settle for jobs that don’t require Bachelor’s degrees,” said Paul. “However, more jobs than ever require a college education, so even students who avoid debt can struggle in the job market.”

Paul doesn’t expect to make a great deal of money in her lifetime since she is majoring in Early Childhood Special Education, but she is still hopeful that she will land a job.

At maximum, she would say that $20,000 is the highest level of student loan debt anyone should take on, since that’s the equivalent of an entry-level position’s annual salary. But in a perfect world, she thinks that “free tuition should be implemented across the country.”

For those interested in Oregon’s colleges and the passing of House Bill 3472, Oregon’s free tuition program is expected to be implemented in 2015.