What is the Pay it Forward Pay Back College Program?
It seems like all news stories about education these days are in regards to the high cost of tuition. Students are afraid of getting loans and then having to pay them off for the next 10, 15 or 20 years of their life. And the interest rate goes up the longer it takes them to pay off, so that makes it even more stressful. It is like paying for a mortgage for a decade or longer, just to pay off the college education that may not have even gotten them the job they wanted. That is where the Pay it Forward, Pay Back college program comes in.
What is the Program
The Pay it Forward Pay Back college program offers students an alternative to having a pile of student debt. This program is being introduced in Oregon as a pilot program. What it will do is offer students the opportunity to pay back their tuition with part of their salary, rather than a traditional student loan. It will still be owed over a couple decades, but it prevents them from overpaying with interest rates and not worrying about that huge pile of debt.
How Does it Work?
Basically, the Pay it Forward program works by having a student attend college and not having to get a school loan. Instead, they attend a state college (community college) and promise to pay the college a percentage of every paycheck after graduating. This is a very small percentage, usually around 0.75 percent of their checks, per year of schooling. So someone who got a 4-year bachelor's degree, would pay 3 percent of their paycheck to the school for about 20-25 years. If they were earning $1,000 per paycheck, they would be paying the school $30 from every paycheck. It is a lower, reasonable amount than loans, at just $60 a month. This is the average for most graduates.
How it Differs From a Loan
The common first question is: isn't this a loan? But in fact, it is like a loan, though by a different name. There are benefits to choosing the Pay it Forward program, such as no high interest rates, lower monthly payments and no student loan burdens. The main issue with student loans is that they hurt the student's credit, require high monthly payments and the interest rates are causing students to pay much more than they would have otherwise.
Will States Pay For It?
Right now, what is keeping the program from being implemented across the country, is that each state would be paying about $1.4 billion to start the program. This is a big cost for most states who are still trying to recover financially from the latest recession. Hopefully the U.S. will realize other countries like Australia are already using a similar program and it is working well for them. It will improve the college experience, increase the number of graduates and help the economy in the long run.