What's Best Isn't Always Clear
Oregon’s “Pay It Forward” program may eliminate up-front payment of tuition and fees. But it would not eliminate all student debt, nor necessarily widen access to higher education.
The authors of the plan argue that this is better than student loans because it does not require a predetermined payment, with interest, to a bank, and because payments are based on the ability to pay. There are several flaws with this plan.
With no predetermined amount for repayment a student could not make an informed decision about whether it is better than a traditional loan.
The percentage of income a graduate must pay may exceed the amount that covered their tuition and fees, particularly for those who obtain more lucrative jobs. Proponents suggest the overpayment is “paying it forward.” But overpayment is simply a hidden way of paying interest.
And since the plan would have no predetermined amount for repayment a student could not make an informed decision about which is the better option, a traditional student loan or “paying it forward.”
There is a mild deception at play here; the plan’s architects want us to believe that because the word "loan" is not used that somehow “pay it forward” is not a debt scheme. But a contractual obligation for repayment is nothing less than an accumulated debt.
William A. Darity, Jr., is the Arts and Sciences Professor of Public Policy at the Sanford School. Rhonda Sharpe is research director of the Research Network on Racial and Ethnic Inequality. This article originally appeared in the New York Times.