Paying for College: Delaying the Inevitable

The idea is intriguing, although the system may come up a cropper if graduates later stay home with their children. Also, change may make originally employable majors obsolete. That being said, the idea would make colleges more responsive to the market. But who would pass on traditional knowledge? "Man does not live by bread alone, but by every word of God."

Other countries have been doing this for years in one form or another. When I did my undergrad degree in Australia in the early 1990´s we had what was called the HECS system. Basically, you studied without having to pay tuition fees up front. Once you started earning, post University, a portion of your salary was held back through the Australian Tax Office (ATO) as income tax until your fees were paid off. The amount paid back, through the tax system was scaled based on your earnings. You could also chose, at any time, to make lump sum installment payments to reduce your HECS debt. I used all my bonuses for the first 4-5 years of my employment to pay off my debt.

Obviously, like any system, there will be an many cons as there are pros but from my own point of view it worked well in that it set me up professionally. Without HECS I (and my family) simply would not have been able to have afforded for me to attend University.

This is an interesting idea for sure. However, the first thing that jumps out at me is that it doesn't talk about how this will affect the admissions/acceptance selection and process. It seems like a complementary step would then be for the university system to admit students with the best potential for high revenue streams. This is consistent with Tom's comment, but a bit more sinister in that it could potentially reduce the number of students who come from statistically low income groups.

On the upside, colleges would likely make significant improvements to their career placement programs since it would be in their best financial interests to get their graduates employed as soon as possible.

EW: I think you raise a good point, but I think they do this now anyway. That is they admit students who have high potential to succeed so they can either give back to the almamater through donations or reputation. Most of the top ivy league schools don't even charge a penny to their students (i.e. Harvard, Princeton), so it is clear that these schools only care about the student's future contribution to the school.

Notice that their future contribution is not only tied to money (i.e. donations), but also reputation. Reputation can be had in jobs that don't pay much, such as art, music, and numerous non-profit industries. In addition, it's proven that students do better if they have knowledge in diverse things. This means to help the students succeed in life, they inevitably have to bring in students who are not interested in business, but also in literataure, music etc. Diversity makes everyone better, and in the end the school makes more money in the long-run.

Harvard and Princeton certainly know this. This is why they have diverse majors that have nothing to do with making money.

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A key assumption in this intriguing analysis is that college is trade school. There is no sense that a liberal arts education is still useful, even vital, to society even if the graduate is now an assistant manager of a fast-food restaurant.

Seems like a form of communism. For students attending any given college, the cost of providing education is the same for all students. The quality of education provided is also identical. However, it stands to reason that students who work harder and smarter will earn more and consequently end up paying a lot more for the same education. In essence, they'd be paying for the education of the person who chooses to "enjoy" life.

Seems like the HECS system that DM referred to in an earlier post is a fairer way to achieve the same results.

Reform must start with rigid cost controls for higher ed--ending wasteful spending, requiring full-time teaching from faculty and greater use of technology, such as distance learning. Such waste as tearing down the 1956 University of Maryland's president's home and replacing it for $7.2 million is criminal, but has sadly become the norm in higher ed.

The proposal implies that each student accepting the stipulations outlined in the proposal will be employed 1.) in some capacity over the life of the amortization and 2.) the amount made over the lifetime of the student will be more than the cost of the loan. Sure, #2 seems intuitive.. that one w/a college degree should meet the payback period. But that is no longer the case. There are other concerns, but those two are the major ones.

Interesting idea with inflation built right into the payment. I wonder how enforcement would be handled? Many people try to skip on student loans and this could be more difficult to track with career changes and moves.

Does the program account for the students that become stay at home moms and dads? They have an important job, but they don't earn income. It seems like a large revenue gap would appear if colleges are not getting paid by a significant portion of its graduates.

As a graduate of UCR I am proud that we could come up with such an intriguing idea. One of the problems with our education system is that the increasing prices have forced some students that have worked very hard to get to a UC, back out because they simply can't pay to stay. The price of education also can become a barrier to many students from disadvantaged backgrounds from even trying to go. Although this plan may not work for everyone, it is a great start and could solve many of the problems in higher education.

What a great idea. I wonder how difficult it would be to implement the collection process? And would there be any cap to the amount a student would be required to pay back? Seems like there could be a wide range of incomes from those UC graduates. And what happens to those who dont graduate?
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I have taken the time to thoroughly evaluate the website of the board who posted the proposal at www.FixUC.org and many of the concerns raised in these comments are not outlined in this particular article, nor should they be, since it is just a brief overview of the program. There is no doubt that this system would be similar in nature to the Australian HECS program however, from the board’s website it states that “The contribution system in the UC Student Investment Plan is fundamentally different from income contingent loan programs. There are no loans involved and no interest accrued on contributions. The only similarity is that contributions through the UC Student Investment Plan are based on a percentage of income earned.” It is my understanding that HECS was an income contingent loan that also accrued interest.

Also, a question previously asked by EW is “What happens to admissions?” The proposal document on the website states that “Institutions will be encouraged to refrain from only admitting students to traditionally more lucrative careers.” Although this doesn’t solve the problem, it is a good first step. Furthermore, it seems that, under the proposal, the university will be admitting the best-of-the-best students because they have an invested interest for those students to be successful. I do not believe this will curtail low-income enrollment because the admissions process will be significantly more performance based regardless of family income status. The university will have no incentive to accept higher-income students because the students will not be paying for their education until they have already graduated.

Delaying the inevitable by paying five percent of a annual salary for the first 20 years after graduation is the kind of left coast thinking that will continue to send this country into a depression. This would be causing the inevitable by driving up the cost of education and the money that’s paid out for it. I have an even more radical idea; let’s pay education forward to the next generation.

Put future college education as a monthly bill parents should be paying for even before a child’s birth. Depending on the number of kids parents decide to procreate, should determine the monthly bill you pay. Taking in account what job they will be working, how many children will be conceived, the cost of a house, car, gym membership etc… families should work this future education cost into the budget. Let’s break this down real simple so we can understand what “delaying the inevitable” really means.

Putting this down into averages and using estimates that are realistic for today climate. Monthly expense for a family of two children should be right around three hundred per month. That’s less then the mortgage and more then the electric bill. Should be taught in High School? Umm YES….along with Math and Social Studies. Let’s call the class Real Life!

Then teach how to real life. How to utilize the tools of a technological age to research a modest budget for the real life they want to live. Less then fifty percent of all undergraduate students pay less then nine thousand dollars per year for tuition and fees. The median household income is fifty thousand dollars per year. If we look at giving five percent of our income for the next twenty years we are talking one year’s salary (fifty thousand dollars) to pay for a four year degree that cost thirty six thousand dollars to get.

If we look at student loan right now that help pay for a child’s education it’s at one percent interest. Over the course of a twenty year loan (which could be paid back early) would cost thirty nine thousand seven hundred thirty four dollars. That’s a total savings of ten thousand two hundred sixty five dollars and thirteen cents families would have put towards the next generations education.
Between our economies home values dropping, job loss and corporate greed we need to start paying education forward so our families are not buried in financial debt and the educated future starts managing a better economic claimants for the future of the educational structure in this country or world for that matter.

Now that higher education is a radical gift from families to there children and not a system like social security that costing the country and adding to the national debt. Let’s lobby to give tax deductions on an annual basis to the good stewards of this fine country who are working hard not only to make this country great but to raise families who can contribute to the society with said higher education.

Reversing the mindset of main stream society to see past there own generation and contribute to the grader good of the negative society that themselves have struggled thru the debt and greed just to work a job they wouldn’t wish on a enemy let alone hand down to a loving child. If our youth were handed the key to an education the masses would be happier with the job they choose, not the one chosen for them to survive.

I personally am working a job I love but corporate greed makes daily task un-enjoyable. If my parents would have prepared for two kids instead of one I might have the life my older sister lives. It’s full of enjoyment, stability, comfort and love. This is a direct result of the pre-paid college education she received from a family who decided that education was worth paying forward. At the age of thirty four I work a forty hour week and attend classes.

The saying another day older and deeper in debt should no longer apply if we teach what we only know to be true. That the right decision isn’t delaying anything, the right decision is realizing everything. Pay for the next generation’s education so the decision is made from the heart and not the pressure of the pocketbook situation.

Then and only then will we see a shift in home values, job loss, corporate greed, consumer debt, national debt and negative undereducated societies who could care less about the next generation. This is not a choice that should be delayed.

1 question:

Is that gross or net (of 5%of annual salary?

UPDATE: I just got off the phone with a spokesperson for the UC system who told me that two vice presidents will be meeting with the Fix UC group when the Regents hold their meeting at the Riverside campus on Jan. 18-19. The Fix UC plan isn't on the meeting agenda, so there will be no vote or any other official action at that time.

I also spoke to William Tierney, director of the Center for Higher Education Policy Analysis at the University of Southern California, who was pessimistic about the prospects for the Fix UC plan.

While a similar plan has worked well in Australia, and the Fix UC plan itself has its merits, Tierney said California leaders lacked the political will to make it happen, at least for now. “For the UC to do this is not simply a board decision. The governor would weigh in, the legislature would weigh in, and all of a sudden this becomes a political process. Unfortunately the decision-making apparatus right now is not prepared to make significant decisions like this."

He added: “Is it possible that a discussion like this could happen and in five years it would be implemented? I wouldn’t reject that out of hand.”

Tierney said it was a "tragedy" that what passes for educational policy in California is a sustained exercise in budget cutting, but he doesn't see that changing any time soon.

Louis Lavelle
Associate Editor
Bloomberg Businessweek