Oregon's 'Pay It Forward' plan tackles loan debt

• Portland State University students%27 idea leads to action from state Senate
• Oregon Rep. Michael Dembrow hopes the plan will become a model by which other states can restructure their tuition plans

While Congress debates student loan rates in Washington, the state of Oregon is fighting its own battle to solve the student debt crisis.

Oregon's Senate unanimously passed a bill earlier this month creating a committee charged with developing a pilot program called "Pay It Forward, Pay It Back." The program allows students to attend public and community colleges tuition- and fee-free, as long as they promise a fixed portion of their yearly salaries after graduation to their alma mater.

Sami Alloy, campaign manager of the Oregon Working Families Party, which championed "Pay It Forward," said the plan will help graduates get out of student loan debt estimated to be more than $1.1 trillion.

"The student debt crisis is causing an unsustainable drain on our recovering economy," Alloy, a 2011 graduate of Portland State University, said. "It's hampering graduates' ability to invest. Since Congress failed to act, we had to get creative at the state level."

The idea for "Pay It Forward" arose out of a Portland State University capstone course called "Student Debt, Economics, Policy and Advocacy."

The idea drew the attention of state lawmakers, who created House Bill 3472.

In support of the legislation, PSU president Wim said, "In PSU's Capstone courses students from a variety of majors and backgrounds work as a team, pooling resources and collaborating with faculty and community leaders to understand and help solve some of the real problems of our community. Pay It Forward is an excellent example of this engaged scholarship in action."

Under the plan, students would promise .75% of their yearly income for every year they attended school -- for example, a typical four-year degree would come with a 3% rate. The graduates would make fixed payments, waived in times of unemployment, for 20-25 years.

Alloy said that "Pay It Forward" is less burdensome on graduates than loans: payments don't carry interest or affect graduates' credit scores.

Oregon Rep. Michael Dembrow, (D-Portland) who proposed the legislation, said that he hopes the plan will become a model by which other states can restructure their tuition plans.

Morgan Benham, a communication studies senior at Sam Houston State University, said that she would be on board with the program if it expands nationwide.

"3% of my income doesn't seem bad when I am salaried," Benham said. "Hourly work during college sometimes does not cover all living expenses. Between being a poor college student now or paying off the same amount over time and being able to live more comfortably, I would choose living more comfortably now and paying off college over time."

Cameron Taylor, a sophomore liberal arts student at the University of Phoenix and the Community College of Allegheny County, said such a program would provide him with more time to focus on school instead of working to pay tuition.

"I'm paying for school on my own," Taylor, 19, said. "I work two or three jobs just to pay for it, and if I had just slightly more help then it would allow me to focus on my studies, take more classes and possibly have more time to search for a suitable career choice."

Not all students like "Pay It Forward," however.

University of Texas - Austin chemical engineering junior Bryan Nguyen said he wouldn't opt in to the plan if it came to Texas, saying that too many factors could affect paying back the loan.

Joseph Backlund, pharmacy graduate student at UT - Austin, said he hates the idea of owing money.

"I would absolutely not do this," Backlund said. "Simply because I hate having any kind of financial responsibility. To expand on that, I haven't had a car payment since 2007 and I can't imagine any other way. It doesn't matter to me how large or small that 3% turns out to be. For me, anything that I 'owe' is a burden."

Alloy said that students in Oregon are excited about the plan.

"Students and families are really mobilizing behind the idea, and we've already had a ton of inquiries from students and parents about when we're making the program available," Alloy said.

The pilot program will begin in 2015, when legislators will vote again to decide whether to make the program permanent, Alloy said.

Alloy said as long as they can keep the momentum going, she's certain the program will be successful.

"This victory in Oregon is a great example of students showing leadership regarding the issue of student loan debt," Alloy said.

"Even though the students who helped pass this bill will be long gone from college when it goes into effect, it's a great example of how the millennial generation is socially engaged and how much they care about social justice and economic welfare for future students."

Katey Psencik is a summer 2013 Collegiate Correspondent.