Thursday, July 25, 2013

Can Oregon's "Pay it foward" tame the higher education cost monster?

While “Pay it forward” is an interesting and innovative thought experiment in the context of funding for higher education, I am afraid that it will not solve the problem of the ever increasing costs associated with earning college credentials.

To begin with, “Pay it forward” is something like the social security idea, but in reverse.  

With social security, we contribute into the system in order to pay the current beneficiaries, with the understanding that we, too, will be able to collect those same benefits upon gaining eligibility decades later.  

With “Pay it forward,” college-attending students will be able to collect the benefits first, and then contribute to the system for twenty years.

Such schemes require redistributing money by collecting from one group in order to pay another group.  Fairness, or unfairness, in any redistribution, depends on the beholders and their values.  

For example, in the current public higher education system, where taxpayers pay for a portion of the college expenses, those who choose not to attend college do not benefit from this redistribution.  Given that the income levels of families is a pretty good proxy to estimate the probability of whether or not students will attend college, and complete the degree requirements, the current system is quite regressive in how it ends up subsidizing middle and upper income families.

Similarly, the “Pay it forward” scheme will have its own set of unfairness.  The repayment, for all practical purposes, is a three-percent income tax on top of all the other income and payroll taxes.  This means that the cost of higher education will not be shared equally and will, in effect, mean that high income earners will end up subsidizing those who earn considerably less.  

Further, while female students outnumber males at colleges and universities--it is roughly a 60/40 split at Western oregon University, where I teach--a significant percentage of women opt to be homemakers after they complete their formal collegiate education, at both the low and high ends of the family incomes.  It is not clear how those who choose to be non-wage earners will pay it forward and, if they do not pay, then the cost of their education will have to picked up by those who are wage-earners?

Also, the “Pay it forward” system could potentially lead to the state government getting out of the funding process altogether.  

As competition for its budgetary resources increase, lawmakers will be tempted more and more to set aside money for the K-12 system, or the criminal justice system, while reducing the funding for higher education other than to stand as a guarantor to the “pay it forward” funds.

All these troubling questions aside, the “Pay it forward” idea does not get into the fundamental reason behind such out-of-the-box proposals-- for decades now, the cost of higher education has been increasing at rates that significantly exceed inflation.  

”Pay it forward” is merely a proposal to pay for the costs, without measures to restrain further increases.  It will mean that colleges and universities might not be compelled to innovate, and can, instead, continue to spend money on athletics, on student life bureaucracy, on fancy dormitories, or on esoteric topics that fit the faculty’s fancies, while worrying even less about the cost dimension, and with even less taxpayer oversight than before.

I hope that the pilot project will address these and more issues.  Else, similar to how we are now discussing the budgetary issues related to social security, future generations will be burdened with the obligations of “Pay it forward.”

Update: a slightly edited version of this was published as an op-ed in the Statesman Journal (September 1 2013)


Ramesh said...

"Pay it forward" is a daft idea. As you observe, its just another form of income tax, couched in flowery language. And it might not please the residents of the Great State, but Oregon is not a country. People educated outside the state will come and live in Oregon and the reverse will be true as well. Why should this form of "redistribution" be fairer than any other form of redistribution.

The problem that you guys don't want to tackle is cutting down the cost. You have eloquently argued before that non educational activities like sport must simply be stopped. Equally your "assets" including Professors must be sweated. In the "real world" everybody works 50 hour plus weeks. Cut the staff by half., make everybody work 60 hours, give them a 25% raise, cut all fancy facilities, stop courses like Anal obsession of prehistoric man" and all will be well :):)

Sriram Khé said...

I tell ya, if not for you agreeing with me most of the time, I would worry myself to death that I am the nutcase who doesn't understand why others are so eager about some bizarre ideas. At least now I have another inmate in the cuckoo's nest ;)

I cannot believe that universities are given a free pass when it comes to controlling costs, and taxpayers are delighted that they have come up with a way to pay for the costs. Didn't a few people ask a simple question: that paying won't be the real hassle if only the costs hadn't gone up this much? And, what if costs continue to go up, now that we have a system to pay it forward?


Why am I thinking like this when I am supposed to enjoy my summer? What is my problem? Help!!! ;)

Ahem, for all you know "Anal obsession of prehistoric man" is a real course somewhere. And, for all we know, prehistoric man had an anal obsession? haha

Most read this past month