Oregon’s Step Towards Debt-Free Degrees

I got a check from the U.S. Treasury in the mail this week. It was both a surprise and a mystery. It was a surprise, because I wasn’t expecting any checks, least of all from the federal government. At first the reason why the government sent me a check was a mystery. It turned out the mystery went all the way back to my college days.

I was reminded of my (as yet un-deposited) check when I read the news that Oregon has taken a step towards making tuition free at the state’s public universities.

On college campuses across the United States, the eternal optimism of youth has been throttled out by a fear of crushing student debt. That’s certainly the case in Oregon, where the cost of tuition has soared as public funding for higher education has declined.

But the state Legislature this week approved an idea that might ease the economic dread for future philosophy and art history majors. The concept – called Pay It Forward – calls for students to attend public universities tuition free and loan free. In exchange, students would have 3 percent deducted from their post-graduation paychecks for about a quarter-century. The money would go into a fund to pay for future students.

The bill, which passed unanimously and is expected to be signed this month by Gov. John Kitzhaber, directs the state’s Higher Education Coordination Commission to develop a Pay It Forward pilot project for consideration by the 2015 Legislature. One question that must be resolved is how to fund the program’s start-up costs, estimated at $9 billion, since the initial students who attend tuition-free would be years away from entering the labor force.

Though the timing was coincidental, the bill won final approval on Monday, the same day that federal student loan interest rates doubled from 3.4 percent to 6.8 percent.

I only wish something light that had been in place when I was in college.

That brings me back to the check I got in the mail this week. I knew before I opened it that it was a check from the federal government, because recognized the familiar greenish paper used for such checks. I opened it to find the government had cut me a check for $12 and some change.

The mystery was why would the federal government would send me a check, let alone for such a small, unusual amount. Then I saw read the information on the check stub, and it all became clear. In a box on the check stub, after all the other information, was typed: “FED STUDENT LOAN REFUND.” It was enough to jog my memory.

More than year ago, I wrote about the experience of finally paying off my student loans at the age of 43, after going into debt to finance my education at the age of 18. That is, I paid off the federally-insured student loans, serviced, processed, and collected by SALLIE MAE. Those loans comprise the bulk of my student loan debt.

However, I still had a small direct loan from the federal government, that I’d used to get me through the very last part of my senior year of college. I wouldn’t have graduated without it. Around the time I paid off my SALLIE MAE loans, I set up a direct withdrawal from my checking account to take care of the federal student loan.

I then forgot about the automatic withdrawal, perhaps because I was no longer receiving bills and payment envelopes in the mail. I guess I must have overpaid via automatic withdrawal, to the tune of a little over $12.

In the quarter century or so it I spent acquiring and paying off my student loans, plus the interest that accrued over the years — including the times when I employed deferments and forbearances, because of economic hardship — I’m sure I ended up paying far more than 3 percent of my paycheck. I attended a public university. If something like what’s been proposed in Oregon had been in place when I went to college, it would have saved me thousands of dollars over the years.

I think I’d have felt good about having 3 percent of my paycheck deducted, in lieu of a loan, if I knew that it would go into a fund to pay for the education of future students, rather than padding the pockets of private lenders, and graduating without a huge debt hanging over my head. It not only eliminates student-debt, but it reinforces the idea that we all have something invested in more people having access to higher education.

This week Congress let student rates double, and went home for the 4th of July holiday. While Members of Congress spent the holiday glad-handing with donor and constituents at patriotic-themed cookouts, millions of students had their debts increase practically overnight, ostensibly for the purpose of deficit reduction.

If the Oregon bill is signed into law, as seems likely, future students in Oregon will have access to debt-free degrees, and no student loans, or interest rates subject to increase as If Congress lacks the political will to do anything about it. Here’s hoping more states will follow Oregon’s example.