Today students are graduating from college with a mortgage on their hands. Total debt on student loans has surpassed total credit card debt and has reached beyond $1 trillion.

The cost of going to college is climbing exponentially; to make matters worse, public funding has plummeted since the recession, as states don’t have as much revenue and had to start cutting. To compound the problem, on July 1st interest rates on government tuition loans doubled from 3.4% to 6.8%.

How Did This Happen to Begin With?

Since 1978 the rise in college tuition has increased 7.45% per year, approximately triple the general inflation rate. This equates to a four-fold increase over 20 years.

If the same increase applies over the next 20 years, we’re looking at the annual cost of private college tuition soaring to $250,000 from today’s annual cost of $60,000.

A Fix

While we may not be able to hold down the cost of tuition, the Oregon legislature has conceived a plan called, “Pay it Forward, Pay it Back.” It is based on successful plans that have been implemented in both the UK and Australia.

Like any other payment plan, this plan allows students to pay back tuition over a period of time; during that time, the student will not only pay back their own tuition, but will also fund loans for future students, thus the name. Based on a typical graduate with an average income, the promoters of the plan figure the student’s tuition will be paid in the first 20 years, with the remaining four years of payment to fund the future.

Here are the details:

  • No money down
  • The student pays back 3% of their income for the next 24 years
  • If the student doesn’t graduate, they’ll pay a portion depending on how long they were in school


One of the weaknesses of the plan is that it could attract students that go into low-paying jobs. The cost of their tuition will be the same as anyone else, but the amount they pay back over the 24 year period will be substantially lower than say, someone who goes onto law school. Furthermore, students with the highest earning potential may figure they would be better off paying on a traditional loan.

Do you think the plan proposed by the Oregon legislature is a good idea?