Lawmakers in the state of Michigan are working on a plan that proposes an alternative way for students to pay for college without traditional tuition fees. As students of this generation are almost drowning in tens of thousands of dollars of student debt, there poses a problem of repaying that money and the time required to do so.
Called the “pay-it-forward” tuition plan, the legislation allows students to pay a fixed percentage of their future income for a set number of years to a fund specifically created for college tuition. What makes this fund special is that graduated students aren’t paying for their tuition, they are affording future college prospects an opportunity to go to college.
The Detroit Free Press reported that along with Michigan, 20 other states are considering various versions of the same plan, however, Michigan is the closest to passing it and would serve as a pilot program.
For Michigan’s postgraduates, the plan would require them to pay a fixed 2 percent of their post-college income for community college students and 4 percent for university students. Democratic state politicians believe the plan will be a positive way to afford more students the chance of gaining a higher education without putting them into dire financial straits.
“The goal is to remove every financial barrier to high education,” said Michigan state Rep. David Knezek D-Dearborn Heights. “We’ve increasingly placed the financial burden of college on the back of students. This is a no-interest plan that allows you to pay back as you go and as you can afford it. It takes the monkey off the student’s back.”
After the state primes the fund with $2 million in start-up cash, which will apply to 200 students, repayment from a small portion will continuously grow the fund over time. A $30,000 a year salary would equal to about a $100 a month payment.
American college students are in over $1 trillion of debt, and that amount is on a steady rise. Students only owed about $250 billion in aggregate debt as of 2003. Eleven years later, the amount increased 300 percent to $1.08 trillion. The Institute for College Access & Success found that 70 percent of students graduated with loans, and the average amount owed was about $30,000. And the amount lended is outpacing the amount paid back.
Delinquencies on payments are steadily increasing as they increased 11.5 percent by the end of 2013. Economists says that the rising number of account delinquencies can be attributed to the increasing cost of college tuition. As of 2011, tuition increased 8.3 percent, doubling the rate of national inflation. Along with underemployment of college graduates at a low point, it has become increasingly difficult for students to pay back their loans.
Pay-it-forward plans appear to be a helpful alternative to the current state of student financial issues. Underemployment, increasing tuition, market inflation, and a shaky economy have proven difficult obstacles for student to hurdle in the face of insurmountable amounts of debt.