Education payments being based on income.

[austrianecon]

How is this fair or a good idea is beyond me.

3% of your salary over the next 24 years? So assume you go to college for 4 years. So you start working at age 22/23. You are gonna pay 3% of your salary to the State until 46 or 47 years old, before income and local taxes. Just using what the median salary for a Bachelor Degree in this calculation ($56,000)..and they make that for the next 24 years. They would pay $40,320 back. Now there are variables in the true cost of going to college such as do you go to a community or junior college first or do you go straight to a 4 year college. Avg cost to go to 4 year University in Oregon is $21,766 (so $87,000 for 4 years.

The State would have a short fall of $46,680 per student assuming the $56,000 annual salary of a bachelor degree.

 

[imagep]

With people's education often running more than $100K, this seems like a plan for long term insolvency. With interest, a 24 year repayment plan will cause the debt holder to pay a lot more than just the cost of their education. If the average person attends college at age 20, they will be approaching mid-life by the time it's repaid. Do we really want individual debt to hang around for so long?

I agree that we need flexible repayment plans, but this seems a bit outrageous. We will still end up loaning more money than can ever be repaid.

We aren't really lending money, we are providing services, which the consumer agrees to signing a deferred payment plan which is based on his ability to pay and the benefits that he received from such services. This plan actually reduces that burden on the taxpayer as it directly bills the cost of government services to the individuals who receive such services. Not a penny of taxpayer money is going to the program, with the possible exception of some startup funding (the article clearly indicated that most of the startup funding was going to be borrowed money, and that the students payments would eventually payoff the borrowed seed money). Once the initial borrowed seed money is repaid, the system becomes more or less self funding. thus, the overall state tax rate could actually be reduced, or alternatively, funds could be diverted to infrastructure or whatever other needs that the state has.

By the way, the cost of tuition (excluding room and board) at most state colleges, for four years of colleges, is between $40k and $50k. Now do the math, if the typical college grad averages $60k/yr income in stable dollars, the 3% repayment over 24 years would work out to about $43,200.

 

[austrianecon]

Exactly. Those who complain that the 47% pay no taxes yet "consume the most government services" should LOVE the idea. It's rare that an idea is embraced by liberals and conservatives alike. Of course I imagine that many conservatives will find something against the idea, just because they want to oppose liberals.

This doesn't change the equation at all. If a program like this took place for me while I was attending college, I would have paid $100,000 plus back only 8 years into the 24 years required to pay. Just assuming my salary stayed the same today for the next 14 years.. I would be paying another $200,000 into as well. So I'd be paying a total of $300,000 for an education that cost $75,000 at the time. So I'd be paying 4 times more for my education compared to a person who made less then me.

 

[austrianecon]

By the way, the cost of tuition (excluding room and board) at most state colleges, for four years of colleges, is between $40k and $50k. Now do the math, if the typical college grad averages $60k/yr income in stable dollars, the 3% repayment over 24 years would work out to about $43,200.

Room and Board has to be included, your first year of a 4 year college typically requires you stay on campus. Then you have to assume cost to rent off campus and food for the next 3 years.. which in a college town isn't cheap. Paid $1,500 a month in State College back in 2002-2004 and split the cost with 2 other room mates. So $500 a month or roughly $6,000 a year.

 

[imagep]

How is this fair or a good idea is beyond me.

3% of your salary over the next 24 years? So assume you go to college for 4 years. So you start working at age 22/23. You are gonna pay 3% of your salary to the State until 46 or 47 years old, before income and local taxes.

Correct. I paid my last student loan payment the same month that I turned 48. Sounds about right to me.

Just using what the median salary for a Bachelor Degree in this calculation ($56,000)..and they make that for the next 24 years. They would pay $40,320 back.

Correct. Thats about the average cost of 4 years of college at a state university.

Now there are variables in the true cost of going to college such as do you go to a community or junior college first or do you go straight to a 4 year college. Avg cost to go to 4 year University in Oregon is $21,766 (so $87,000 for 4 years.

The State would have a short fall of $46,680 per student assuming the $56,000 annual salary of a bachelor degree.

No. For 2012 the cost of tuition at the U of Oregon was just $9,258 according to 2012-2013 Cost of Attendance | Office of Student Financial Aid and Scholarships. I believe your figure includes room and a meal plan. I would assume that the deal offered by the state doesn't include room and board. Room and board however could be covered by federal student loans or grants or scholarships or family contributions.

 

[imagep]

Room and Board has to be included, your first year of a 4 year college typically requires you stay on campus. Then you have to assume cost to rent off campus and food for the next 3 years.. which in a college town isn't cheap. Paid $1,500 a month in State College back in 2002-2004 and split the cost with 2 other room mates. So $500 a month or roughly $6,000 a year.

There is no need for room and board to be included. Different students have different costs of room and board, and everyone has to have housing and food regardless of if they go to college or not. I figure those things are personal decisions and the amount spent on those things will vary widely from student to student.

Most colleges these days have a variety of meal plans ranging from 5 meals a week to 21 meals, and each meal plan cost a different amount. Last year my son didn't even get a meal plan because it was actually cheaper just to pay for his meals individually, or cook in his privately owned off campus apartment than to have a meal plan.

Anyhow, room, board, and incidental costs of living can be covered with traditional student loans, family contributions, work study, grants, scholarships, etc. There is certainly no neccesity for them to be covered in the 3%/24 year deal.

Notice that above I mentioned that conservatives should like this plan because it only taxes those who receive benefits. And that I also suggested that I expected some conservatives to make up a reason for not liking it just so that they can oppose liberals. I think you proved my case.

 

[austrianecon]

Correct. I paid my last student loan payment the same month that I turned 48. Sounds about right to me.

For you.. I paid of my loans in 5 years. So it's different for everyone.

Correct. Thats about the average cost of 4 years of college at a state university.

No, it's not.

No. For 2012 the cost of tuition at the U of Oregon was just $9,258 according to 2012-2013 Cost of Attendance | Office of Student Financial Aid and Scholarships. I believe your figure includes room and a meal plan. I would assume that the deal offered by the state doesn't include room and board. Room and board however could be covered by federal student loans or grants or scholarships or family contributions.

Then they'd have to change State policy for State ran Universities which require you to stay on campus your first year. In fact it doesn't matter what University you go to they require you stay on campus your Freshman year if you go to main campus.

And this is why this is a BAD program if the way you think that's the way it's ran. We'll pay for the education but you have to borrow from the Federal program to support yourself to go to main campus.

 

[imagep]

This doesn't change the equation at all. If a program like this took place for me while I was attending college, I would have paid $100,000 plus back only 8 years into the 24 years required to pay. Just assuming my salary stayed the same today for the next 14 years.. I would be paying another $200,000 into as well. So I'd be paying a total of $300,000 for an education that cost $75,000 at the time. So I'd be paying 4 times more for my education compared to a person who made less then me.

So what?

Ya, it might would have been a bad deal for you since you ended up being a high income earner. But for most people they would have got a fair deal, and a few would have gotten away with a bargain. But when you sign a contract, you should be fully aware of the ramifications. If you somehow knew in advance that you were going to be a high income earner, you could have chosen another option, like paying in full at the time that services were rendered, or going to a private school, etc.

So did you really average $416,666 per year in earned income for your first 24 years out of college? Thats something like 6 or 7 times the typical income for someone with just a bachelors degree. Impressive.

 

[imagep]

For you.. I paid of my loans in 5 years. So it's different for everyone.


No, it's not.



Then they'd have to change State policy for State ran Universities which require you to stay on campus your first year. In fact it doesn't matter what University you go to they require you stay on campus your Freshman year if you go to main campus.

And this is why this is a BAD program if the way you think that's the way it's ran. We'll pay for the education but you have to borrow from the Federal program to support yourself to go to main campus.

Thats simply not true. We have a very large branch of our state flagship university in my hometown, they do NOT require freshmen to live on campus unless they are from out of the area. Maybe some schools have that requirement, but certainly not all.

Regardless, the deal proposed in Oregon is only for tuition, not for room and board. A contract can include or exclude anything that the people committing to the contract mutually agree upon. Almost every decent size community has a community college of some sort. It's entirely likely that a student who could not afford to live on campus at a major university could spend his/her first year or two at a community college, then transfer to a four year university. Lots of people do it.

 

[Fisher]

There is a small private university near me that requires students to live in the dorms through their junior year if they are not married and are not living with their parents/grandparents. A lot of juniors however have their parents officially move to town even though they really don't actually live here to get around the rule. Some will buy houses when their children are freshmen and rent out rooms to other students and then sell the house when theirs graduate but at least one parent has to be in the deed so if the parents are reputable people, they will put one of each underclass tenant's parents on their deed and then have them gift their interest back when their child finishes or moves out.

 

[austrianecon]

There is no need for room and board to be included. Different students have different costs of room and board, and everyone has to have housing and food regardless of if they go to college or not. I figure those things are personal decisions and the amount spent on those things will vary widely from student to student.

Freshman are REQUIRED to stay on campus. That cost has to be accounted for.

Most colleges these days have a variety of meal plans ranging from 5 meals a week to 21 meals, and each meal plan cost a different amount. Last year my son didn't even get a meal plan because it was actually cheaper just to pay for his meals individually, or cook in his privately owned off campus apartment than to have a meal plan.

Ramen noodle meals. Been there, done that.

Anyhow, room, board, and incidental costs of living can be covered with traditional student loans, family contributions, work study, grants, scholarships, etc. There is certainly no neccesity for them to be covered in the 3%/24 year deal.

Seriously? You are gonna have an increase in demand so the price is gonna go up and a lack of work study, grant and scholarship money. So you are only left with 2 options in reality, Student loans and family contributions. Now if the point is to educate all and not just a few, subsidizes will have to be paid out to poor and middle class students as most families really can't afford providing money in this manner or they'd have to take student loans. So you are gonna pay 3% of your salary for 24 years and principle plus interest on student loans.

How does that make it more affordable, free or anything close to it?

Notice that above I mentioned that conservatives should like this plan because it only taxes those who receive benefits. And that I also suggested that I expected some conservatives to make up a reason for not liking it just so that they can oppose liberals. I think you proved my case.

If you read the link you'll find this little tid bit..

Additionally, because a universal IBR system requires individuals to pay back a percentage of their income, it ensures that graduates that go on to more lucrative careers effectively subsidize graduates that do not. So, it is (in a sense) internally redistributive, which is a positive from an egalitarian perspective.

 

[austrianecon]

Thats simply not true. We have a very large branch of our state flagship university in my hometown, they do NOT require freshmen to live on campus unless they are from out of the area. Maybe some schools have that requirement, but certainly not all.

A branch is not main campus now is it? As I said, if you spend your Freshman year and main campus you are required to live on campus.

Regardless, the deal proposed in Oregon is only for tuition, not for room and board. A contract can include or exclude anything that the people committing to the contract mutually agree upon. Almost every decent size community has a community college of some sort. It's entirely likely that a student who could not afford to live on campus at a major university could spend his/her first year or two at a community college, then transfer to a four year university. Lots of people do it.

And I didn't say that's not true. If you read my first post.. http://www.debatepolitics.com/economics/165423-education-payments-being-based-income-3.html#post1062013517.. I admit there are variables such as junior or community college.

 

[austrianecon]

So what?

Ya, it might would have been a bad deal for you since you ended up being a high income earner. But for most people they would have got a fair deal, and a few would have gotten away with a bargain. But when you sign a contract, you should be fully aware of the ramifications. If you somehow knew in advance that you were going to be a high income earner, you could have chosen another option, like paying in full at the time that services were rendered, or going to a private school, etc.

So did you really average $416,666 per year in earned income for your first 24 years out of college? Thats something like 6 or 7 times the typical income for someone with just a bachelors degree. Impressive.

Most people don't expect to make that kind of money. I lucked into the job I got after college. Then lucked into owning successful business. Because someone get's a good job or has a successful business is no reason to punish them over the long term.

Yes, as of right now I am paid $600,000 a year and get commissions and I lose half of it after taxes. My commissions are automatically taxed at 35%. If I stick at that wage for the next 14 years I will avg just above $420,000 over my working career.

 

[imagep]

Most people don't expect to make that kind of money. I lucked into the job I got after college. Then lucked into owning successful business. Because someone get's a good job or has a successful business is no reason to punish them over the long term.

Yes, as of right now I am paid $600,000 a year and get commissions and I lose half of it after taxes. My commissions are automatically taxed at 35%. If I stick at that wage for the next 14 years I will avg just above $420,000 over my working career.

Just wondering, but is it the type of job that someone can get without a college degree? Sounds like a good sales job. Business consulting maybe?

 

[austrianecon]

Just wondering, but is it the type of job that someone can get without a college degree? Sounds like a good sales job. Business consulting maybe?

No, it requires some type of degree, mainly economics or business degree. No, it's not Business consulting.

 

[JP Hochbaum]

You know what's an even better idea? Not making everyone start out their working life in debt. Education should be an investment in future generations, not something we hold them on the hook for.

I agree but this idea is a vast improvement over current conditions.

 

[JP Hochbaum]

How is this fair or a good idea is beyond me.

3% of your salary over the next 24 years? So assume you go to college for 4 years. So you start working at age 22/23. You are gonna pay 3% of your salary to the State until 46 or 47 years old, before income and local taxes. Just using what the median salary for a Bachelor Degree in this calculation ($56,000)..and they make that for the next 24 years. They would pay $40,320 back. Now there are variables in the true cost of going to college such as do you go to a community or junior college first or do you go straight to a 4 year college. Avg cost to go to 4 year University in Oregon is $21,766 (so $87,000 for 4 years.

The State would have a short fall of $46,680 per student assuming the $56,000 annual salary of a bachelor degree.

You have bad numbers.

The state would win out big time. The average tuition in Oregon for a four year degree is this:

In-state: $23,352

They would pay $40,320 back.

University of Oregon Tuition, Costs and Financial Aid - CollegeData College Profile

 

[austrianecon]

You have bad numbers.

The state would win out big time. The average tuition in Oregon for a four year degree is this:

In-state: $23,352

They would pay $40,320 back.

University of Oregon Tuition, Costs and Financial Aid - CollegeData College Profile

Not if you include housing and fees. Something that still would have to be paid for.

 

[imagep]

You have bad numbers.

The state would win out big time. The average tuition in Oregon for a four year degree is this:

In-state: $23,352

They would pay $40,320 back.

University of Oregon Tuition, Costs and Financial Aid - CollegeData College Profile

that cost of attendence is for just one year, so you would have to multiply it by 4. but it's still not really correct, as it includes far more than tuition, it also includes housing, meals, transportation, and other costs. the tuition is only like $10k/year, so with the understanding that the contract is just for tuition, it's a pretty fair deal for all parties.

 

[imagep]

Not if you include housing and fees. Something that still would have to be paid for.

No one suggested that housing and food was included in the deal.

 

[austrianecon]

No one suggested that housing and food was included in the deal.

Please.. read the article.. It'll HELP you all.

What is proposed and passed includes all fees for college as the point is to leave each student with NO debt coming out of college. The whole point is no fees paid up front but on the back end. Housing is a front end fee.

 

[JP Hochbaum]

Not if you include housing and fees. Something that still would have to be paid for.

Not by the state. This entire bill is about tuition, not housing and fees. Different thread different subject, different problem.

 

[austrianecon]

Not by the state. This entire bill is about tuition, not housing and fees. Different thread different subject, different problem.

From your link..

Oregon's legislature is moving ahead with a plan to enable students to attend state schools with no money down. In return, under one proposal, the students would agree to pay into a special fund 3% of their salaries annually for 24 years....
make college free at the point of delivery, but impose what amounts to an income surcharge tax on college attendees after they leave.

From OWFP:

Pay It Forward would allow college students to attend college tuition-free and debt-free

Oregon Legislature Unanimously Passes HB 3472 Pay It Forward » Oregon Working Families Party

The whole point of the bill and it's support is to provide "FREE" front end education to Oregon youth. Fees are included in this. Tuition costs are cheaper then housing costs so housing costs will have to be included if the point is to get students into the work force debt free because taking a student loan to pay for housing is still a debt. If you fail to realize this, that's your fault and not mine.

 

[JP Hochbaum]

Sorry Austrian but tuition free = debt free. There is no language in the bill that mentions rent free or other costs are free. I know this because I helped the people who wrote the bill.

Here is the link for the bill:

http://www.leg.state.or.us/13reg/measpdf/hb3400.dir/hb3472.a.pdf

SORRY BUT NO MENTION OF ANYTHING OUTSIDE OF TUITION OR FEES.

 

[Fisher]

I would oppose this particular bill if it came to my state. It does nothing to contain the cost of the public colleges, just the debt of some graduates. It does not scratch the surface of the more systemic problems.

http://www.nytimes.com/2010/07/10/education/10education.html?_r=0


But the trend toward increased spending on nonacademic areas prevailed across the higher education spectrum, with public and private, elite and community colleges increasing expenditures more for student services than for instruction, the report said.

The student services category can include spending on career counseling and financial aid offices, but also on intramural athletics and student centers.

“This is the country-clubization of the American university,” said Richard K. Vedder, a professor at Ohio University who studies the economics of higher education. “A lot of it is for great athletic centers and spectacular student union buildings. In the zeal to get students, they are going after them on the basis of recreational amenities.”
--------
and some other quick links:

The Rising Non-Instructional Cost of College Exemplified By University of Minnesota |e-Literate

Rising cost at Virginia