A fresh approach to financing higher education is gaining interest in Olympia. Called Pay It Forward (PIF), it would cover upfront tuition costs of public colleges and universities in Washington, in return for the student paying a fixed percentage of their income for a fixed number of years post-graduation. Three different PIF bills have been proposed in the state legislature, but none have made it past committee. Supporters argue PIF would provide much-needed financial support to students – increasing the affordability and accessibility of higher education while decreasing student debt. Opponents claim PIF has too many uncertainties and drawbacks for it to be a worthwhile investment and that students would be better off receiving more funding from existing programs.
If successful and implemented on a large scale, PIF could reshape how Washington students finance their in-state public university or college tuition, but start up costs can be quite steep and skeptics are vocal.
State Divestment and Student Debt
At a time when global competition suggests the need for greater participation in and funding of higher education, Washington finds itself with no money to spare. There has been a dramatic state divestment from public higher education accompanied with rising tuition costs and disappearing access to state financial aid. Matters became worse in early 2012 with the State Supreme Court’s McCleary ruling to increase funding to K-12 education. According to the Office of Financial Management, the legislature will be responsible for finding an additional $3.2-$4.5 billion per biennium over the next six years for K-12 education. Higher education could take a big hit as a result, leaving Washington families to foot the higher tuition bills.
In the 2013-15 Washington State budget, out of $81.8 billion, public higher education received $13.1 billion or 16 percent, and K-12 around $18.2 billion or 22.2 percent. Over time, tuition revenue has surpassed state funding even though total funding per full time equivalent student has remained relatively consistent.
Students in the class of 2013 graduated with an average of $35,200 of debt. In 2012, Washington State ranked 13th in average college-related debt per student at $23,293 and 15th with 56 percent holding student debt.
Pay It Forward: One Possible Approach
PIF is now being considered in 25 states only one year after Oregon passed a bill exploring creation of a PIF program.
According to Kelli Smith, Higher Education Policy Associate at the Seattle-based Economic Opportunity Institute, tapping into private funding is one option for PIF. “Washington State has a number of big industries, foundations, and companies that would be able to partner with the state to send Washingtonians to college tuition-free. Many of those would benefit directly from having a more educated workforce, and all would benefit from the larger economic benefits that Pay It Forward would provide: growing and strengthening the middle class by educating a larger portion of our citizenry, with increased upward mobility and less debt.”
Garrett Havens, Executive Director of the Washington Student Association (WSA), acknowledged that “the big questions with the PIF program are: where is the funding coming from, and is it worth funding when other programs like the State Need Grant or faculty salaries are not currently being adequately funded.” He added that if PIF is worth pursuing then “a public-private partnership is the best way to go…because state funding is not reliable.”
In the 2013-14 Washington State legislative session, there were three bills proposed:
| HB 2720 (Rep. Seaquist) | HB 2619 (Rep. Bergquist) | HB 2429 (Rep. Stonier) |
|---|---|---|
| Status: Passed House Committee on Higher Education, referred to Appropriations. | Status: Public hearing held in House Committee on Higher Education. | Status: Passed House Committee on Higher Education, referred to Appropriations Subcommittee on Education, public hearing held in Appropriations Subcommittee. |
| Description: Develop and implement PIF and select up to five high schools for participation. State legislature determine rate of expansion. | Description: Creates the state need pay it forward program to expand access to need-based aid for a larger number of qualified students. | Description: Creates the Washington Advance Higher Education Loan Program as a pilot program targeted at high demand industries. |
| Funding Source: State legislature, PIF participants, and private contributions. | Funding Source: State legislature, private gifts, grants, and endowments, and pledges of future grants and contributions. | Funding Source: Unspent money from other programs. |
State Rep. Larry Seaquist (D – 27th), Chair of the House Higher Education Committee and lead sponsor of HB 2720, said PIF could help increase qualified applicants for high demand industries who currently face the challenge of having more jobs than applicants while also helping students graduate with less debt.
As one of the sponsors of HB 2619, State Rep. Chad Magendanz (R- 5th) takes a very realistic approach to the issue. He said that in light of the McCleary decision, any idea pursuing new funding for higher education will unfortunately be a non-starter in this upcoming session, which is why he believes incorporating PIF into the already existing State Need Grant holds the most leverage.
State Rep. Monica Stonier (D – 17th), Vice Chair of the House Education Committee and lead sponsor of HB 2429, proposes a PIF model that would establish a state loan program with interest rates lower than federal loans. She said this bill would target students who don’t qualify for need-based financial aid but cannot afford to attend college without financial assistance, specifically for STEM related disciplines. Stonier estimated a state loan program would need $2.5 – $3 million to fund 300-500 students, which could be allocated from unspent dollars from aerospace, workforce training or other programs.
All three of the bills seek to create a self-sustaining and potentially profitable program, but the initial estimates for the Oregon model put startup costs at $9 billion, a steep barrier to entry that will slow momentum in cash-strapped Olympia.
Havens said that “students are cautiously participating in PIF discussions” because they recognize that “PIF provides potentially great benefits in increased access to higher education and decreased student debt”, but are also “aware of potential drawbacks”.
State Rep. Ross Hunter (D – 48th), Chair of the House Appropriations Committee, said PIF made no headway there “because it is not a good idea.” He said, “In order for [PIF] to work, someone has to pay for it” at a time when the State Legislature does not have adequate funds available. He added students likely to become higher wage earners might opt out of PIF, making it more challenging to self-sustain, and that the infrastructure necessary to track and collect students’ income post-graduation would be expensive. Hunter said a better option than PIF is to increase State Need Grant funding, lower tuition, and focus on filling the demand for engineering, computer science, various masters programs, and research positions.
Hunter is highly skeptical of relying on private contributions to help initially fund PIF. He said “private contributions are not a viable solution because they do not raise a lot of money.” Hunter would be happy if private funding reached “$40 million, but that is not close to adequate”, he said.
Starting with the 2015-17 biennium, the state budget process will become even more challenging as a result of the gargantuan challenge posed by the McCleary decision. The full range of stakeholders will be watching closely as funds are appropriated in this upcoming budget session. Near-term prospects for PIF legislation are unclear, but deep concerns around public higher education accessibility and affordability in Washington give the state every incentive to explore all viable funding options.
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Emphasize Affordability, Access, and Accountability in Postsecondary Education – PLAN Washington Education Strategy #2.