College tuition is rising faster than inflation ““ an alarming trend that desperately calls for an alternative funding model for American higher education.
On Wednesday, Chris LoCascio , editor in chief of the UC Riverside Highlander and president of the organization Fix UC, presented one of these alternatives at the UC Board of Regents meeting.
His plan, The Student Investment Proposal, would postpone all tuition payments for UC students until after graduation as a 20-year, five percent payment of your salary, with further discounts for taking a public sector job or working in California.
With the state as an unreliable funding partner and skyrocketing tuition becoming an obvious and unreasonable burden, this plan may just be the right answer.
The delayed payment program addresses the critical issue of student debt ““ a prevailing concern that some economists see as the next major economic bubble to burst. The most important aspect of this proposal is that it circumvents student debts while still requiring students to pay for their education ““ a win-win for the students and the university.
With rising tuition, students are seeing doors close and barriers rise. Admission to prestigious institutions is more difficult than ever and taking out necessary loans is now seen as a baited trap rather than a helpful step up. Fix UC’s proposal would seek to eliminate these risks by investing in each student with the knowledge that some will fail, but many others would pay back their share many times over.
This idea is nothing new, however, largely stemming from the idea of human capital contracts ““ an idea espoused by free market economist Milton Friedman in the 1950s and implemented in countries such as Chile, Colombia, Mexico and the United States by private investment firms.
Robert Reich, a professor at UC Berkeley, presented a similar plan to the regents in 2009.
These human capital contracts, like the Student Investment Proposal, delay tuition payments until after graduation and fix payment percentages to a student’s yearly income to prevent burdensome student loan debt.
Whether you see education as a privilege, a public good or even both, education has proven to economically enhance individuals’ lives. Historically, college graduates have had higher median salaries than peers without college degrees. So why not make the investment?
But let’s not get ahead of ourselves. If we want to fundamentally reform the way California students pay for college, we must tread carefully.
Switching to a delayed, fixed-income payment leaves a complicated transitional period when there is a loss of upfront tuition revenue that currently subsidizes the functioning of the university and even the tuition of others.
By losing this revenue, the UC would potentially have to borrow substantial sums of money hoping that future income payments would cover the loss of current revenue ““ that is, if the banks are willing to back this investment.
However, the proposal does plan to begin the transition period by only covering students already under the Blue and Gold Opportunity Plan until acquiring enough capital to begin covering other students.
Since students under the Blue and Gold Opportunity Plan already do not pay tuition, money used for financial aid could be recovered and used elsewhere, while money from post-graduation contribution increases until ultimately surpassing revenue from tuition. The proposal states that this process would take seven years.
Aside from transitional difficulties, some argue the proposal faces incentive issues. Because payments are proportional to income, students would not have to make any payments if they had no income. After graduation, students would have no debts to repay and less incentive to find a job, especially if one has substantial family money or can live off the salary of a spouse.
But life doesn’t end after college and most, if not all, want a well paying career in order to raise a family and lead a comfortable life. If anything, this proposal enables students to take essential public sector careers after college without the burden of debt and with the added incentive of decreased fixed income percentage, before taking a more lucrative job afterward.
The most pervasive issue with the plans seems to be the enforcement of payments from students. It is difficult to understand just how to track students who are in and out of different jobs, states and countries.
These are just a few of the kinks that need to be worked out during further deliberation. However, this plan is definitely a step in the right direction as made apparent at the regents’ meeting on Wednesday.
“President Yudof was very impressed and our budget people are going to have a look at it,” said Dianne Klein, spokeswoman for the UC Office of the President.
It is exciting to finally see student involvement and the regents seemingly taking a student plan seriously ““ a trend that can hopefully continue into the future.
Do you support the Student Investment Proposal?
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