(MoneyWatch) Can you imagine attending college without paying tuition or taking out a single college loan?
For millions of college students in Oregon, this could soon become a reality.
Last week, the Oregon legislature unanimously passed a bill that could lead to students attending one of the state's seven public universities without incurring any upfront costs. In what proponents are calling a pay-it-forward model, students would agree to designate a small percentage of their future income to repay the state for their education. Gov. John Kitzhaber is expected to sign the measure into law shortly.
For the plan to work, supporters have projected that former students would have to contribute about three percent of their income during a 24-year repayment period. Graduates using this social insurance program would reimburse the state for their bachelors degrees through payroll deduction.
According to estimates, a student whose adjusted gross income over 24 years was $500,000 would ultimately pay $15,000 for his or her bachelor's degree. Someone earning $2.5 million over the same period would pay $75,000.
Over time, advocates of this program say, it would create a stable funding stream for public education in the state. Initial funding would be needed until enough college graduates are repaying their loans.
The approved legislation specifically directs the state's higher education coordinating commission to create a Pay-It-Forward pilot program.
According to the Oregon University system, students in the state who took out federal student loans owed an average of $24,616. The average debt load for undergrad borrowers nationwide is $30,000, according to Mark Kantrowitz, a financial aid expert and the publisher of college education resource site Edvisors.
The pay-it-forward approach is not new as way to fund college education. The bill, which originated with the Economic Opportunity Institute, a nonprofit group in Seattle, is based in part on a model used in Australia. Last year students at the University of California Riverside also created an organization called UCFix to promote a similar idea.
According to the Economic Opportunity Institute, legislators in other states including Pennsylvania, New York, Vermont and Washington have expressed interest in the concept.