Michigan plan promises to cover college tuition, but students must ‘pay it forward’

BY Margaret Myers  March 19, 2014 at 4:27 PM EST
A new plan proposed by Michigan legislators would create a pilot program to send low and middle income students to college for free, as long as they promise to pay into the program with a percentage of their post-graduate incomes. Image by Mehmed Zelkovic/Getty Images

A new plan proposed by Michigan legislators would create a pilot program to send low and middle income students to college for free, as long as they promise to pay into the program with a percentage of their post-graduate incomes. Image by Mehmed Zelkovic/Getty Images

Higher education doesn’t come cheap, but legislators in Michigan have proposed a creative solution for financing college tuition — make it free. That’s the first step. Second step: require the student to “pay it forward” by contributing a fixed percentage of their post-collegiate income into a fund that would help aid future college students.

The proposed bill would create a pilot program with the goal of removing financial barriers to higher education like crushing student loans and high interest rates, said state Rep. David Knezek, a democrat who helped introduce the legislation in February. The plan would secure $2 million in start-up money and involve 200 low and middle-income students.

Here’s how it works: in exchange for a “free” education, a student would be required to pay a fixed percentage — 2 percent for community college students and 4 percent for public university students — into the fund for five years for every year they attended school under the program. So a student who attends the University of Michigan for four years would pay into the program for 20 years.

“The only thing free about this is it is interest free,” said Knezek. “You go into the program and as soon as you have a job and are above the federal poverty line, you start paying.

Students also must maintain a good GPA and the program caps the number of years a student can participate — three years for a community college student and five years for a university student.

John Burbank, executive director of the Economic Opportunity Institute in Oregon, told the Detroit Free Press that this is a simple mechanism for students to be able to afford college.

“The percentage you’d have to pay is predictable and predetermined. You don’t have to worry about interest rates fluctuating. It’s all locked in.”

But of course there are some disincentives for joining the program. A student who expects to do well in the labor market might not want to risk losing a percentage of his or her income for a fixed period of time.

“As a result, those who expect to earn a lot won’t participate,” Susan Dynarksi, a professor at the University of Michigan, told the newspaper. “If the future starving artists flood into pay it forward and the future engineers shun it, the program will spiral into insolvency.”

Americans have more than $1 trillion in student loan debt. PBS NewsHour’s Making Sense team has reported on the ever-growing student debt issue and what it means for new graduates.

The bill is working its way through the Michigan legislature, but there is no scheduled hearing yet.