Pay-it-forward college financing policies examined in new study

October 4, 2017, University of Illinois at Urbana-Champaign
Pay-it-forward financing programs could have differing effects on college access and voter support for tax subsidies, depending on how individual voters fare economically, suggests a paper co-written by University of Illinois education professor Jennifer Delaney. Credit: L. Brian Stauffer

Pay-it-forward college financing programs that enable students to pay tuition upon departure rather than entry may make college more accessible to greater numbers of students in the U.S., a new analysis suggests.

And despite some critics' fears, PIF programs could increase - rather than erode - for higher , say the researchers, higher education finance expert Jennifer A. Delaney and co-author Dhammika Dharmapala.

In a paper published in the journal Contemporary Economic Policy, Delaney and Dharmapala used a theoretical model to examine how public funding for higher education might be affected if U.S. colleges and universities changed from an upfront tuition model to PIF programs that allowed students to pay for their education after graduating and obtaining employment.

Delaney, a professor of education at the University of Illinois, and Dharmapala, a professor of law at the University of Chicago, examined two types of potential PIF policies - deferred tuition programs and income share agreements.

Deferred tuition programs, which are common in other countries, generally take the form of income-contingent loans that students begin paying back upon leaving and entering the workforce.

Income share agreements are financing contracts in which students agree to pay a percentage of their earnings for a predetermined period of time after graduation. These agreements typically cap participants' repayment period at 10 years and don't charge interest.

Delaney and Dharmapala compared the potential impact of deferred tuition and income share programs on college access and voter support for taxes that subsidize higher education. Their analyses assumed a theoretical national PIF system funded by the federal system that currently supports the federal loan .

Since 2012, at least 24 states, including Illinois, have considered PIF programs, according to a report by the Illinois Student Assistance Commission. Some states, such as Ohio, looked at deferred tuition programs, while Florida and other states considered income share arrangements.

The scope of the PIF programs considered - such as whether they would apply to all public institutions within a state, to tuition only or the full cost of attendance - varied widely from state to state, according to the Illinois Student Assistance Commission's report.

Despite a flurry of proposed legislation, no state started a PIF program, Delaney and Dharmapala wrote, and critics' arguments against PIF policies have been as forceful as those of supporters who favor them.

By removing the financial barrier of upfront tuition, a deferred tuition model would promote college access, making attendance nearly universal, the researchers suggested.

However, the impact of income share agreements would be more complicated, the researchers found. While these agreements would increase access under many conditions, they also could deter people from attending college if the incremental gain in income they expected from a college degree was relatively small and their anticipated increase in taxes was relatively large.

Critics of PIF programs contend that PIF legislation would further erode public funding of postsecondary education, which has been trending downward over the past two decades.

"While PIF critics have suggested that subsidy levels would absolutely go down, we didn't find that," Delaney said. "In some cases, subsidies would go down, while in others they'd stay the same or increase."

Voters' likelihood of supporting higher taxes to subsidize postsecondary education would depend on whether their personal incomes increased or decreased compared with the societal median income, the researchers' model suggested.

"One important takeaway from our work is that the extent to which higher education either increases or decreases income stratification really matters for the level of subsidy provided to higher education in the political equilibrium," Delaney said.

"If only wealthier individuals can get into and pay for college - that matters for how people vote in supporting ," she said. "If college attendance solidifies structural income inequality in society, then we might see decreases in subsidies. But if college attendance narrows disparities and promotes upward mobility, subsidy levels don't necessarily go down - and they may even increase."

Since public investment in postsecondary education won't necessarily be undermined, concerns about subsidy levels should not derail discussions about implementing alternative tuition policies, the researchers wrote.

Explore further: Guaranteed-tuition laws inflating college costs, study finds

More information: Jennifer A. Delaney et al, "PAY IT FORWARD" AND HIGHER EDUCATION SUBSIDIES: A MEDIAN VOTER MODEL, Contemporary Economic Policy (2017). DOI: 10.1111/coep.12222

Related Stories

Recommended for you

Tiny 'water bears' can teach us about survival

March 20, 2019

Earth's ultimate survivors can weather extreme heat, cold, radiation and even the vacuum of space. Now the U.S. military hopes these tiny critters called tardigrades can teach us about true toughness.

A decade on, smartphone-like software finally heads to space

March 20, 2019

Once a traditional satellite is launched into space, its physical hardware and computer software stay mostly immutable for the rest of its existence as it orbits the Earth, even as the technology it serves on the ground continues ...

Researchers find hidden proteins in bacteria

March 20, 2019

Scientists at the University of Illinois at Chicago have developed a way to identify the beginning of every gene—known as a translation start site or a start codon—in bacterial cell DNA with a single experiment and, through ...

Turn off a light, save a life, says new study

March 20, 2019

We all know that turning off lights and buying energy-efficient appliances affects our financial bottom line. Now, according to a new study by University of Wisconsin-Madison researchers, we know that saving energy also saves ...

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

not rated yet Oct 04, 2017
Another dodge.

But we can expect this policy to be welcomed --on a limited basis, at least-- by Academe, Politicians, and Public alike.

At least until --years later, after the problem has balooned out of control-- a popular outcry surfaces about the essential unfairness of what should clearly be apparent to everyone:
This will inevitably, i.e. --right out of the gate-- produce rapidly inflating tuition, fees, and supplies costs.

Imagine what kind of life you could look forward to after graduating from a four year degree program, with probably a minimum of 70-80K student debt.

Uber's not going to even make a scratch in that.

Especially since Uber will have, by then, replaced human drivers with self-driving vehicles.

Just another filthy NeoLiberal FreiMarket exploit.

I condemn the policy wankers that even had the temerity to market this horseshite.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.