Two thoughts on Oregon’s Pay It Forward tuition experiment

I am not entirely sure what I think about the Pay It Forward approach to tuition for public higher education in the U.S., but I do think that the Oregon legislature passing a bill to study the idea is a a welcome spark of creativity in the ongoing debate about costs and affordability.

At first look, I am drawn to the idea for its apparent progressiveness, but it is hard to say how well, or how progressively, Pay It Forward, as proposed here, would actually work in practice. If the proposed study is well crafted and executed, and a solid pilot is recommended and launched, there should be answers to these questions in the next couple of years and perhaps some meaningful action on at least college affordability as a result, whether in the form of Pay It Forward or some other approach that might emerge from the discussion being started here in Oregon.

However, I do have two more specific thoughts on the early debate over the idea.

First, I am singularly unpersuaded by one of the central arguments being made against the concept of Pay It Forward, namely, that the approach is either unfair to or a disincentive for students intending to, and who do, enter high-paying jobs or professions after college.

Sandy Baum, senior fellow at the George Washington University Graduate School of Education, sums up this argument in a Time Business article by Martha C. White, “‘It’s a real moral hazard problem,’ she says. ‘If you have no intention of doing anything other than staying home with your kids, this is great for you. If you think you’re going to be an investment banker, you’re going to think really hard,’ and might decide not to participate with ‘Pay It Forward’ or attend a state school.” At The Atlantic, Jordan Weissmann, calls this the, “engineer problem.”

Baum’s invocation of “moral hazard”, suggests that, on one level, this is an argument about the ethics and politics of “redistributive” social policies. Where one stands on this question depends on one’s political commitments and vision of a just society. Some people will insist on seeing Pay It Forward as a system that punishes the rich, who are, implicitly, hardworking, and rewards the poor, who are, implicitly, lazy. Comparing a stay-at-home spouse to an investment banker is a framing that seems deliberately designed to make this point.

Writing as a professor, I’m thrilled by the prospect of the odd student who is not fixated on what job they’ll get after graduation. Presumably, that individual is seeking a college degree to be a more fulfilled human being, citizen and member of society and not just because they’ve been told, repeatedly, that higher education is necessary to securing, “a good job.” If it takes a few investment bankers – or a few more university professors – to subsidize that person, fine by me, and, on balance, better for my classes.

More realistically, there are very few individuals who choose to go to college without some job or career intentions, and in that case, where everyone has a job and everyone is paying back into the system, identifying “takers” and “makers” becomes less clear. I think you have to look at his issue from a particularly abstract perspective to see much of a problem with Baum’s investment banker paying more, over time and in absolute terms, than, say, a teacher or home healthcare worker.

And if you do consider the principle here in abstraction, I think that you then also have to consider the broader question of value in relationship to different educational and employment choices, and not just how much someone ends up paying back to their college or university. Does Baum really think that the well-educated stay-at-home parent contributes less to society than the investment banker? (I’m not even asking for consideration to be given to the damage that actual investment bankers have done to other people’s livelihoods when using their educations solely for their own enrichment. Imagine an ethical banker, if you want).

The other side to this argument, Weissmann’s “engineer problem”, is not so much that Pay It Forward sets up a moral hazard, but rather that individuals with high-income aspirations simply won’t like the idea of ultimately paying more than those whose job goals or prospects are less lucrative. These feelings of unfairness or resentment will lead the engineers of the world to avoid Pay It Forward schools, leaving those institutions with a revenue problem.

Unlike the moral hazard question, the “engineer problem” is an empirical matter and until there is an actual trial of Pay It Forward no one will know if this problem is, in fact, a problem. That being said, I do think that arguments like these are rhetorically powerful for many Americans, but that, in practice, most people don’t actually base many of their important life decisions, like where to go to college, solely on calculations of whether their choices will result in them coming out economically “ahead” or “behind” other people.

Studies of the effect of tax rates on both households and businesses largely suggest that these play little to no role in individual choices regarding where to live or do business. That isn’t to say that there aren’t those who will decide to move, whether themselves or their business, because of perceptions of being unfairly taxed, but as Matthew Yglesias has noted recently, even in contexts where you might expect individuals to act as rational profit-maximizers, they often don’t, choosing instead to give greater weight to other values or outcomes.

While the ability to choose a college for reasons other than cost and affordability is substantially tied to class in the U.S., this is also an intensely personal choice for many students. Closeness to, or distance from, home, where one’s friends are, or are not, going, family ties to an institution, sports and geographic allegiances, quality of academic programs, appeal of campus life and activities, are some of the more obvious factors that can and do influence where an individual might go to college in addition to cost and how to pay. In other words, and by way of example, it is hard for me to imagine an aspiring engineer from a long line of engineers, all of whom attended Oregon State, turning their back on the family legacy simply because Pay It Forward leaves a bad taste in their mouth, which is how I understand the essence of the argument articulated by Baum and Weissmann.

I first learned about the Pay It Forward proposal in the Oregon legislature from Think out Loud on OPB and on that broadcast one of the arguments in favor turns the “engineer problem” on its head. The position here is that the status quo causes students to value earning potential over other considerations when choosing a program of study and looking at options for employment after college. The result is that many individuals end up majoring in fields about which they care little and entering into jobs that might pay well, but are not very fulfilling. More particularly, individuals are dissuaded from choosing jobs and professions in socially valuable, but lower paying, fields such as teaching and social work or, even, less remunerative specialities in otherwise higher paying areas like law and medicine.

In the absence of evidence one way or another, it is difficult to say whether the status quo’s “teacher problem” is greater than Pay It Forward’s “engineer problem”, but I do think it should be noted that the proposal under consideration is not classically progressive in that the tax that would be levied on post-college income will be flat, working out to 3% annually for individuals who finish their degrees in four years. This is clearly intended to make the system appear “fair” and to garner support across party and ideological lines, but it does make Pay It Forward less progressive than it could be if there were different tax rates for different income levels. I also think that this decision has implications for my second thought.

Pay It Forward is clearly aimed at addressing the problems of student debt and college affordability, but, in regards to U.S. public higher education at least, those issues are not isolated, but are the consequences of declining funding. Simply put, rising tuition and fees, and therefore student debt, are responses to state legislators cutting support to public institutions of higher education.

My sense here is that following a Pay It Forward model for tuition is probably an excellent idea where there is an adequate baseline of funding for services and the physical plant, but that where tuition dollars are being counted on to provide that baseline, the model turns risky. This sense is reflected in the recurring question of how to pay for the first generation of students, if and when Pay It Forward is adopted. In effect, state voters or legislators will have to be willing to provide funding to the public system at a level much higher than they have been willing in order to implement Pay It Forward. The question then becomes one of how serious everyone is about the potential for the model to bring down debt and make college more affordable. Maybe the Oregon study will reframe the funding issue in a way that gets the relevant individuals thinking about funding in a realistic and productive way or maybe members of the legislature who voted for the proposal are hoping that somehow the study will provide a magic key for solving all of OUS’ financial problems. It won’t, obviously.

Even if at the end of the study process in Oregon there is a consensus that Pay It Forward would reduce student debt and make college more affordable for more people it still seems likely that no one will have the will to address the problem of funding. In that case, the real shame won’t be the failure to implement Pay It Forward, but the confirmation that platitudes, and studies, are about as far as most people in positions of political and economic power are willing to go in support of higher education.