Two States Offer Proposals to Pay for College; Economists Like Neither of Them

Two states consider two new ways to fund college tuition: Tennessee is considering the “Tennessee Promise,” which proposes free tuition for two years of community college or technical school and would be funded through sales of lottery tickets. Oregon is considering “The Pay It Forward” program, which I’ve previously discussed here, in which students would pay no tuition upfront — rather they’d pay a small percentage of their income for a set number of years after graduating from college.

Which program is better? Planet Money talked to a few economists to hear their thoughts.

Some issues with Tennessee’s idea:

Since studies show that, in many states, lottery ticket sales are higher than average in impoverished regions, Richard Wolff, a professor of economics at the University of Massachusetts, Amherst, says this is fundamentally unfair: “A lottery is a tax on middle- and lower-income people. So if you are going to use this you are basically saying that in Tennessee the cost of college will be subsidized by lower-income people.”

Susan Dynarski, professor of economics, education and public policy at the University of Michigan, says that is true but not the only thing to consider. “If a lottery is already in place and the tickets are being bought anyway then why not use the funds for education?”

And we’ve talked a little bit about the issues with Oregon’s “Pay It Forward” program, which is that it may discourage students entering high earning fields from taking part in the program, and that it is another form of of an “income-based repayment” program.

Says Richard Wolff, the economist at Amherst: “This is like choosing between a crappy and a more crappy option.” But the fact that there are proposals popping up to fix the student loan system is promising.

Photo: Brad Montgomery

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