Michigan Proposes Its Own Pay It Forward Tuition Plan

As USA Today reports, the state legislature in Michigan is reviewing a bill to create its own “Pay It Forward” tuition program. We’ve covered it on the site before, but basically, you go to school for free (“free”), then pay back the school, interest-free, out of your future paycheck. Your payments cover the next kid to go to school for “free.”

Michigan’s plan would require students to agree to pay a fixed percentage of their post-collegiate income — 2% for community college students and 4% for university students — to the fund for five years for each year they attended school under the program. So, a student who went to the University of Michigan and graduated in four years would have to pay 4% of their income back every year for the first 20 years after college.

“The goal is to remove every financial barrier to high education,” said Democratic state Rep. David Knezek. “We’ve increasingly placed the financial burden of college on the backs of the students. This is a no-interest plan that allows you to pay back as you go and as you can afford it. It takes the monkey off the student’s back.”

You have to have a job and be living about the federal poverty line before you’re required to make payments, which I like. I also like that how much you pay is tied to your income, though that’s what’s going to rankle some people especially. Say you get a job out of school making a ton of money and you have to pay back 4% of your income for 20 years — you’ll end up paying back your tuition and then some. A suggested compromise would be to end your required payments once you’ve paid back what you would have been charged for tuition.

Only students with a household income below $250,000 would be eligible for the plan. Detractors argue that tying the program so closely to income will make it unattractive to higher earners. I also wonder what this would mean for financial aid.

Oregon went through this in 2013, and they’re voting on whether to approve their own plan in 2015. A few other states are “looking into it”. Hmm!

Support The Billfold

The Billfold continues to exist thanks to support from our readers. Help us continue to do our work by making a monthly pledge on Patreon or a one-time-only contribution through PayPal.