Wednesday, March 19, 2014

New measure allows Michigan students to get free college tuition

This is an interesting Raw Story article:
Students in Michigan could receive free college tuition in exchange for a fixed percentage of their future income under a new proposal under consideration by lawmakers.
More than 20 states are studying similar proposals, reported the Detroit Free Press, but the Michigan bill would set up a pilot program.
Under the measure, students would agree to pay a fixed percentage of their post-college income for a specified number of years into a special fund to help pay tuition for other students.
The measure calls for a rate of 2 percent for community college students and 4 percent for university students, and each would be required to pay into the fund for five years for each year they attend school under the program.
So, for example, a student who attended the University of Michigan for four years would be asked to pay 4 percent of her income back for 20 years after graduation.
That would work out to $100 a month for graduates who earned $30,000 a year.
“The goal is to remove every financial barrier to high education,” said state Rep. David Knezek (D-Dearborn Heights). “We’ve increasingly place 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.”
The Michigan bill would establish a $2 million fund for a pilot program that involved 200 students, and the state’s treasury department would track the money and verify income.
The interest rates on federal student loans currently range from 3.86 percent for newer loans to 6.8 percent on older loans.
Susan Dynarksi, a University of Michigan professor and expert on higher education finances, said spreading payments out over 20 to 25 years and linking them to income “ensures borrowers against hard times.”
But, she said, borrowers who expect to earn high salaries after college have a disincentive to participate.
“If the future starving artists flood into pay it forward and the future engineers shun it, the program will spiral into insolvency,” she said.
But Dynarski said this flaw could be easily fixed by denominating the debt in dollars, instead of years, so borrowers could stop paying into the system once they’ve paid back their loans.
The measure has not yet been scheduled for a legislative hearing.
It is a step in the right direction, but there are some big problems with this program.  First and foremost, this program seems to be a voluntary program.   Students who already have the means to pay for college would not want to enter this program.  Such students who opt out of the program may have much higher salaries that would not be paid into this fun--unlike the "future starving artists," who may or may not make the $30,000 a year salary.  What if the students move out-of-state, after they graduate?  They are not using their skills, or spending their salary to help contribute to Michigan's economy in the long term?  Finally, while this appears to be a pilot program, what if a greater number of students request applying for this program than the amount of funds the state has to pay for such education?  Will the state turn away students from getting their education?  What if the students actually get their degree, but still can't find a decent paying job, and end up working in the minimum wage McDonald's crap jobs?

Ironically, in the 1950s and 60s, there used to be a program to help students pay for a low-cost, college education.  It was called taxation, where everyone paid their fair share of taxes.  The state taxed its citizens to provide funds to help invest in college students' education, and help make them productive members of society within the state. 

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