<p>So let’s say a student graduates with a $100,000 worth of education. If he takes out a 20 year loan he pays a set amount each year until the loan is repaid. He is repaying 2012 dollars with future discounted dollars. Under the proposed plan he pays 5% of his salary for 20 years. With very low inflation, this could be a good deal, he may pay less than with the fixed rate loan. However with rampant inflation and concomitant salary increases he could end up paying more over time than if he had opted for the fixed rate loan. </p>
<p>Calculations aside, it would take the resources of the IRS and Mossad combined to monitor and enforce such a scheme.</p>
<p>UC has a significant number of students who take longer than 4 years to finish because they take quarter/semester-long breaks in order to work full time to pay for the next term. Other students take on jobs with heavy workloads while carrying a full academic schedule, which generally results in so-so grades. Telling these students that they’ll be able to concentrate on their academics, and repay any debt later, is very appealing.</p>
<p>I’ve been near that, myself. My parents and I had a falling-out partway through my sophomore year, and I was financially on my own for the rest of my undergrad years. It was possible at that time (1980’s) at a UC, even living away from home: ramped up my work-study hours, cut my expenses to the bone, and took on subsidized debt. That was when I first learned that no, just because my parents weren’t paying didn’t mean that the FA folks considered me independent. I remember feeling frustrated that the state of California couldn’t see that it was in everyone’s best interests for me to finish my undergrad years as quickly as possible, and then move on to being a productive taxpayer. The state would make more money off of me finishing in four years and immediately moving into a higher-paying job, rather than having me take on part-time minimum-wage type work and eking out enough to finish in six years.</p>
<p>UC has toyed with this idea for years. Also, professors in engineering, business and biomed are paid substantial premiums over the regular Joe professors. Rationale is that the U needs to “compete” with private sector jobs for this rich talent.</p>
<p>The poorest ROI (for both the student and the school/state) is probably biology, at least for the majority of students who do not get the medical-school-minimum GPA of 3.6 or so. Teaching biology requires labs which are more expensive than just lecture and discussion, but the job and career prospects at the bachelor’s degree level are comparable to humanities and social studies (not economics).</p>
<p>Yet, somehow, biology is the most popular major at many schools.</p>
<p>However, industries and the economy as a whole go through economic cycles, changing what graduates in many majors find in terms of job and career prospects.</p>
<p>I think we agree that if a student takes out a fixed rate loan, inflation helps the borrower and hurts the lender. If the student commits to pay 5% of salary, and if there is inflation, the students pays more dollars, but those dollars are worth less. If wage and price inflation are equal, the student is neither hurt nor helped by the inflation in this scenario.</p>
<p>It won’t work because the basic math doesn’t work. In order to pay back $100,000 at 5% of salary over 20 years, the person would have to earn $2,000,000 over that 20 years or an average of $100,000 per year. </p>
<p>Even with inflation, that is very, very optimistic. </p>
<p>The scheme also doesn’t solve today’s cash flow problems at the UCs.</p>
<p>Does the responsibility to pay pass on to a spouse if the one owing under this plan decides to stay home and raise kids? If yes, creates a whole new dynamic in the courting process. Kind of the opposite of a dowry.</p>
<p>Another problem with inflation is that the cost of college is increasing at 2-3x the rate of inflation, and this shows no signs of slowing down. So while today the rate may be 5% per year, in 20 years it may need to be 10% or more, or go for much longer than 20 years.</p>
<p>Another big problem is that a very large percentage (57% according to the docs) of current students are on the Blue and Gold plan, and pay no or greatly reduced tuition. Now these kids are going to willingly give up free tuition and have their pay garnished for the next 20 years? Sounds like a “screw the poor kids” plan.</p>
<p>R+B is covered by adding to the percentage you pay for every year you are in the dorm, but only for 10 years instead of 20. I don’t think it comes close recouping the costs, but the docs just do some hand-waving on this.</p>
<p>OOS kids pay more, too. Oh, yeah - don’t transfer or drop out, you become instantly liable to immediately repay all the accumulated costs based on some “rate” which they don’t specify how they calculate.</p>
<ol>
<li>If you have money, pay it.</li>
<li>If you have the stats, school pay for you.</li>
<li>If you have needs, borrow it. And pay it back after you’ve finished.</li>
</ol>
<p>The new system assumes everyone is on level 3.</p>
<p>The current system is unsustainable. If you have been giving something away and then realize that you can no longer afford to give it away, that hardly qualifies as a “screw the poor kids” plan.</p>
Maybe a hybrid system is something to consider - those who pay as they do now, full pay people, partial pay people, etc., would continue on the same as now but those who would currently fall under need-based assistance, rather than essentially just being handed the money gratis as they are now, would need to commit to paying back the cost of the particular grants they received at a maximum rate per year (5%, 10%, or whatever) until it’s paid off. This sounds like a win/win and let’s the person with the need-based grants have the satisfaction of knowing they’re not taking a handout and will pay the same as anyone else for their education even if it means paying back for 10 or 20 or 30 years. It also might make people give some thought to what they want to major in, job prospects, not becoming perpetual students, etc.</p>
<p>The only thing the California colleges can do is asking students who receive financial aid sign a honor statement to donate money back for future classes. And they should have done this a long time ago.</p>
<p>Many California residents think they are entitled to free education but they don’t give a single dime for the public causes.</p>