Pay It Forward: Th D bt F The Debt-Free Degree Plan for D Pl f - PowerPoint PPT Presentation

Pay It Forward: Th D bt F The Debt-Free Degree Plan for D Pl f Vermonters John Burbank Econom ic Opportunity Institute Seattle, Washington Presentation to the Verm ont House and Senate Education Com m ittees, March 22, 20 13

Pay It Forward is a Pay It Forward is a pragmatic p g business model f for funding f di higher higher education.

How does it work? • Replaces tuition with post- graduate contributions into a graduate contributions into a state trust fund • Funds future students from this trust fund • Future students will also participate in Pay It Forward pa t c pate ay t o wa d

UVM Tuition and m andatory fees in UVM Tuition and m andatory fees in constant 20 13 dollars $15,0 8 6 $12,961 $11,8 22 20 0 4 20 0 5 20 0 6 20 0 7 20 0 8 20 0 9 20 10 20 11 20 12 20 13 Source: page 20 of UVM Sourcebook FY 2013: http:/ / www.uvm.edu/ ~ofabweb/ sbfy13web.pdf http:/ / www.uvm.edu/ ofabweb/ sbfy13web.pdf

Percentage Increases in Tuition and Fees: Vermont public higher education 28 % 24 % 4 22% 18 % UVW: 2004- 4 Castleton State: Vermont Community y 2013 2006-2013 Technical: 2006- Colleges of 2013 Vermont: 2006- 2013 page 20 of UVM Sourcebook FY 2013: http:/ / www.uvm.edu/ ~ofabweb/ sbfy13web.pdf; page 45 of the Vermont State Colleges Sourcebook of Institutional Data, Fall, 2012: http:/ / www.vsc.edu/ about- vsc/ VSC_Office_of_the_Chancellor/ VSC%20Fall%202012%20Sourcebook%20of%20Institutional%20Data.pdf; BLS CPI-U Index, 1913- present: ftp:/ / ftp.bls.gov/ pub/ special.requests/ cpi/ cpiai.txt

Average Student Debt of VSC Graduates (72.7% have debt) $30,381.00 $3 ,3 $ $28,307.00 $24,722.0 0 $19,549.00 $19 549 00 Associates Baccalaureates Masters Total Average Debt per graduate in debt Source: page 53 of the Vermont State Colleges Sourcebook of Institutional Data Fall 2012: http:/ / www vsc edu/ about- Source: page 53 of the Vermont State Colleges Sourcebook of Institutional Data, Fall, 2012: http:/ / www.vsc.edu/ about- vsc/ VSC_Office_of_the_Chancellor/ VSC%20Fall%202012%20Sourcebook%20of%20Institutional%20Data.pdf

The Pay It Forward Solution y Go to college without upfront costs costs Contribute a fixed percent of income for a pre-determined number p of years. to a higher education trust to a higher education trust fund after graduation The fund enables access for h f d bl f future students

No upfront costs. • Abolishes and replaces tuition • Free and open access to all qualified students all qualified students • Increases career choice at college and after at college and after graduation • Zeroes out student debt • Zeroes out student debt

C Contributions proportional to ib i i l income . income . • Amount based on market Amount based on market income; it is a rough estimate of human capital estimate of human capital development gained through higher education.

Hailey is a high school senior. If she goes to a four year college, she will pay 4% of AGI for 25 years. $300 $231 $250 $221 $200 $150 $91 $100 $50 $- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Years After Graduation Calculations based on median income years after graduation. Source: Median Annual Salary BA (Total salary source: US Census Bureau data for 2010: "PINC-O4": http:/ / www.census.gov/ hhes/ www/ cpstables/ 032011/ perinc/ new04_001.htm)

If she had paid with student loans and was $30,000 in debt Hailey would be charged about $350 a month. Years Standard Loan Income-based Pay It Forward Median AGI (post- Repayment Repayment Contribution (Annual) graduation) (Monthly) (Monthly) (Monthly) 1 $36,000.00 $348.00 $240.56 $120.00 15 15 $50 000 00 $50,000.00 - - $166 67 $166.67 25 $55,000.00 - - $183.33 Total Paid $46,080.01 $53,903.79 $46,900.00 $33,368 average total debt, 6.8% loan interest, and 4% monthly AGI Pay It Forward contribution

If she goes to a community college, she will pay 1.5% of AGI for 25 years. $60 $52 $47 $50 $40 $30 $15 $20 $10 $- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Years After Graduation Calculations based on median income years after graduation. Source: Mean Annual Salary AA (Total salary source: US Census Bureau data for 2010: "PINC-O4": http:/ / www.census.gov/ hhes/ www/ cpstables/ 032011/ perinc/ new04_001.htm).

If she had paid with student loans If she had paid with student loans, Hailey would be charged about $125 a month. Standard Loan Income-based Pay It Forward Years (post- Median AGI Repayment Repayment Contribution graduation) (Annual) (Monthly) (Monthly) (Monthly) 1 $33,000.00 $127.23 $127.23 $ 41.25 15 $40,000.00 - - $ 50.00 25 $45,000.00 - - $ 56.25 Total Paid $15,268.08 $15,267.94 $ 14,625 $11,056 average total debt, 6.8% loan interest, and 1.5% monthly AGI Pay It Forward contribution.

Statewide Implementation • Transition to PIF in all public colleges and p g universities • $110 million in Year 1 • Each year as graduates • Each year as graduates contribute to PIF, net cost declines • Year 17-26: Net Revenue

Pilot Programs • Incoming class of students at UVM: 600 students $9 million, $36 million in four years 9 3 y • Students at one VSC campus: Lyndon State: $6.5 million, reduced each year forward • First year of Community College: $22 million • Higher Education Endowment Trust Fund • STEM majors • Medical professions • Parental participation: pre-funding PIF P t l ti i ti f di PIF

UVM Higher Education Trust Fund: $1.5 m illion a year, with Pay Forward Receipts Pay Forward Receipts 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 YEAR

Students on UVM Trust 20 4 18 9 18 9 163 139 139 119 10 5 10 0 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 YEAR

Pay It Forward at UVM with VSAC Pay It Forward at UVM with VSAC Funding $18 ,10 9,767 $ $14,70 1,235 $10 750 192 $10 ,750 ,192 $9,0 0 0 ,0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Students in Pay It Forward at UVM with 1,20 7 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 98 0 Year 717 VSAC Funding VSAC Funding 9 8 7 6 5 4 60 0 3 2 1

Pay It Forward at UVM and VSC with VSAC Funding VSAC Funding • $9 million • 30% for UVM students • 40% for VSC 4-year students % f VSC t d t • 30% for CCV students

$22,537,48 6 28 27 26 25 24 23 $17,344,643 22 21 20 19 18 PIF UVM/ VSC Receipts 17 p 16 15 14 13 $11,507,485 12 11 10 9 8 7 6 5 $9,000,000 4 3 2 1

Students in Pay It Forward at UVM and VSC with VSAC Funding VSC with VSAC Funding 2,126 1,636 1,0 8 6 8 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Years to Positive Cash Flow per CCV student: various tuition levels: Pay It Forward 24 22 22 17 15 $7,500 $6,690 $5,000 $4,000

P P AY I T F OR AY I T F OR WARD AT G REEN R IVER C OMMUNITY C OLLEGE : WARD AT G REEN R IVER C OMMUNITY C OLLEGE : A NNUAL A DDED R EVENUE ) enue (2011 dollars) Annual added reve A 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 Years after Green River Promise implementation

P P AY I T F OR AY I T F OR WARD AT G REEN R IVER C OMMUNITY C OLLEGE : WARD AT G REEN R IVER C OMMUNITY C OLLEGE : G ROWTH IN N UMBER OF S TUDENTS 10,000 9,000 8,170: Current FTE at Green River Community College 8,000 7 000 7,000 6,000 ents (FTE) 5,000 Stude 4,000 3,000 2,000 1,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Year(s) after Green River Promise implementation

16,58 2 Students on Green River Prom ise calculated with various tuition alternatives 14,739 Number of 13,265 Students on Green 12,0 60 River Promise 11 0 55 11,0 55 9,212 Tuition: 8 ,170 : current FTE at Green River $2,000 $ , Tuition: $2,250 Tuition: $2,500 Tuition: T iti $2,750 3,10 8 Tuition: $3,000 1,727 ,7 7 Tuition: $3 600 $3,600 Year From Inception of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

P AY I T F ORWARD STEM E DUCATION : G ROWTH IN N UMBER OF S S TUDENTS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Year(s) after implementation

Partnering with other states would increase students’ options and p mobility. • Pennsylvania • New York • Washington W hi t • Wisconsin • Oregon Oregon • California

Right now, we are: • Consulting with legislators • Consulting with legislators • Working with stakeholders • Figuring out how to start pilot programs g g p p g • Developing tighter actuarial calculations • Developing interactive spreadsheets • Working with the US Treasury W ki i h h US T • Working with other states about their efforts efforts