Financing College With a Tax On All Graduates

Hugh Pickens DOT Com writes "As the number of students attending colleges and universities has steadily increased and the cost for most students has climbed even faster, student debt figures (both total and per person) have continued to get bigger. Now Josh Freedman at Forbes Magazine proposes a graduate tax-funded system of higher education, under which students would pay nothing to attend college upfront. Instead, once they graduate and move out of their parents' basements, they would begin to pay an additional income tax (say, for example, three percent) on their earnings that would fund higher education. 'In other words, the current crop of college graduates funds the current crop of college students, and so on down the line. There is no debt taken on by students, which minimizes risk (good); repayment is tied to income, because only people who make income pay the tax (also good); and it is simpler and more easily administrable than plans to make loans easier to pay off (still good).' The main argument for a graduate tax comes from its progressivity. Supporters of a graduate tax point out that most college graduates, particularly those from elite universities that use a greater share of resources, are richer than people who have not graduated from college. The state of Oregon made headlines last year for an innovative proposal called 'Pay It Forward' to fund higher education without having students take on any debt. Pay It Forward amounts to a graduate tax: All of the graduates of public colleges in Oregon would pay nothing up front in tuition but would pay back a percentage of their income for a set number of years. These payments would build a fund that would cover the cost for future students to receive the same opportunity to attend college with no upfront costs. 'As pressure mounts for more students from all backgrounds to attend college, it will become increasingly difficult to try to stem the rapid tuition inflation under a loan system,' concludes Freedman. 'Our current student loan system has made college more expensive, turned higher education into an individual, rather than a communal, good, and generated serious negative economic and social risks.'"

Comments

Lifers?

[Anonymous Coward]

So under this new system, why would I ever stop going to college? This is already a problem with some of the higher level institutions.

Re:Lifers?

[Mr. Freeman]

Obviously, there would be a limit on the amount of subsidized education you can get. Did you seriously think that this proposal was as simple as "pay for it with some taxes"? Use some common sense.

Re:Lifers?

[Sponge Bath]

Many universities with full enrollment already give you the boot if you burn too many hours without graduating.

That said, this scheme sounds no different than a student loan tied to the ability to repay. If anything, it obscures actual costs which usually causes problems.

Re:Lifers?

[ganjadude]

obvious to you and I, lets see what the actual bill says

Re:Lifers?

[ILongForDarkness]

A more key part of the problem IMO is the "progressive" statement. Progressive = "we the government know how to spend your money better than you do"

Engineers paying for the next generation of engineers is one thing, engineers paying for 3 basket weaving degrees is something else entirely. If they tie the payers to the degrees that the current students are pursuing it is likely okay. But if they tax all and then decide afterwards which programs get the money collected based on political pressure we'll end up with a bunch of "coal science" programs and black history graduates. Society can use some of both of course but separating market supply from market demand (by pushing the cost of inputs to everyone rather than the person making the choice to enter that field) isn't good. Nor would it be good for the relative costs of programs. A literature degree might end up costing the same as an engineering degree even though one has a large unmet demand and the other does not, one requires much more expensive teaching resources than the other etc.

A better solution along these lines though hard to enforce people actually trying hard to get good paying jobs early on: a fixed percentage for a fixed number of years after graduating. Given that people are getting out of school right around when they start having families and have the lowest earnings (and higher unemployment) I'd say some delay. Say from year 5 to year 10 after graduating you pay 20% of your salary. People are less likely to take a couple years "to see the world" when they are 30 with kids or just have bills than right after graduating so that would help mitigate the risk of people just saying "screw it now is a good time to be a missionary for no pay". Tying it to graduate pay would also allow the market to naturally choose how much money goes into each program based on its value to society.

Re:Lifers?

[JoeMerchant]

So under this new system, why would I ever stop going to college? This is already a problem with some of the higher level institutions.

What happened to my mod points? This ^^^ in spades. I was remembering the "Freshman flameouts" that occupied dorm rooms, enrolled for classes, and basically partied non-stop until they were academically expelled. If school is free to attend, I see a rapidly growing segment of the University population who are just there for the ride - stretching it out as long as they can get away with it, then moving on with no tax burden because they didn't graduate. Which brings up another thought - people who get within 3 credits of graduation and then don't complete - I know some people who have done this already, without a tax-disincentive to graduate.

I'm all for tax funded higher education, but putting the burden only on the graduates seems regressive.

Since we're moving to a debt based economy, why don't we all start life tax-free, then incur tax loads as we place burdens on society. Using healthcare? Now you're in the healthcare payback tax pool. Got in a car crash? That's fine, we'll cover you as if you were insured, and you'll pay back the cost plus administrative fees as a tax over the next several years. The taxes will have to be higher than actual costs to cover those who don't, or can't, pay back, but they only fall on the users. So, you got into Harvard but can't afford to pay? Finance it with the IRS.

Re:Lifers?

[JoeMerchant]

Take a look at European University tuition structures... I believe they are as simple as "paying for it with some taxes."

Re:Lifers?

[amalcolm]

In the UK it's paying for it with crippling student debt

Re:Lifers?

[Impy the Impiuos Imp]

Prices have been increasing at double digit rates for two decades now because easy borrowing, in service to the political goal of more students, makes such increases easier -- nobody wants to buy a $2000 super-radio for their car, but $35/mo. on the payment? Sign me up!

In practice, the extra money doesn't even mostly go to education -- it goes to a massive increase in sinecure positions -- positions unrelated to teaching, which, at some universities, are now over 50% of the positions.

This solution will just add to that. Like a new tax added without ending the old one, now two rates get ratcheted up.

Re:Lifers?

[BobMcD]

That said, this scheme sounds no different than a student loan tied to the ability to repay. If anything, it obscures actual costs which usually causes problems.

This.

How is 'go to school now, pay it back later' any different than 'go to school now, pay it back later'?

Aside from the individual's control over the cost of their education, that is. Under the debt system a person could elect to go to a cheaper school to minimize their repayment cost, and/or select a career rather than a hobby.

Under the new system, there's no incentive to control costs at all.

Re:Lifers?

[ShanghaiBill]

obvious to you and I, lets see what the actual bill says

I hope they are careful. Here is another way to scam the system: Arrange your classes so that at the end of your senior year, you are one credit hour shy of the requirement for graduation. Now you have the education, and the transcripts to prove it to prospective employers, but no actual taxable degree.

Re:Lifers?

[iserlohn]

The UK wasn't like this before. The system has been Americanized. Before 1998, there were no tuition fees for public universities (All top UK Universities are public), but afterwards (apart from Scotland) this was increased first to ~£1000, then ~£3000, and now to variable fees with a £9000 cap.

The government still has to spend similar amounts of money to back these loans, so in the end, the whole reason for introducing this change in policy is because this spending is classified differently in budget. It is a graduate tax in all but name, however, administered in a more complex fashion.

Re:Lifers?

[LordLimecat]

"Thats all in the details" is a really good way to draft a crappy law with lots of unintended consequences. What happens when those folks dont graduate, and thus dont pay the tax? What happens when they dont get a job-- does that mean that the people who succeed are in effect subsidizing those who failed?

I dont know, that seems like a pretty fundamental flaw of the idea. Its actually the fundamental flaw of any idea that seeks to indiscriminately share wealth-- what happens when half the populace decides to abuse the free ride, is the other half just on the hook for it? Where's their incentive to uphold such a system?

Re:Lifers?

[bigpat]

The only way this works is if everyone has to pay a tax. And basically we are then back to government paid for higher education. Which is probably more equitable and should be what we are discussing instead of some new loan scheme.

Unless this is a universal tax, then this just reminds me of the 50 year mortgage that people were talking about right before the housing market bubble burst. Students won't need as large of a loan when the education bubble bursts and tuition costs come down, just like people didn't need 50 year mortgages just to prop up absurdly high prices in the housing market.

- Eliminate a year of high school for some students and put that money towards University or trade school education. (And/or put the money towards universal 4 year old education)

- Eliminate one years worth of classes for a bachelors education. Make it the equivalent of 30 classes instead of 40.

- Make an associates degree a one year degree instead of a two year degree and make an associates degree automatically part of a bachelor's degree as something get after successfully completing the first year.

For those of us that paid too much for college, yes it sucks, but stop whining. But student loans should be able to be discharged in bankruptcy after 5 years or so.

Re:Lifers?

[rnturn]

Who decides which degree has more value to society? It sounds like you think some board should decide which degrees are going to be subsidized by the tax. But later on you mention The Market which, frankly, has sucked as a mechanism for steering people into the kinds of study that are supposedly needed. Part of your argument reminds me a lot of what I used to hear from people who no longer have kids in the school system complaining about their property taxes going up because a new school was needed. I support the local schools with my taxes because I don't want a bunch of kids growing up in our town with no future. I support the arts because they make society a better place to live. Geez... just imagine... an engineer having to support the education of a non-engineer? The horror! If you want to earmark funds to help educate the next generation of engineers, create a scholarship fund at your alma mater for a deserving undergraduate engineering student.

At one time, a college education was, or was almost, free. How did we do it? Well, for one we taxed corporations far higher than we do now. We also had an income tax rate was much higher at the higher income levels, we didn't have to waste money supporting a gigantic military that we used to police the entire planet. (Imagine what could be done with the $100B/year that's being thrown down the rat hole that is Afghanistan?) I'm willing to bet that the writer at Forbes never had to worry about how to pay for his higher education nor did he have to defer buying a house, or having children, because he was saddled with years of college loan payments. Or a tax on his post-gradate income. It's easy to suggest that new graduates pay an extra tax for their education when you've never had to do it yourself. The whole concept reminds me of another argument for people to "have more skin in the game" for whatever reason the staff at Forbes thinks will save those more well off from having pay higher taxes.

And don't get me started on why using colleges and universities as vocational training grounds for corporations is the wrong way to be using higher education. I just visited a college book store this past weekend and took a look at what texts were being used for the CS courses. It looked like the school thought that a CS education meant Microsoft Office and developer training. I should take a closer look at their web site; maybe their CS degree comes with a Microsoft certification. Thank $DIETY my daughters aren't interesting in CS; I'd likely forbid them from attending any school that thought teaching students how to use the latest Office and Visual tools constitutes a college-level computer science education and steer them to a local community college's computer curriculum if all they wanted was to learn something that makes them employable for a few years.

Re:Lifers?

[Obfuscant]

Who decides which degree has more value to society?

Since the plan is to base payback on a percentage of income, we've pretty much defined the arbiter of degree value to be the employers.

There is just as much overhead cost for a black history major as there is for a math major. The cost for electricity to light the classrooms doesn't depend on who uses them. The administration that keeps track of the progress of the student costs the same. Instructors, ditto. Are black history majors finding jobs that would have them paying back any significant portion of the costs of educating them, or will they join all the other history majors at minimum wage jobs in the burger-flipping industry?

Re:Lifers?

[swb]

At one time, a college education was, or was almost, free. How did we do it?

We also had a college system that was principally focused on education, not on a broad range of social welfare goals and without the bureaucratic empire builders.

Re:Lifers?

[funwithBSD]

"“But we have to pass the bill so that you can find out what is in it." - Nancy Pelosi

Re:Lifers?

[cornjones]

I really don't get this argument. the UK system is much like is being proposed here but w/ less burden on the student. You are asking the student to go into 9k/yr debt but it is only payable once you get a good job. That is a good deal for the student, if you spend a bunch of money on school and still can't get a job, you don't pay it back. the risk is all on the gov't (which i am ok with).

this 'tax on future earnings' really sounds like a loan w/ slightly different terms. Rather, terms that never end.

Re:Lifers?

[es330td]

If you don't have a degree, you don't "have the education." As an employer, I would take a dim view of a person who wants to use a college transcript, without a conferred degree, as evidence of having an education. If a person is trying to cut corners for personal gain, what is that person going to do as my employee?

The easy solution to this is a prorated "tax" on earnings. One year of attendance = 0.75% tax on earnings. Since you are paying the tax, you have a very strong incentive to finish. Taken further, a person could be dissuaded from stretching it out by having a penalty. A person taking 150 hours to get a 120 hour degree will pay 3.75% on future earnings with an absolute cap to make them leave and get a job at some point.

Re:Lifers?

[Sporkinum]

Unless you are Jamacian.

Re:Lifers?

[schnell]

There is a much more dangerous issue here that makes it a terrible idea: decoupling the provider and user from the costs involved is exactly why the US healthcare system is so screwed up. Today, colleges have a cost that is known to the student, and students factor that in to their education "purchase." I might like to go to a college that charges $50K a year, but if there's another one that charges $30K a year and provides a similar education, I may choose the cheaper one. Colleges know this and they model their cost structure to fall within a tuition rate that students will be willing to pay.

But now, with students and colleges not having to consider price, no college has any incentive not to inflate its costs - hey, if cost is no object to the student, why not? New Ferraris for all the administrators and a shiny new $50M Center For the Study of Basket-Weaving! The college is getting paid either way, and the student doesn't care because they don't see a bill. Maybe that provides a better quality education for some people, but it's dubious as to whether the benefit outweighs the costs to all the people who have graduated and are now paying for $100K/year per student tuition rates.

This is the same thing that happens in the US medical system today - doctors don't have to think about what procedures cost, so, hey, why not run a bunch of tests that cost $15,000 a pop just to be safe? They're getting paid either way. And the patient typically doesn't see much of that cost directly because (post-deductible, blah blah) most of it is absorbed by their insurance company. Nobody (for the most part) chooses which hospital to go to based on what it costs, and there is no incentive to reduce costs for anyone except the insurance companies. (If you want to hear the gory details, NPR did an awesome story on this several years ago.)

At any rate, while improving access to college education is a great goal, the healthcare example should scare anyone sane that taking "what college costs you to deliver or receive" out of the equation is a recipe for costing everyone way more money than it should.

Re:Lifers?

[Anonymous Coward]

I would never hire such a person. Getting only "most" of a degree is one thing, but deliberately milking the system is an automatic DO_NOT_HIRE.

Re:Lifers?

[IcyWolfy]

This is handled in most other countries.
Yes, the cost is no longer an object to the student, however it doesn't mean the costs are paid in full arbitrarily.
The absolute costs repaid to the institutions are capped and based on attendance, pass-rates, student-count, etc.
And, it's also a fixed $/head count as well.

In Canada, this issue happened in the 90s when they were still phasing out Private Health Insurance for the Government Subsistance.
Basically came down to:

We'll pay you $100. BUT -- If you charge any co-pays, co-insurance, or any other administrative fees. Those will be taken out of your payment. (And finances sometimes dictated that their future payments are basically $0 untill everything they charged was cancelled out).

The net effect was they cut costs, and increased efficiencies -- more importantly, they cut salaries of the doctors, getting them in line with other professions. (10 years experience as an Electrical Engineer? You make 65k**. 10 years experience as a doctor? You make 75k**, etc.) It stopped wage inflation, which is good for the person, bad for society.

If they do the same for the College system here, it will have the levelling effect lowering salaries, and thus reducing the income gap. And keeping the costs under control. Some colleges will transistion poorly, others better; and there will be years of painful transition. But, in the end, the net result will be positive.

Though I'd say that the system should basically be:
Income is taxed at 3% while you're taking classes.
Income is taxed at 3% for 20 years of being a non-student.
You can go back, but then that 20 year time-frame resets itself.
With the average US salary of people over 25 being $35,000
That would mean on average, people would be paying about ~20,000 into the system.
Which is about the out-of-pocket cost for a degree in Canada at a 4-year university.

It's a good idea, the politicians just need a damned backbone to say :
That's all you get, lower salaries for the professors if you need to make ends meet.

If the health-care system was able to do that, the rising cost problem wouldn't be an issue.
But becasue insurance companies don't all band together to say "fuck you." doctors continue to get paid exhorborant amounts compared to doctors in most every other western country. Doctors in the US make on average 150-380k/yr depending on being GP or specialist. Doctors in Germany, Canada, Japan all make a (still very well off) 80-100k a year.
If you were able to take off $50,000-250,000 per doctor per year in this country, the health-care costs would quickly fall in line.
But people are too fucking greedy.

Re:Lifers?

[bigpat]

If the degree doesn't prepare you to make a living, then of what value was it to the student? If a judge determines that a person can't pay back a student loan because of the circumstances of their life then so be it. The original justification for not allowing students to discharge student loans in bankruptcy was because students are just starting out and getting jobs in the first few years after college so letting them declare bankruptcy right after school would have undermined the point of the loan in the first place.. But if they are 5 years out and unable to get a job that can support their living expenses and a student loan then it should at least be partially discharged and I would put the University on the hook for part of the loan in that case.

Holy cow, a decent idea!

[Mr. Freeman]

This is actually a really good idea. However, it does need some limits, particularly with regard to tuition prices. This proposal will give universities to raise tuition prices like mad. We need to place some serious restrictions on those.

Re:Holy cow, a decent idea!

[Albanach]

No, it is not good idea. Everyone benefits from an educated workforce. The self-made entrepreneur benefits from employing graduates. The store worker benefits from the graduates that built the business employing them.

If we accept that taxation is they way to fund education, the smart move is to do it through general taxation. Since everyone benefits from education, everyone pays a share. And you drop the administrative costs associated with managing loans or adding a section to the tax code.

Re:Holy cow, a decent idea!

[mjr167]

Naw... just require a vote to raise tuition. We'll vote it down like a raise for teachers.

Re:Holy cow, a decent idea!

[jbmartin6]

I agree, this is a horrible idea. The rate of students actually graduating in 4 years is already low, it will just go down as soon as students are attending for "free". There might be some minor improvement if there were a competitive process and only the students who gave a crap about their education would qualify. But this notion that every slacker has a "right" to attend and fart around for six years is a disaster. When I went to graduate school, anyone could tell, with a high degree of accuracy, which students were paying their own way and which were not. The ones paying for it were the ones who worked hard and tried to get something out of even the easy classes. The other just wasted everyone's time. A couple times I had to get one of the latter removed from my team projects since they weren't worth anything.

Re:Holy cow, a decent idea!

[DeathToBill]

Lots of other Western countries already have similar systems. Where I studied in Australia, I 'paid' about $5,000 per year to attend University. The government loaned me this money. Once I graduated, any income over a certain threshold was taxed at 1.5% and any income over a further threshold at 3% until the loan was repaid. The loan amount increases with inflation (CPI).

There are two main problems with it: 1 - it penalises disciplines that are productive in the economy. The BA student who either never works or flips burgers at McDonalds gets his education for free, while the engineers or doctors have to pay. 2 - it encourages brain drain. Since the repayment is through the tax system, the easiest way to avoid it while still earning good money is to move to another country where they won't care about it.

Re:Holy cow, a decent idea!

[jittles]

This is actually a really good idea. However, it does need some limits, particularly with regard to tuition prices. This proposal will give universities to raise tuition prices like mad. We need to place some serious restrictions on those.

A decent idea? I don't think so. A decent idea is going to a school you can actually afford. I have no interest in paying for you to go to Embry Riddle or Fullsail college. If you want to drop $100k a year going to Harvard, you can pay for it. I am not going to pay a tax to cover your educational choices. You want to go to that fancy school? You can pay for it. If you can't understand personal finance well enough to understand that you'll be burdened with debt for the rest of your life if you take out a $200,000 loan to become a history major then perhaps you should just go to a vocational school.

Now if you only had to pay that tax until you repaid the amount you spent, plus interest, then that makes a lot more sense to me. But at that point you're basically just talking about a federally backed student loan.

Re:Holy cow, a decent idea!

[The123king]

Here in the UK we have a system of student loans to help finance the cost of university or college. This loan can, and in most circumstances, does cover the university fees, along with rent and living fees. This is great, as we can go to uni without having to pay anything at all up-front. But, seeing as it's a loan, we have to pay it back (at 9% or our earnings (!?!?!)) once we earn more than £21,000.

This loan system allows people from poorer backgrounds to get the same access to education that richer kids get. I'm sure there's a similar system in America, but this one works well here. We don't pay (much) tax towards uni fees, and only people who actually want an education get funding.

Re:Holy cow, a decent idea!

[MindStalker]

I think the best system would be a mixed system.
1) Have a tax that pays a high percentage up to a certain amount (State colleges work this way) per credit hour or whatever.
2) Have a national scholarship program that pays for good grades. Our currently scholarship program are a patchwork system and leave out many students.
3) Strict requirements for attending college. If you can't make the grade you get kicked out. Do allow for reentry after a few years, sometimes people have to grow up and mature.

Re:Holy cow, a decent idea!

[HuDongQing]

" Since everyone benefits from education, everyone pays a share."

That's true, but the share shouldn't be 100% - you don't benefit from my education as much as I do, so I should pay more for it than you, right?

This scheme is called "Income Contingent Loans" and has been used to finance higher education in Australia and other countries since the 1980s. It's excellent from almost any measure.

Re:Holy cow, a decent idea!

[ganjadude]

The reason the cost is so high is that the government guarantees student loans. As such the schools know they are going to get paid either way and they are doing a disservice to our people telling everything that they should go to college. Frankly not everyone should go to collge but the schools have a financial stake in getting everyone in. Drop out or not, the schools get paid, as such, the cost of education has sky rocketed since the guarantee of loans

Re:Holy cow, a decent idea!

[jythie]

The problem is right now we are in a massive wave of being against things that benefit everyone or have systemic benefits. The big idea right now is selfishness, everyone focusing on getting ahead of everyone else and hoping that in aggregate it results in something positive.

Re:Holy cow, a decent idea!

[squiggleslash]

Tax funded higher education, including a "maintenance grant" that covered (or intended to cover) living costs, was the norm in Britain when I went to University (I'm not sure what the current situation is, this was at the end of the Thatcher administration), and I can assure you your depiction of free education bears no relation to reality.

Indeed, I'm actually a little horrified by the notion that anyone would consider access to higher education should be dependent upon their access to wealth, because somehow a child with much inherited (or soon to be) wealth would work harder than a child of a family with little or no money. It's absurd, it's insulting, and it's ultimately damaging.

Re:Holy cow, a decent idea!

[dfghjk]

This is, of course, the correct answer and one that has been known for ages. This is how primary education is done and is the motivation for land grant colleges. College used to be affordable in-state or even free.

We don't need to invent a new solution, we need to return to what we used to have. Restore education as a public service, it should not be a profit center and our kids should not be turned into indentured servants.

Re:Holy cow, a decent idea!

[John.Banister]

This actually sounds better than the proposed system. Even with the problems you mention, a loan from the government where there's no choice about repayment is better, because you're only on the hook for the specific debt you choose. In the proposed system, anyone with an education pays the tax forever. When schools decide in the future to fire half the teaching staff in order to pay for a new stadium, graduates who would never have chosen to attend such a school have no choice but to pay for that. Paying back a loan, you at least get to choose the education you're buying.

This is an Australian innovation

[purnima]

called HECS.

http://studyassist.gov.au/site...

It began in the 1990's and was developed by the economist Bruce Chapman.

https://crawford.anu.edu.au/pe...

It is a great success in Australia. I graduated under the system. It was perfect for me, because I had no money to study but made some after and payed the loans through my taxes.

Re:This is an Australian innovation

[rvw]

If you can avoid paying income tax in Australia then you can avoid paying back the HECS fees. The classic way of doing it is by emigrating to the UK once University is finished.

Seriously?! The classic way? If I can rob a bank for $25m and can get away to the UK without having to pay the "tax", I would do it, but fleeing the country for 3% extra tax sounds absurd.

And for those few 90+ students you can set an age limit, or a limit on the number of years. Or you can set an increasing onetime tax for each college year after 40.

Re:This is an Australian innovation

[HuDongQing]

No, this is not the "Scandinavian" model (whatever that's supposed to mean), it's Income Contingent Loans and was developed mostly in Australia in the 1980s (implemented in 1989) by Bob Hawke. In Sweden, fees are repaid by annuities beginning not less than 6 months after graduation: http://gse.buffalo.edu/org/int... In Finland, students don't need to repay the loan at all: http://en.wikipedia.org/wiki/E... In Norway, it's mostly covered by government grants to students, conditional upon graduation: http://gse.buffalo.edu/org/int... As Purnima said, the scheme described here is the model pioneered largely in Australia and championed most aggressively by Bruce Chapman. It's used in some other countries: Thailand, South Africa I think... Australians have been trying to get governments everywhere to adopt it because it's clearly the best policy. Every Australian student has access to subsidised university, with the difference between the full cost and the subsidy made up automatically by a government loan indexed to inflation. Repayments occur automatically through the tax system, so you only repay the loan when you have enough money (there's no timeframe to repay). Tax is deducted from your salary by your employer, so all this happens without you having to worry about it. Some people mentioned a few ways to work the system. They exist, but they aren't a very big deal. Completion rates and repayment rates are very high. There is some loss from people who go overseas and never return (so they never pay Australian tax) but this is negligible. Tax payers pay a share of the fees because society benefits from an educated population, but students pay a share because individuals benefit from their own education, but no one pays anything they can't afford because education should be available to everyone, regardless of their parents incomes. Australia has no such thing as student loans, student debt or anything like that, and higher education isn't sending our government broke. This policy is the main reason. From where we stand, the American situation is truly bizarre.

Re:This is an Australian innovation

[SeanDS]

This issue is fixed by making higher education free to everyone, which is what happens in Scotland. No fees to collect from fleeing emigrants. This works a treat because universities in Scotland are public institutions with the tuition fees they charge set/capped by the government (the rates they can charge the government, essentially). The country benefits from an educated workforce, especially because there are many high-tech businesses in the country that can employ them (letting the government recoup their investment in the form of income tax).

Loans for living expenses are also provided on a means-tested basis, and these are paid back by graduates only once they start to earn enough money. If they never earn enough money, they never have to pay their loan back. Also, if they haven't paid their loan back in full by the age of 50 (or something like that) then it is written off. These loans are provided by a semi-governmental organisation which has the power to collect the fees like any bank, so fleeing abroad will work only as well as it would for any kind of loan.

This probably sounds crazy to most Americans, but it works, and it receives overwhelming public support. It seems the only people complaining regularly are the universities who say they make a loss providing the education, but this argument is usually muted when you consider the huge amount of money the government spends on research in these universities (and lecturers are usually also researchers, so you can't really separate the two).

So what will end up happening is the states that

[portforward]

implement this will be very popular with college students and then everyone will move to the "traditionally funded college" state schools to avoid the tax. Also the STEM, medical and business students will end up subsidizing the fine art, journalism and french medieval poetry students and their professors. This already happens to a degree (no pun intended), but at least the penalty is more born by the student through loans that need to be repaid, rather than the people who studied a more rigorous and practical career. Also, we will probably end up with too many people who go through law school because there is really no penalty to attend (besides lost wages) and then they won't be able to find jobs and then become something else.

Some issues I see

[thaylin]

1. People who go to college and graduate, only to become stay at home dads/moms would be a burden on the system.. Easy to fix for marriages, but harder for the unmarried.

2. People who dont graduate/stay in school forever.

3. Dwindling population, in general, or just of graduates, will destroy the system.

And that is just at a quick thought.

Re:Some issues I see

[hypergreatthing]

So what's to stop people from graduating and moving to another country where this tax doesn't exist?
How will this affect foreign students who are there just to get a good education?

Re:So what will end up happening is the states tha

[thegarbz]

This happens in Australia. Even with a country wide tax there's nothing stopping someone from emigrating after studying is finished and thus never repaying the student loan.

Get Government OUT of Edukation

[Lawrence_Bird]

For fifty to sixty years now government on all levels, Feds in particular have tried over and over to "fix" education. And what has happened every single time? It has gotten worse and/or more expensive. GET THE FUCK OUT OF EDUCATION. That this suggestion comes from a nominal business magazine like Forbes is even more abhorent (Malcomn Sr must be rolling in his grave).

The idea itself is great, but ...

[Opportunist]

But what about those that already went through college and are now paying off their loan? Do they get to pay off twice or what?

Re:While debt sucks, it's gives a sense of....

[Anonymous Coward]

MOTIVATION TO SUCCEED.

So does a death penalty for being unemployed.

This already exists

[wisnoskij]

It is called income tax. If your college stay helped increase your income, you should already be paying more taxes.
Unfortunately, this tax is currently quite broken for the rich.

This system is far far better than extra taxes for college graduates. Most college graduates did not go to college to make more money, so they cannot afford to pay extra taxes on their income which is already lower than their peers who did not go to college.

I lot of people go to college to get art degrees. And I do not see adding an extra tax on millions of minimum wage workers.

Bullshit!

[stevegee58]

How about the federal government and higher education address the root causes that contributed to a 1000% increase in tuition and fees since 1980?
Low cost federally subsidized student loans are a major part of this problem. It's bad enough that this is a huge overstepping of federal authority. The availablility of billions of dollars of cheap money has fueled the fire of educational hyperinflation. Take away the cheap money - tuitions go down.
Maybe more people in Congress should go take EC101 again (for the first time).

Richer

[Luthair]

The summary describes why this isn't necessary - college graduates make more money. This means they already pay more taxes.

Yes, let's put the gov't deeper into our pockets!

[PseudoCoder]

Eventually they'll find something soft and squeeze and then they'll own me. That's terrific! Let's also further minimize risk, so I have no idea what is wise and what isn't. This way I get to make others pay for my prospect-less liberal arts degree. That's so nice of them! Now everybody will get into college, even the less scholarly types who would be better off in trade schools, and graduation rates will plummet, and this new super efficient government program will be paying for those who flunk out and will exempt them from paying anything since they didn't graduate because the over achievers oppressed them somehow and they are the ones who should pay for drop-outs anyways. That's so sustainable!

We should make everything "communal"! Just like they did in that union that isn't there anymore. Or that other country that's still there imprisoning its dissenters and running them over with tanks. I love my Brave New World!

I call bullshit

[XB-70]

The biggest issue surrounding higher education is the lack of oversight of university administration over-spending.

There is also an enormous trend toward creating universities in towns and cities that are suffering economic collapse just for the sake of optics.

No one is looking at employment outcomes nor are they looking at job trends. Putting a tax on the lucky few employed graduates to subsidize fat-cat administrators, university contractors and their ilk does nothing to help the ones who need it most, the students.

Stop this lunacy before it starts.

How about no tution at all?

[Qbertino]

How about no tution at all? It works great for Germany. ... Just sayin' ...

(Cue "Nanny State!", "OMG SOCIALIZM!!", "Obviously won't work because of reasons a,b,c and d", etc. remarks below, thank you.)

Allthough we do have Semestergeühren. Something like 150€ per Semster (GASP!) of enrollment fees. ... This is outrage! I'm going to protest tomorrow. ... Oh, wait, you get the public transport flatrate for that ... and student benefits (cheaper access to public events, etc.) ... Scratch that, I guess I won't protest after all.

Seriously, you guys should move out of the middle ages allready. Healthcare, tution-free college and metric system. It works. Get with the programm. :-)

My 2 cents.

Re:How about no tution at all?

[Stormy Dragon]

Of course, Germany system only works because they break children up into different academic tracks at the fourth grade. If you're not in the top track, you're simply not allowed to go to college. Maybe you're fine with having someone's entire life being set in stone at 10 years old because some bureaucrat decided they were or weren't one of the ubermensch, but I hardly consider that a model to aspire to here.

Get the government

[skipkent]

Get the government out of the loan business and prices will drop like a rock.

Re:Questions.

[Opportunist]

I'm not from the US. I've been paying for students for pretty much all my working life, we already have a rather similar system. With the difference that EVERYONE gets to pay for students. Oddly, nobody complains. Why? Because we know that once these students graduate, they'll earn some decent money and pay a metric ton of tax (*sigh* believe me...) which will in turn pay for their pension, their kids' education and so on.

In turn it means that everyone, not just whoever can afford it, but EVERYONE can go and study at a university. Which in turn translates to a lot of students, which again means that universities can afford to simply weed out like crazy. The average field has dropout rates way above 90%. What sounds like very dim students is rather a very brutal selection system. They don't carry your ass around because they need your tuition money. Get organized, get your act together or get the fuck out.

In turn, our universities have a very good rep, nationally and internationally. What comes out of there with a degree is DAMN good. You not only get people who are among the top of their field, they are also experts in organization, information finding (or rather, scrounging), negotiations, project management and a few more things. Or else they'd simply never have graduated.

To answer your questions:

Who pays for the students who go to university and don't graduate?
Who cares if one more person sits in the course? Don't get a seat? Then come in earlier for the next lecture! It's not like you have any right to sleep in.

What happens with perpetual students?
If they can afford it, again, who cares? Either they are lazy bums, then they won't waste space in the lectures because they don't want to get up before 7am. Or they're not then they could as well have a job. Either way, get up early if you want a seat!

What is to stop someone from going to a university until they are one class shy of graduating, moving out of state or even out of the country, and then finishing their degree and never falling under the tax?
What keeps them from finishing and then moving? Nothing. What keeps you from paying back? Well, the "pay back in full if you bail" clause you have to sign if you want your degree.

It kinda helps if your country runs the universities, I have to admit that.

More taxes is always the solution!

[Marful]

Or how about we fix the problem by cutting out all the bloat in our education costs?

http://articles.latimes.com/20...
http://online.wsj.com/news/art...
http://www.forbes.com/sites/pa...

Easy

[danbob999]

1. Attend college in Oregon 2. Move to another state/country 3. Profit Since it's a tax, and not a debt, you don't legally owe anything back and you are free to move elsewhere.

Problem: not loans, it's profit-seeking schools

[ReallyEvilCanine]

Even if institutions are non-profit or not-for-profit, cost have been running amok. Schools are paying outrageous sums to executive staff (but -- surprise, surprise -- not to teachers) and spending money hand-over-fist on projects and buildings and anything else they can think of. As long as this spending remains unchecked the best financing plans in the world can't and won't fix the situation.

Don't suppress the sticker shock

[Cajun Hell]

Indirection just delays the anger and fear, and keeps it from being expressed. People ought to be seeing numbers-right-now in their faces, getting horrified, and yelling back. Just like with loans, this will make people think, "Oh, I pay later when I'm rich," and suppresses the sticker shock.

We NEED the sticker shock. And we all (not just students) need to get shocked by it. Because the problem of education isn't who pays and how they pay, but how much you pay for it. The price is totally unrealistic compared to the capital required to provide the service.

Re:Problem

[nedlohs]

No it wouldn't, which you'd know if you read the slightest bit of detail about the proposal in question. But I guess that would require engaging your brain instead of your default biases which is too difficult for someone of your mental stature.

Re:can also lead to more schools to teach real ski

[Bengie]

"Fluff and filler"? I hope you're not talking about GDRs. I hated my general classes ever since middle schools, but they were taught differently at my Uni. Every class and subject became a topic for critical thinking. What I got out of GDRs was a better ability to critically think in topics that I was less interested or knowledgeable in. This is a different type of skill than critically thinking on topics in which you are already well versed; but this skill applies to all topics.

College as we know it.. is obsolete.

[FirstOne]

Traditional college is vastly overrated and a waste of huge amounts of resources. Most grads don't end up having jobs related to their major.

It's just a matter of time before most classrooms will be replaced by remote learning . Leaving only the lab-work to be completed in some rented facility.

Instead of trying to find new ways(taxes) to prop up a overpriced, obsolete, low ROI, educational system, we should go forward and cost reduce the whole Enchilada. Deploy a national fibre network to every occupied structure within reason, similar to the old rural electrification act brought electricity to most farms.

Besides educational aspects of a national fibre network. I will bet their will be large number of societal fringe benefits, reduced travel needs, lower levels of communicable diseases, reduced crime, reduced infrastructure requirements, etc. Remember the benefits that occurred when President Clinton removed SA from GPS sats, that act spawned entirely new industries overnight.

So don't look at patching up our backwards educational system, go forward into the future.

Re:While debt sucks, it's gives a sense of....

[benjfowler]

Sounds like bullshit young-Republican rightwing talking points.

Let's see some evidence that granting the private sector a license to impose debt-slavery on people actually concentrates minds in college.

Re:This is a terrible idea - here are modification

[serviscope_minor]

Well, dan_in_dublin, why don't you look around and see how well it's working in Ireland where the government pays for most of the tuition costs.

Does it work as badly as you claim?

When you tax something, you get less of it.

[felrom]

It's why the government taxes cigarettes, alcohol, and machine guns: because they want less of those things.

If you start taxing college, you'll get fewer people going to college, and fewer people who went will work as hard as they would have otherwise. If you want to fix college tuition problems, then stop underwriting loans with tax dollars. Let private investors determine the proper risk of each student based on GPA, SAT, and the field they want to study.

It's such a daftly basic concept of economics, that it's depressing to see so many smart people trip over their own feet trying to explain why it shouldn't apply. You can rationalize to yourself why this is different all you want, but as Feynman said, "Nature cannot be fooled."

Conditions

[morgauxo]

That's easy to fix, If you don't graduate you have to pay it back.

I wouldn't put a 4 year limit on it though. Some students will have more or less parental support than others. Those not being supported by parents will still need money for books, rent, food, medicine and all that life stuff. To stay out of debt they will still have to work, not just be full-time students.

Besides, if you really want people to get something out of their classes they shouldn't be rushing things. Most full time students I have known that had good grades didn't really learn much of what was taught in class. Instead they were good at filling their short-term memories with enough facts to do well on the test and immediately forgetting it all in order to do it again with new facts for the next test. Truly learning the material associated with a 4-year degree will take much more than 4 years! I graduated in 4 years + 1 semester myself. I regret that. I wish I had taken fewer classes at a time, studied each class harder, learned while at the same time doing more to enjoy my pre-career life. Remember, once you start working you probably aren't going to stop until you are old and suffering age-related illness.

But then I am assuming this isn't paying room and board, just tuition and only for the credits necessary for a 4 year degree. I would attach some rules to this:

  Degree must be chosen by sophmore year. Alternatively, only common electives that everyone has to fill plus classes that count towards a declared major count. Declare your major when you chose (up until you run out of electives) but if you do all your electives first it's going to be some very difficult later years! People that can't make up their mind pay their own way. Sorry, the tax payers don't need to pay for half a dozen half-degrees just so you can finally settle on underwater basket weaving.

Student must be enrolled for at least one class in each of two semesters each year. This way there has to be some end to it, someone can't just take a few classes then quit going claiming 'it is only a break' forever and thus get out of re-paying. Going back to the previous part about not forcing them to graduate in 4 years I wouldn't care if they go greater than full-time every semester or only 1 class a semster with summers off. So long as the taxpayers are only paying for the classes themselves and the student does eventually finish the cost to benefit ratio for the taxpayers is about the same.

Easy problems with easy solutions

[sjbe]

What happens when those folks dont graduate, and thus dont pay the tax?

You make the tax contingent on time spent in school rather than whether they graduation. You're subsidizing their education, not their degree.

What happens when they dont get a job-- does that mean that the people who succeed are in effect subsidizing those who failed?

You give them a reasonable grace period of a few years (5 maybe?) and if they don't find or seek employment, the subsidy converts to conventional debt which they have to repay similar to the current system. If someone wants to become a stay-at-home parent, that is fine but then they can pay for it like any other loan for the education they are not using.

These are problems with relatively easy solutions if you give it more than about 2 seconds thought.

Re:Easy problems with easy solutions

[JeffOwl]

I hadnt realized that you could pay taxes in excess of what you make / own.

Apparently you hadn't realized you can read the post you are replying to either so I'll repeat my response. If the person doesn't pay taxes towards their education after some reasonable number of years then you turn it into regular debt and turn them over to a collections agency if needed.

Apparently you hadn't realized that you should address the stated concern in your response. The collection agency doesn't just conjure up money from the air. How does sending it to a collections agency solve the problem of the person not having any money to pay it back? I mean other than to make sure that IF the person ever does earn any money most of it will go to the collections agency instead of back into the system.

Furthermore you can also require a cosigner like a parent or spouse and require them to pay if the student doesn't. This is not a difficult problem to solve but you seem awfully determined to think every little nuance is some insurmountable obstacle.

So if you can't come up with a qualified co-signer you still can't go to college? I think the problem is not as simple as you would like it to be.

Think about it

[sjbe]

I hope they are careful. Here is another way to scam the system: Arrange your classes so that at the end of your senior year, you are one credit hour shy of the requirement for graduation. Now you have the education, and the transcripts to prove it to prospective employers, but no actual taxable degree.

So tax them based on the amount of education received, not the degree. I should think that would be obvious. The point is to better fund their education, not their degree.

Plus would you hire someone who did that? Me neither. Such a person would raise all kinds of red flags about how they would game the system at my company.

Re:Think about it

[ShanghaiBill]

Plus would you hire someone who did that?

Yes, I would. I would consider it an IQ test. Nobody has a legal or ethical responsibility to adjust their behavior in order to maximize their taxes.

Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. -- Learned Hand

Re:Think about it

[sjbe]

"Based on the amount of education received" isn't a measurable metric.

Nonsense. It is ridiculously easy to measure. Credit hours taken (doesn't matter if they pass) is a trivial way to do it. Semesters attended is another. There are plenty of useful proxies for the amount of time spent in a classroom. Pick some useful ones. This is not hard.

What if you don't pay administrative costs (like dorm deposits, paying for the credits, etc)?

Administrative costs can (and are) easily be rolled into the total amount charged if needed. Not difficult from an accounting standpoint and I am an accountant so I ought to know.

You really aren't ready to discuss solutions when you have no idea about the workings of the US collegiate ecosystem and assume that a bill can be tailored to restructure it at-will to serve a specific purpose.

Interesting how you presume I have no knowledge of the business end of US higher education or lawmaking since you have no idea what my background actually is. You might want to reconsider that.

Re:Government is not a fee for service business

[expatriot]

The French system is good in this regard that everyone can go to university for one year with almost no restrictions. They have to pass to continue. The costs increase after the first year, but probably less than US schools.

Re:So what will end up happening is the states tha

[asylumx]

Also the STEM, medical and business students will end up subsidizing the fine art, journalism and french medieval poetry students and their professors.

I see this as the bigger problem. It's not that I don't think these degrees should exist, but there is low demand for these degrees so we should be discouraging too many people from pursuing them if we're going to make efficient use of these tax dollars. The problem is as soon as you start favoring some degrees over others, you'll have the anti-gov't folks yelling about how the gov't is trying to decide peoples' careers for them.

Stereotypes

[sjbe]

Depends on the position. If we are talking engineers probably not but that may be "just the right kind of out of the box thinking" needed for the standard MBA types.

Oh yes, engineers are just paragons of virtue. I'm reading a whole bunch of engineers posting in this thread about how they would scam the system and you think someone with a business degree is somehow worse? Seriously, I have both engineering and business degrees. Are you claiming that I am a criminal because I went to school to learn how to run a business? Or are you just interested in scapegoating a bunch of people you don't actually know much about because it is convenient and you don't actually understand what they do?

Let me give you a tip. No matter what your job is, people think you are an incompetent idiot in some way and few people will ever really understand what you do. People (wrongly) think engineers are arrogant nerds with limited social skills and bad hygiene who don't understand anything that isn't a machine and who don't understand money at all. People (wrongly) think all finance people are criminals who are only interested in making a quick buck. People (wrongly) think all marketing people are a bunch of impractical imbeciles who don't understand anything technical. People (wrongly) think that people who manage others are incompetent greedy asshole who can't actually do anything useful and who never make correct decisions. In ANY profession you will find some people who are good, a lot of people who are mediocre and some people who are genuinely incompetent. Just because you've run into some of the later doesn't mean everyone is just like them.