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Financing College With a Tax On All Graduates

Posted by samzenpus on from the time-to-pay dept.

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.'"

17 of 597 comments (clear)

  1. Lifers? by Anonymous Coward · · Score: 5, Interesting

    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.

    1. Re:Lifers? by Mr.+Freeman · · Score: 5, Informative

      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.

      --
      -1 disagree is not a modifier for a reason. -1 troll, flaimbait, redundant, overrated are NOT acceptable substitutes.
    2. Re:Lifers? by Sponge+Bath · · Score: 5, Insightful

      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.

    3. Re:Lifers? by ShanghaiBill · · Score: 4, Interesting

      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.

    4. Re:Lifers? by schnell · · Score: 5, Insightful

      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.

      --
      "95% of all Slashdot .sig quotes are incorrect or completely fabricated." -Benjamin Franklin
  2. Holy cow, a decent idea! by Mr.+Freeman · · Score: 4, Insightful

    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.

    --
    -1 disagree is not a modifier for a reason. -1 troll, flaimbait, redundant, overrated are NOT acceptable substitutes.
    1. Re:Holy cow, a decent idea! by Albanach · · Score: 5, Insightful

      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.

    2. Re:Holy cow, a decent idea! by jbmartin6 · · Score: 5, Insightful

      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.

      --
      This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
    3. Re:Holy cow, a decent idea! by ganjadude · · Score: 4, Insightful

      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

      --
      have you seen my sig? there are many others like it but none that are the same
  3. This is an Australian innovation by purnima · · Score: 5, Informative

    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.

  4. So what will end up happening is the states that by portforward · · Score: 4, Insightful

    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.

  5. Bullshit! by stevegee58 · · Score: 4, Interesting

    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).

  6. How about no tution at all? by Qbertino · · Score: 4, Insightful

    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.

    --
    We suffer more in our imagination than in reality. - Seneca
  7. Re:Questions. by Opportunist · · Score: 5, Interesting

    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.

    --
    We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
  8. College as we know it.. is obsolete. by FirstOne · · Score: 4, Interesting

    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.

  9. Re:Think about it by ShanghaiBill · · Score: 4, Insightful

    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

  10. Stereotypes by sjbe · · Score: 5, Insightful

    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.