Oregon Trail: College Costs Tied To Future Paycheck
NEW YORK (TheStreet) -- With the cost of a college education rising to alarming levels and the interest rates doubling on government student loans, to 6.8% from 3.4%, students and families are feeling the financial squeeze.
College graduates, on average, could make $300,000 more over the course of their careers than non-college graduates, and that factors into the cost of a college degree.
Still, the college cost issue is virtually screaming for a common-sense solution, one that provides affordable college tuition tied to some sort of repayment plan that doesn't break the bank for college graduates.
The state of Oregon believes it has such a solution - a new investment model that offers free tuition at state public universities with no onerous student loan payments to pay back.(AAPL) or Federal Express (FDX), Oregon is betting its college graduates will flourish in the business world and easily cover the 3% of their annual pay for a full quarter-century. How does the proposed deal look from a cash perspective? Consider a college graduate who earns $600,000 over approximately 25 years (not a huge annual salary.) At a 3% repayment rate, the cost of that college education in Oregon would cost $18,000. But what about a grad who cashes in on his or her career and earns $1 million over 25 years? That's going to cost $30,000 in college repayments, giving Oregon a big return on its investment. Oregon is essentially gambling that its investment will be covered by financial overachievers who out-earn their peers in their first 25 years out of college. student loan debt something to chew on.
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