“Pay forward, Pay Back”: New Jersey’s Plan to Decrease Student Loans

Student loan debt is growing rapidly across the country, leading to many calls for education reform. New Jersey in particular is feeling the rising costs of higher education with some of the highest public tuition rates in the nation.

New Jersey State Senate President Stephen Sweeney (D) is hoping to spark reform by decreasing the amount of student loans college students need to take out. He and Assemblywoman Celeste Riley (D) are introducing legislation that would create a seven member commission who will consider a system where students do not pay tuition but rather give back to the school a percentage of their future salaries for an undetermined number of years, interest free. Passing S2965 would not necessarily enact that policy, but it would allow a task force to look over the pros and cons and decide if the program is feasible. If it decides the program is feasible, it could then enact it.

While most are in agreement that change needs to happen, there are strong critics of this particular solution. Critics point to the other costs of college (books, room and board, etc.) and the logistics of the program- how do you fund the first few years of the program? What happens when students move out of the state or are unemployed?

In a statement about his legislation, Sweeney says, “President Obama has elevated the discussion on a national level. We must continue to make this issue a priority.” Hoping to connect with the New Jersey population and gather support in the Democratic Party, Sweeney is bringing this national problem to a more local level. He offers stories of a few select students who cannot continue their education because their loan debt became too high or who are struggling to work multiple jobs while pursuing a double major, noting that these situations are happening “in every town in New Jersey.” By framing this as a salient issue for New Jersey residents, Sweeney may hope districts call upon their Congressmen to vote in favor of the legislation.

What chance does S2965 have? It is being introduced by two important figures, Senate President Sweeney and Assemblywoman Riley, who is currently head of the Higher Education Committee. Democrats have control of both Houses in the state Congress. A similar proposal was recently passed in Oregon by a Democratic congress. If the party supports Sweeney, there is a good chance New Jersey will follow in Oregon’s footsteps. However, Sweeney has admitted that “Pay Forward, Pay Back” “may not be the best idea,” and that it is just a way to get reform started.




5 thoughts on ““Pay forward, Pay Back”: New Jersey’s Plan to Decrease Student Loans

  1. This is a classic adverse selection problem – those who think they will make the most money aren’t likely to sign up, as they’ll probably end up overpaying for their education compared to most. Only those who don’t believe they’ll make a high income will sign up, and the program will struggle to pay for itself. One possible solution is a “buyout” option – allowing people to pay their tuition costs early. Another is to change the payment plan by major, making the program more attractive to those with potentially high-paying majors like engineering. It’s a good idea, but there are plenty of problems that lawmakers need to work out before it can become a feasible, sustainable system.

    Chris Gibson

  2. Though I think that this type of solution could be particularly difficult to enact in the current job market, in which graduates cannot be certain that they will be getting stable jobs after college, it is clear that reform needs to happen. Setting up a task force to weigh the pros and cons of such a program and look into other solutions is still a step forward. It seems as if, considering the Democratic alignment of the state Congress and the similar proposal passed in Oregon, that this will also pass. Also, since President Obama is making this type of reform a national priority, the Democratic members of the state Congress may want to push through similar legislation to reach party goals.

  3. Some objections to this bill make more sense than others. Worrying about people moving out of state, for example, makes sense – it would be an easy way to run out on the bill, and it’s not a difficult move from Hoboken to NYC. Worrying about employment makes less sense. It seems to me that if a university consistently hands out degrees with little in the way of job prospects, they probably don’t deserve to collect a huge fee. While I like the concept of this bill, its implementation will likely need a bit of revision, or even introduction at a national level, to be very successful.

  4. I think this system could be easily gamed by students. If I was a student attending Princeton or some other expensive private school in New Jersey, I could be incentivized to find a low paying job for the first few years out of college in order to pay a much lower price for my education. This game, however, is unlikely because most students choose jobs that are the best for their career. However, it is something to keep in mind!

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