Giving Compass' Take:

• Anne Kim reports that as student loan debt continues to grow, states and schools are working to identify new student loan repayment schemes that will better serve students. 

• How can funders help to develop scalable, equitable solutions to the student loan debt crisis? 

• Learn about racial gaps in student loan debt and repayment. 

An ambitious group of seniors from Oregon’s Portland State University devised a creative plan in 2012, dubbed “Pay Forward, Pay Back,” to deal with spiraling college costs and student debt. In exchange for deferred tuition, students would contribute a chunk of their post-graduation earnings to a fund for future students, ultimately creating a self-perpetuating pool of aid passed from one generation to the next.

Unfortunately, Pay Forward, Pay Back quickly hit the wall of fiscal reality. Despite the embrace of legislators, the state’s Higher Education Coordinating Commission concluded that the deferred tuition plan was unaffordable, costing as much as $20 million a year for 20 years to benefit just 1,000 students annually.

Yet interest in new ways to finance college remains very strong, especially as average in-state tuitions at four-year public universities have roughly tripled since 1998, total student debt topped $1.5 trillion in mid-2018 and state grant aid has stayed flat.

Rather than look to public money, however, some states are exploring novel alternatives to traditional student debt, ideas that would rely on private and philanthropic financing. Of particular interest are so-called income share agreements (ISAs), which proponents argue has the sex appeal of Pay Forward, Pay Back, but poses less risk to the public purse. Six states considered ISA-related legislation in 2018, according to the Education Commission of the States. In 2019, California could launch the nation’s first statewide ISA pilot.

Read the full article about finding a new student loan repayment scheme by Anne Kim at Governing Magazine.