Is This the Answer to the Student Debt Crisis? FixUC's 5% Solution

College tuitionWhen it comes to economic protests, the Occupy movement has dominated headlines. But as the recent pepper spraying incident at a Santa Monica College tuition protest demonstrates, the struggle over America's economy is playing out on several fronts.

For college students, recent graduates and their families, the most pressing concerns may surround our higher education system: Student loan debt is at an all-time high, and the average college graduate leaves school with over $25,000 in loans. And, with tuitions rising and unemployment among recent college grads still high, it's no surprise that many students are up in arms.

"For years, there have been protests in response to university budget cuts," UC Riverside student Chris LoCascio notes. "The system is clearly broken, and new solutions are needed."

LoCascio thinks that he may have found the answer. His group, FixUC, has developed a plan that, they claim, will ameliorate the student debt crisis while actually increasing university funding. On the surface, it's remarkably simple: Rather than charging tuition, the University of California system would charge its graduates 5% of their yearly salaries for twenty years.

"Charging students when they don't have money doesn't make sense," LoCascio points out. Instead, the FixUC plan would charge students when they are actually able to pay -- once they're out in the workforce. "In 20 years, our plan would double the amount of money coming into the UC system."

Students protest the SMC Board of Trustees meeting at Santa Monica College. Getty Images

'A Massive Undertaking'

While the basic outline of the FixUC plan is simple, the implementation would be more complex. To begin with, there's the issue of ensuring collection. Under the current system, universities have an ironclad method to compel students to pay their tuition: Those who don't fork over the money generally aren't allowed to stay in their classes.

The FixUC plan, on the other hand, would task universities with recovering funds from students who are no longer under their control -- which, LoCascio admits, would require some level of enforcement. He proposes that the IRS get involved: The FixUC plan calls for "a new department of the United States Internal Revenue Service in charge of collecting contributions." This added layer of bureaucracy would be somewhat self-financing -- partly funded by the tuition that it would collect.

LoCascio's knows that adopting the plan would be "a massive undertaking," fundamentally changing the way that America views -- and funds -- college. "It would involve a complete tear-down of our current funding model."

A Cost Beyond Tuition?

Because the FixUC calls for a 5% yearly contribution from graduates, it effectively establishes a wide-ranging tuition. One version of the plan establishes a base income of $30,000 -- graduates who make less than that amount would be exempt from making their 5% payments. On the upper end, graduates who make more than $200,000 per year would have their yearly contributions capped at $10,000. In other words, the yearly post-graduate tuition payment would range from $1,501 to $10,000.

One could argue that this system would, effectively, force graduates from high-paying majors to fund lower-paying ones. After all, while the median income for a petroleum engineering graduate is $127,000, the median income for someone with a bachelor's in school student counseling is only $20,000. For universities looking to maximize their income, it would make sense to channel funds to more profitable departments, while letting less lucrative ones wither on the vine.

Lest that scenario seem too outrageous, it's worth remembering that a very similar situation led to Tuesday's incident at Santa Monica College. The school, looking to increase funding, was considering a proposal to quadruple the price of some of its most popular courses. When students tried to attend the meeting evaluating the plan, they were pepper sprayed.

But LoCascio is convinced that the FixUC proposal would not result in cuts to departments that lead to less lucrative careers. "I have a lot of faith in the UC faculty and their dedication to academia," he says. "I can't imagine that a plan like this would have such an effect."

A Plan for California ... And the Country

Having put together a plan for the UC system, FixUC is expanding. FixCSU, a similar proposal tailored for the California State University system, is in the works. Meanwhile, LoCascio has begun laying the groundwork for a national organization. "I've been contacted by a number of universities across the country," he notes. "It looks like the FixUC plan might be way of the future."

With states across the country cutting higher education funding and the student debt crisis growing increasingly dire, there's little question that bold solutions are needed. While some wrinkles certainly need to be ironed out, it seems like FixUC may well be on the way to finding the answer.


Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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Milan Moravec

Public university Chancellor advises politicians to raise instate tuition. University of California Berkeley (UCB) Chancellor Robert J Birgeneau is outspoken on why elite public universities should charge more. With Birgeneau’s leadership flagship UCB is more expensive (on an all-in-cost) than private Harvard and Yale. Cal. is the most expensive public higher education in our country!

Birgeneau likes to blame the politicians, since they stopped giving him every dollar expected. The Chancellor’s ‘charge more’ instate tuition skyrocketed fees by an average 14% per year from 2006 to 2011-12 academic year. If Birgeneau had allowed fees to rise at the same rate of inflation over the past 10 years they would still be in reach of most middle income students. Increasing funding is not Cal’s solution.

UCB is a public universities created to maximize access to the widest number of instate students at a reasonable cost: mission of diversity and equality of opportunity. Unfortunately Birgeneau’s ‘charge more’ instate tuition diminishes the equality and inclusion principles which underlie our state and country. Birgeneau’s and Provost George Breslauer’s senior management ‘charge more’ instate tuition denies middle income Californians the transformative value of university education.

Chancellor Birgeneau’s tenure is a sad unacceptable legacy. University of California Berkeley is now farther and farther out of reach for the sons and daughters of Californians.

Send your opinion: UC Board of Regents marsha.kelman@ucop.edu and your Calif. State Senator and Assembly member.

May 01 2012 at 6:31 PM Report abuse rate up rate down Reply
RobertPlattBell

$25,000 is not a lot of money - about the cost of a new Camry. And these kids have the rest of their lives to pay it off, too.

I had about $40,000 in student loans when I graduated in 1992. I paid them off. It was not that hard.

Why does this generation want their loan debts "forgiven"?

I think I know why. I grew up in the 1970's, when the economy was in the tank, interest rates were staggering and there were no jobs. So a bad economy was no surprise to me.

Kids graduating today grew up during two decades of unparalleled growth and expansion in the economy. They graduate and cannot find a job and freak out. How will they EVER pay back the whopping sum of $25,000? It seems impossible.

But it ain't. Dump those smart phones you are using to text from the protest. Dump cable. Stop buying things.

Twenty-five grand is a "burden" to a college grad? Be serious!

April 09 2012 at 8:33 AM Report abuse rate up rate down Reply
psharac

So, the student who chooses physical chemistry or software engineering and after years of hard studying finds a good paying job, gets to pay five percent of his or her income towards the loan. Sounds like the Income Based Repayment plan in place right now which rewards low achieves and punishes high achieves. Four years in a party school and have low income, pay chump change.

April 08 2012 at 10:35 PM Report abuse rate up rate down Reply
some11bo

5% solution is good. Do not get into excessive debt for your education. Try to find satisfaction in paying debt, being debt free, consuming less, driving less, flying less, working less. Enjoy the smaller things in life. Google for "DEFLATIONARY CRASH" to understand why this is not the time to get ambitious about your economic expansion.

April 08 2012 at 1:17 AM Report abuse rate up rate down Reply
sgtdjusmc

sooo why are people going to these expensive schools? wgu has a business online degree for 2700 per term, everything included..i am going to a state school for my masters and its less then 1k a class..i also went to community college and paid $103 per class.....its the students who are attending these schools...you have choices

April 07 2012 at 6:29 AM Report abuse rate up rate down Reply
Micah Price

A big issue with student loans is that universities can double or triple the cost of tuition and fees from start to finish of a degree. You can only transfer a low number of credits so no going elsewhere. Another issue is that interest rates can be raised at the government's will. Mine went from 2.8 to 6.8% with 3% fees. Once you've started a degree (especially a graduate degree) you must finish it or be massively in debt with no degree or way to pay for it.

The problems students face are like someone buying a house and halfway through paying for it the banks double the interest rates and triple the cost of the house but there is no legal way of getting out of it.

I'd go for the 5% deal but an even better solution for current students: Fix the rate of tuition to be the same from start to finish and since the government handles student loans set the interest rate to a level that covers costs but no more. The government makes more on taxes the more the person makes so it will still make money.

April 06 2012 at 10:00 PM Report abuse rate up rate down Reply
Jason

This is the stupidest thing I've ever heard. For one, if we take the average $25k debt mentioned in the article and pay it out over 20 years assuming a low-end salary of $30k (again, mentioned in the article) it equates to roughly 5% of salary anyway, and it's in a system that already encompasses sticks, carrots and natural enforcement. Now this genius wants to create a whopping new beauracracy for enforcement which will undoubtedly increase overall costs of the system. Here's a better idea: Let's start teaching financial literacy in grade school and teach high school students how to evaluated their likely job prospects vs. debt for different majors so they can make more informed decisions up front.

April 06 2012 at 12:22 PM Report abuse rate up rate down Reply
Richard & Debra

I like it.
More people can go to college to better them selves.
If you drop out you only owe for the years you attended and you pay that over time. It must be tied to the IRS for collection. The only problem is will congress do what is right for the people or what is right for their pocket.

April 06 2012 at 8:51 AM Report abuse rate up rate down Reply
Milan Moravec

University of California Berkeley piles on tuition increases for instate students. UC Berkeley Chancellor Birgeneau and Provost Breslauer pick the pockets of Californian students and their parents clean. Birgeneau’s tuition/fee increases rank Cal. # 1 most expensive (on all-in-cost) public university. UC Berkeley is more expensive than Harvard, Yale. Birgeneau’s decisions are an insult to taxpayers who help support the University of California system and to students confronting soaring costs.

UC Berkeley Birgeneau ($450,000 salary) has forgotten he is a public servant, steward of the public money, not overseer of his own fiefdom. Pays ex-politician $300,000 for several lectures; Doubles instate tuition/fees; Recruits (using California tax $) foreign & out of state affluent $50,600 tuition students who displace Cal. qualified instate applicants; Spends $7,000,000 + (prominent East Coast university accomplishing same at 0 cost) for OE consultants to remove inefficiencies created by his leadership then stonewalls consultants from examining Chancellor office: When procuring OE consultants failed to receive alternative proposals: Tuition to Return on Investment drops below top 10.

In tough economic times, unpleasant decisions must be made: is this the sort of Provost and Chancellor we need?
Email opinion to marsha.kelman@ucop.edu . (The author has 35 years’ consulting, has taught at Cal where he observed the culture & ways of senior management & was not fired)

April 06 2012 at 12:25 AM Report abuse rate up rate down Reply
mbernst126

tuition is out of control .

April 05 2012 at 11:56 PM Report abuse rate up rate down Reply