Madison Weakley graduated from the University of Louisville with a degree in political science, limited job prospects and $16,500 in student loans.
“It’s tough,” said Weakley, who plans on taking a second job to pay down her debt.
Student loan debt reached a national record high of more than $1 trillion and surpassed credit card debt for the first time last year, according to the U.S. Department of Education and the Federal Reserve Bank of New York.
At the University of California Riverside, students unveiled an alternative tuition payment plan in January, which would sidestep federal student loans.
The plan, called Fix UC, would see most students paying 5 percent of their annual salary to the university for their first 20 years of employment after graduation, rather than paying their tuition upfront. Percentages would be slightly higher for out-of-state students and lower for transfer students and for those pursuing careers in the public sector.
The online petition had 197 signatures on Saturday.
According to the National Center for Education Statistics, the national average salary in 2009 for bachelor’s degree holders was roughly $45,000, equating to a $2,250 yearly payment or $45,000 total, under the Fix UC proposal.
Deferring payment until after graduation would “increase access to higher education for those who can’t afford to pay upfront,” said U of L’s Dr. Steven Koven. In-state tuition at the University of California is $12,192, an over 300 percent increase since 2001. The Fix UC proposal chalks it up to slashes in the state’s higher education budget. The University of California “cannot sustain itself through another massive budget cut,” reads the Fix UC proposal.
Cuts aren’t unfamiliar to Kentucky’s colleges and universities. Governor Steve Beshear proposed a 6.4 percent cut to higher education early this year.
Universities in Kentucky will need to explore alternative solutions as the state “continues to lower funding for higher education,” and as tuition increases across the board, said U of L Student Government Association President Kurits Frizzell.
The National Institute for College Access and Success reported graduating college seniors in 2009 carried an average of $25,250 in student loan debt. At U of L, graduating seniors average $22,777 in Stafford loans.
The repayment schedule under Fix UC isn’t so different from some salary-based federal loan repayment options, said Associate Director of Student Financial Aid Michael Abboud. But when students pay the school directly instead of through loans, they avoid “middleman” interest payments added to their outstanding balance, Koven added.
According to Abboud, the initial payments on the average U of L Stafford loan would come to about $262 per month, making only minimum payments. With interest, the average student would end up paying a total of $31,454 — over $13,000 less than the average student’s total payment under Fix UC.
U of L Vice President of Finance Michael Curtin said the repayment plan outlined Fix UC proposal might be “theoretically possible, but not practical.”
Universities would have to front students’ tuition – at U of L, a source of over $230 million in revenue annually.
There would likely be a short-term lull in revenue, as the plan’s first generation of graduates has its tuition deferred. But Koven said such programs could provide universities with “a future stream of payments that could be sold off for immediate cash or could be retained to build and advance.”
In the interim the university would have to pull from internal funds to meet operation costs, Curtin said. At U of L, those funds “clearly are unavailable,” he said, adding the proposed plan might be more viable for private universities with larger endowments.
To avoid damming the university’s tuition revenue stream, the plan would need to be phased in over four years, said Curtin.
Weakley added universities could have trouble keeping up with students’ payments. “What if they move out of state?” she said.
Kentucky, like California, has seen what U of L President James Ramsey has called a “brain drain,” where the newly-qualified members of the workforce leave the state after graduation. Fix UC aims to keep graduates in state by offering decreased repayment for those who live and work in California.