College payment plan proposal in Oregon could be 'model' for other state schools

Students at Portland State University lobbied state lawmakers for the new college payment plan. (AP) (AP)

Oregon Gov. John Kitzhaber plans to sign a bill that would allow for a close study of a novel college payment plan being billed as "free" -- even though participants would pay three percent of their post-college income for up to 25 years.

The idea, called "Pay It Forward," would ease the economic burden for students attending public school and allow a far greater number of individuals to attend state colleges if enacted into law, say advocates of the proposal. But the concept faces a major challenge -- coming up with an estimated $9 billion in startup costs.

The concept was originated by the Economic Opportunity Institute, a nonprofit policy group in Seattle, and is based in part on a model used in Australia. A classroom of students from Portland State University, along with the Oregon Working Families Party, then pitched the idea to state legislators, including Rep. Michael Dembrow, D-Portland.

Dembrow, who co-sponsored the study bill that passed the state House and Senate, said the program, if successful, could also be a "model" for the rest of the country's state schools.

"Our plan right now is to put together a model in the form of a pilot project that could expand – maybe to all of our colleges and universities," he said. "What drove this was this growing problem of student debt that we're facing. Over the last couple of years, it’s reached a tipping point. A lot of students are going into default on their loans ... a lot are being held back as they try to start their lives."

"I’m attracted to this notion that students can come in without having to take out loans for tuition," Dembrow told FoxNews.com. "It’s really going to help students who are non-traditional -- maybe ones new to this country or ones from cultures reluctant to go through that whole process. The notion of them going to school at the state’s expense and then repairing the state with a small percentage of their income, it makes sense to a lot of people."

Students at Portland State University, including 32-year-old Nathan Hunt, researched the problem of student debt and then came up with various solutions as part of a course.

"It’s pretty exciting," Hunt said of the plan the group successfully lobbied to state lawmakers. "I don’t think any of us thought it would have grabbed national attention."

But, Hunt added, "It might just be an Oregon solution."

"Oregon doesn’t have elite level public institutions," he told FoxNews.com. "By in large, most of the top students in Oregon leave the state for other schools."

"The drive of this it to open access to more students and get more Oregonians going to school," he said, adding that colleges, such as Portland State, cost about $8,000 a year.

While startup funds for such a plan would be around $9 billion, a pilot program would cost a fraction of that, Dembrow said.

"Is it going to be a single school? Is it going to be a group of students within one school? The pilot is needed to see if this model works," he said. "It seems to have worked quite well in Australia."

Tim Raphael, a spokesman for Kitzhaber, told FoxNews.com that Kitzhaber is expected to sign off on the bill authorizing a pilot program in the coming weeks.

FoxNews.com's Cristina Corbin and The Associated Press contributed to this report.