"Pay It Forward" and Higher Education Subsidies: A Theoretical Model

• In Event: 14.045 - Roundtable Session 3
  In Roundtable Session: 14.045-6 - Division J Section 5 Roundtable 3

Abstract

Since 2013, more than 20 states have considered legislation on “Pay It Forward” (PIF) models of higher education finance. This paper proposes a theoretical model of PIF policies that enable students to pay the price of college upon departure from an institution (as opposed to upfront tuition). Our theoretical model shows that access is enhanced by PIF policies. In addition, not all equilibrium voting models will result in a decline in subsidy values for postsecondary education and, in some instances, subsidy values may increase due to changes in access for low income individuals under PIF. Likewise, we present a descriptive analysis, which shows that there are higher levels of access to college credentials with deferred tuition systems.

Authors

• Jennifer A. Delaney, University of Illinois at Urbana-Champaign

• Dhammika Dharmapala, University of Illinois at Urbana-Champaign