There are currently three funding models for higher education: pay-as-you-go, pay-it-back, and pay-it-forward. The first two are by far the most popular and the models are self-explanatory: either you cover your tuition in full each semester, or you take out loans that must be paid back later. But the third option, despite being promoted by economists for years now, is still relatively unknown.
The idea is simple — the student pays no upfront tuition, but pledges to contribute a portion of their future earnings to their school after graduation. From there, the precise definition of terms will vary. Some schools might specify an exact percentage and duration — “1% of your AGI for 20 years,” — while others might decide to leave it open-ended. Either way, the underlying mechanics of the system are the same. Students don’t pay for their own education; instead, they pay for someone else’s.
The only thing that’s hard to understand about this model is why it hasn’t caught on, and that may have to do with ideology more than anything else. For many Americans, any idea that resembles “free tuition” is apt to make them think of socialism. This is understandable, given that the most prominent advocate for free tuition in recent years is a self-proclaimed socialist.
But the pay-it-forward model has nothing to do with socialism; it isn’t even “free tuition.” Still, most conservatives find themselves bothered by the idea of anyone getting “something for nothing.” One of the more frequent criticisms of the model is that it would devalue a college education, based on the assumption that how much a person values something depends on how much they had to pay for it. If a student receives an education for free, the student won’t appreciate its true worth, and won’t be sufficiently dedicated to it as a result — or so the thinking goes.
What’s fascinating about this criticism is that it actually doesn’t apply to the “pay-it-forward” model, but it does apply to the traditional pay-as-you-go model. This was proven quite some time ago, yet no one seemed to care.
Students Whose Parents Pay More in Tuition Earn Lower Grades
Laura Hamilton is chair of the Sociology department at the University of California, Merced. Twelve years ago, she published a paper which initially made headlines, but has since become largely ignored. What Hamilton was able to convincingly demonstrate is that the students whose parents pay the most in tuition also end up with the worst grades. In other words, there does appear to be some merit to the “something for nothing” criticism, just not in the way that its proponents intended. Instead of being an argument against pay-it-forward, it ironically ends up being an argument against pay-as-you go.
So what is a parent to do? Just when all hope seems lost, Hamilton offers a caveat. Parents can pay their child’s way without negatively impacting academic performance, so long as the gift comes with strings attached. These strings aren’t legal or financial, but rather relational. When parents have a conversation with their child about reciprocity—how their financial support comes with certain expectations, which then creates a reciprocal obligation on the child’s part—students do quite well, even when their bill is paid in full.
But what about the 70% of families who cannot afford tuition? Need-based scholarships can replicate the same effect to a certain extent, provided that the renewal of the scholarship is contingent upon academic performance. But while this solves the problem of student motivation, it does not solve the problem of the college’s budget. Paying customers are a sustainable business model; need-based scholarships are not!
Pay-It-Forward Provides a Superior Approach to Traditional Scholarships
Enter pay-it-forward, which can be seen as the new-and-improved version of need based scholarships. The advantages of this approach over traditional scholarships are two-fold: not only does the pay-it-forward model solve the problem of a college’s own financial health, but it is also significantly more robust in terms of its effects on student motivation.
Hamilton’s basic insight is that when it comes to student performance, what matters is clear expectations expressed in the context of an ongoing personal relationship. But parents aren’t the only ones who can establish this dynamic. Colleges themselves can maintain an ongoing conversation with each student in which they communicate, “We are giving you an education at no cost to you, but at great cost to us. You have made a promise to give back after graduation. That is a promise that we take very seriously, and we expect you to take it seriously, too.”
Some might wonder if students will forget their commitment after graduation. But pay-it-forward ties students to their alma mater in a unique way. Students know their education was funded by others and that their contributions will support future students. This continuity creates a sense of connection far stronger than we might expect.
Hope is the Most Powerful Motivator
The reason has to do with a sense of interdependence, which is easily felt in the context of a pay-it-forward model. What any student can readily comprehend is that a college can’t just keep giving their services away forever unless someone gives back. The student is confronted with a profound realization: “If I don’t make good on my promise, eventually this college won’t be there anymore.”
This thought is deeply motivating, and not necessarily because the student cares so much about the college’s future. Rather, it’s because the student realizes how invested the college is in their future, as a matter of necessity. An 18-year-old is being told by a group of well-educated, successful adults, “We believe in you so much that we are willing to stake our own survival as an institution — our own livelihoods — on your success. That’s how sure we are that you are going to make it.”
Rather than being a source of pressure, this thought fills students with a deep sense of hope. They are forced to conclude, “If someone this sophisticated is willing to place a high-stakes bet on me, then I must be worth it.” This hopeful vision of their own future then becomes a gravitational force that pulls the student forward, which is very different from being driven by behind. It’s the difference between a sheepdog, barking constantly while nipping at the heels, versus a shepherd, who puts himself out in front of as a focal point, gently drawing the flock forward into greener pastures. Fear is a powerful motivator, but it doesn’t hold a candle to hope.