What would my contributions after graduation look like?

A:

Each Pay It Forward program has a set contribution rate and length, based on the cost of education at the particular institution. Each particular student’s contribution will depend on her income and number of years she attended college while on Pay It Forward.

The modeling in the examples below is based on census data for average incomes, taking into account years after college and highest degree obtained. For example, the average income for someone with a Bachelor’s degree one year after graduation is $26,669, and $18,456 for an Associate degree holder.

Imagine a hypothetical Large State University (LSU) where, based on LSU’s current cost of education, students who participate in Pay It Forward agree to contribute 1% of their Adjusted Gross Income (AGI) per year of college for a period of 15 years. (AGI is an individual's total gross income minus specific deductions, as determined by the Internal Revenue Service.)

Now, LSU student Agnes attended LSU for 4 years; her friend Bernice attended for 2 years (having transferred in from a community college). So, Agnes will contribute 4% of her AGI for 15 years, and Bernice will contribute 2% of her AGI for 15 years.

After college, Agnes becomes a paralegal, earning $30,000 per year. After 10 years, her salary is up to $55,000 per year. But two years later, she has to go part-time for health reasons, and her salary decreases to $25,000. Here’s what her contributions would look like:

Years after completion

Annual Income

Monthly Income

Monthly 4% Contribution

1

$30,000

$2,500

$100

10

$55,000

$4,583

$183

15

$25,000

$2,083

$83

 

Bernice was unemployed for parts of her first two years out of State University, but after that she became a medical assistant and earned the average income for a B.A. holder for the rest of her career. Here’s what her contributions look like:

Years after completion

Annual Income

Monthly Income

Monthly 2% Contribution

1

$15,000

$1,250

$25

10

$54,395

$4,533

$91

15

$62,938

$5,245

$105

 

Because Pay It Forward contributions are tied to income, they are always both predictable and manageable. And since Pay It Forward is not a loan, graduates’ finances are not jeopardized by loans with principal compounded by interest. Agnes and Bernice are free to use their remaining income (96% and 98%, respectively) to buy a house or a car, or start a family or a business.