Financial aid counselors might be able to advise students to take out a no interest, forgiveable loan in the future, which is currently forbidden under federal law.
The Legislature's Sunset Advisory Commission, a body charged with assessing the need of state agencies, directed the Texas Higher Education Coordinating Board to seek a revision to federal law that prevents schools from advertising the state's B-On-Time Loan Program, according to a report released by the commission in July. Financial aid officials are currently only allowed to direct students to federal financial aid programs, not state.
The B-On-Time Loan program grants students a no interest loan that is forgiveable if they graduate in four years with at least a 3.0 GPA. Five percent of a student's tuition is used to fund the program, and the higher education board's preliminary estimates indicate the program will have $84 million in awards for fiscal years 2014-2015. UT-Austin students typically take out $7,400 per year under the program.
One of the program's biggest problems is low student participation rates, according to a report by the Sunset Advisory Commission. At UT-San Antonio, for instance, $100,000 went unused in 2011 because students did not know about it, officials claim.
“We’re not allowed to advertise these funds due to restrictions on alternative lending,” said Lisa Blazer, associate vice president for UT-San Antonio’s Financial Aid and Enrollment Services. “They have to request it from us. That will explain why a small amount will not be spent.”
Follow Jody Serrano on Twitter @jodyserrano.