Office of Student Financial Services

Situated just north of the urban core in an increasingly centralized city, the UT campus boasts some of the most valuable property in Austin, and it is only increasing in worth. But with this growth comes a rising cost of living. Beyond tuition payments, it is the cost of living in a growing city that makes the University financially inaccessible to some students. Though students and legislators alike often call for the lowering of tuition, which would also lower the quality of academics at UT, this energy is misplaced in the fight for a University accessible to all Texans.

The cost of attendance breakdown created by the Office of Student Financial Services is important for students because it is often used to determine how much financial aid a student needs. But it provides some curious figures: The transportation costs for commuter and non-commuter students are both $745. Some creative assumptions are used to account for this equivalency. First, the University defines a commuter student as someone who lives at home, thereby incurring minimal room and board expenses or other expenses associated with living independently. Fair enough. However, this figure necessitates the assumption that students only use public transportation, which is free to UT students, when moving in and around the city.

This implies that all commuter students, who don’t usually have a choice in the location of their parents’ house, live in an area where public transportation is accessible. Anyone familiar with the mess that is Austin’s public transportation system will know this is a ludicrous assumption. A personal, or even a shared, vehicle is often necessary for these students, but is not seen as a necessary expense by the University. The meager $745 per semester the University allocates for transportation expenses would hardly cover parking and gas, much less vehicle maintenance, insurance and other expenses that come with owning a vehicle.

A second assumption is that the expenses outlined in the OSFS breakdown are all incurred during the academic semester, about a four-month period. This initially makes sense: The University should only have to account for expenses accumulated over the period that a student is actually attending, or two-thirds of the year. Where this assumption breaks down is in the expenses that are not so easily segmented, such as apartment rent. Leases in the Austin area are mostly year-to-year. Students are sometimes able to find others willing to sub-lease during the three-month summer, but that still leaves a month in the winter where students must absorb costs, not considered by the University, if they go home. Students may work during these times to buffer the costs, but it is rarely enough to cover all living expenses. Some students may pursue unpaid internships instead during these “off” months that are just as important as academic success in professional pursuits.

Essentially, the University is out of touch with the true cost of living for a student in Austin and needs to re-evaluate the cost of attendance breakdown. Tuition costs for undergraduate Texas residents average around $5,000 per semester. According to the financial services office, the cost of attendance for commuter students is about $9,500, though after taking into account the fact that commuters must spend more on transportation than non-commuters, this can be a serious underestimate. As living expenses increase, lowering tuition would have little real impact on the true cost of attendance for students. If the University is serious about improving accessibility to students from diverse economic backgrounds, it needs to more accurately calculate the cost of living for the average UT student.

Photo Credit: Hannah Hadidi | Daily Texan Staff

Tuition and fees at UT have nearly doubled in the last decade while the need for higher education is beginning to lose support among Texas voters.

According to the Office of Student Financial Services, the total cost of attending the University increased by $4,242 from 2008 to 2014. The total cost includes annual tuition and cost of living. As the cost of attendance has increased, so has the national student loan debt, which the Consumer Finance Protection Bureau reports is over $1 trillion.

Meanwhile, a recent UT/Texas Tribune poll showed 28 percent of Texas voters think a college education is necessary. This is down from 42 percent in 2010, according to the Tribune.

Wanda Mercer, UT System associate vice chancellor for academic affairs, said tuition increases at most System institutions go toward hiring more faculty members and funding student support programs. Mercer said increases also allow for salary increases and accommodate for inflation.

At the University, tuition payments also include mandatory fees, which pay for services available to all students. Despite the lack of tuition revenue bonds — which are used to fund construction projects — in recent legislative sessions, Mercer said tuition increases do not usually go toward building costs.

Citing recent board decisions, Mercer said the regents have been resistant toward tuition increases.

“Our regents have been very, very careful about even allowing increases to be requested, and they’ve been even more careful in approving them,” Mercer said.


In 2012 and 2014, the Board of Regents decided not to increase undergraduate in-state tuition at the University. Both times, the regents did increase out-of-state undergraduate tuition by 2.1 percent and 2.6 percent, respectively.

Up until those recent decisions, the regents had approved significantly higher increases over the past ten years. Supported by then-Chancellor Mark Yudof, the Texas Legislature passed a bill deregulating tuition in 2003. The bill effectively moved tuition decisions for the University from the legislature to the regents. Since deregulation, in-state tuition and fees have increased 80 percent at the University from $2,721 to $4,895, according to the Texas Higher Education Coordinating Board.

Mercer said the increases were primarily to accommodate for reduced state funding.

“The legislature pulled back on its appropriations and said to the institutions, ‘it will be market-driven,’” Mercer said. “I don’t think they had any notion that campuses would then say ‘well, if you’re not going to provide the appropriated money, we will go to the students.’”

According to Mercer, System institutions would not operate as effectively as they do now if tuition was lowered to pre-deregulation levels.

“We would not be able to offer the classes in a timely manner that you need for graduation,” Mercer said. “They would have to cut the offerings by a significant amount. They would have to cut services. I’m just not sure it would move students toward graduation in most circumstances.”

Mercer said a System task force formed to find ways of reducing debt recommended incentivizing students to graduate on time in 2012. Jamie Brown, Office of Student Financial Services spokeswoman, said her office encourages graduating in four years to reduce the amount students borrow.

“One of the factors we’re pushing is that students need to graduate in four years,” Brown said. “For the Office of Student Financial Services in particular, it’s so that they don’t have to borrow as much.”

With UT below the national average in terms of students who graduate with debt and the average amount of loan debt in 2012, Brown said she thinks the University’s overall push to increase four-year graduation rates to 70 percent by 2016 is benefitting students financially.

Student Government president Kori Rady was one of seven student leaders on a committee developing the University’s tuition increase proposal to the regents over the past school year. The final proposal, approved by President William Powers, Jr., called for a 2.13 percent increase for in-state tuition and a 2.6 percent for out-of-state.

Rady said even if all proposed increases had been approved by the regents, the University would have still had a competitive tuition compared to peer institutions.

“I really do believe UT is one of the highest-valued colleges in the nation,” Rady said. “We’re definitely very competitive in terms of affordable colleges.”

Mukund Rathi, a computer science junior who has been vocal against tuition increases, said comparing the University’s tuition rates to peer institutions’ should not factor into increase proposals. 

“It’s pretty much irrelevant where other universities are right now,” Rathi said. “We should be doing what makes sense, regardless of how bad other universities are doing.”


Photo Credit: Omar J Longoria | Daily Texan Staff

During the past school year, annual tuition between University undergraduate colleges varied by $696, but, according to a report on average student debt from the Office of Student Financial Services, student debt among May graduates varied by $3,612.

Students who received undergraduate degrees in May from the McCombs School of Business, which charges the highest tuition, had the lowest average debt, $22,358, while students from the College of Liberal Arts, which charges the lowest tuition, had the highest average debt, $25,970.

Tom Melecki, student financial services director, said there is not one specific reason for the debt variations between colleges, but many factors could contribute.



During the recession, American adults — including parents of college students — took out less loans partly because they worried about being laid off and partly because of problems with passing credit rating checks, Melecki said.

“Because people were suffering … and having trouble keeping up with paying their bills, a lot more Americans had black marks on their credit rating,” Melecki said.

Among undergraduate schools with more than fifteen borrowers, parents of McCombs students took out the highest average loans in both May 2009 and May 2014, according to the report, and parents of students in the Cockrell School of Engineering took out the lowest average loans in May 2014.

Melecki said other possible explanations for why some colleges have more debt than others could include that students in schools with more debt may be more likely to study abroad or graduate in more than four years, or the college may have less scholarship money than other colleges.

Another possible factor is that some colleges may attract more low-income students than other colleges do, Melecki said.

“My wife [who works in the School of Social Work] tells me that [some of] the students she works with … went into social work because, when they were young people, they and their families benefitted from the help of social workers,” Melecki said.

The School of Social Work was the only undergraduate college decreasing in average student debt from May 2009 to May 2014, falling from $27,610 to $23,196. The average student debt among May 2014 University undergraduates was $25,216.

Laura Wells, director of development in the School of Social Work, said this decrease could be attributed to the school working to raise more scholarship money recently. Wells said that, because social workers generally have low starting salaries, these students will face more challenges repaying their debt than students with higher starting salaries.

“While our debt is lower [than that of some other colleges], I still think they have a steeper hill to climb,” Wells said. “[The decrease in social work student debt] was really good news.”

The Jackson School of Geosciences was another school with relatively low student debt, at an average of $22,908 per student, with only six students in debt upon graduation. In 2005, the Jackson school formed after John and Katherine Jackson donated funds presently valued at more than $300 million, according to the school’s website. Nicole Evans, assistant dean for student affairs and administration, said the endowment, along with other contributions, is part of the reason the school can award between 100 and 150 scholarships, ranging from $750 to $3,450 each semester.

“We have very, very active alumni,” Evans said. “A lot of that translates into financial support being given to the school for our students.”

Melecki said he encourages students to continue searching for scholarships while they are in college, instead of only while they are in high school. The freshman class, which is the smallest undergraduate class, accounts for 44 percent of undergraduates’ outside scholarship money, according to Melecki.

According to Melecki, students who graduate in six years rather than four accrue an average of 67 percent more debt, partly because many scholarship and grant programs limit the number of renewal years. Melecki also said he thinks the federal and state governments should increase grant funding.

“If members of Congress or legislators want to know why college students have to borrow so much, one of the reasons is that the federal and state grant programs have not kept up with inflation … forcing [students] to rely more heavily on loans,” Melecki said.


Students who receive forgivable loans under the B-On-Time program receive something in addition — an income tax form.

Under federal law, forgivable loans such as the B-On-Time loan count as taxable income if the loan is forgiven under the program’s criteria.

Although the information is not new and is available on the Texas Higher Education Coordinating Board’s website, the provision has provoked concern from some Texas lawmakers, such as state Rep. Helen Giddings, D-DeSoto. Giddings, who serves on a subcommittee of the House Appropriations Committee, said she and other members sent letters to Texas’ congressional delegation in Washington informing them that lawmakers at home hope to see changes.

“I think when you sign up for the B-On-Time loan and you’re 17 or 18 years old, even 19, you’re not thinking about the end game,” Giddings said. “If you said to an 18-year-old that it is a forgivable loan, I’m not sure that they understand that that means it becomes taxable income once it’s forgiven.”

The program, established by the Texas Legislature in 2003, administers zero-interest loans to students who complete their degrees within four years for a four-year degree and five years for a five-year degree, maintain a 3.0 grade point average and do not exceed their degree plan by more than six credit hours.

Giddings said concern within the committee crosses partisan lines and found the support of state Rep. John Otto, R-Dayton, the subcommittee’s chairman.

Thomas Melecki, Office of Student Financial Services director, said discussion in Washington concerning whether to pass legislation making forgivable loans non-taxable income has died down.

“That’s pretty much ground to a halt given the current financial situation,” Melecki said.

Melecki said students pay taxes on the loan the year it is forgiven and suggested students participating in the program set aside money to try to offset the impact of increased tax payments.

“Let’s say that you get out of school and you are earning $25,000 a year and then you get your B-On-Time loan forgiven,” Melecki said. “That would add on $12,000 [if you received the loan for four years], which takes you up to $37,000 in taxable income before deductions.”

Melecki said his office does not advise students regarding the taxability of forgiven loans but said the office would consider doing so in the future.

“We do try to be straightforward about loans, but every once in a while, we miss something and shame on us when that happens,” Melecki said.

There are 384 UT students who receive an average annual loan of about $6,855 under the program, according to data provided by the Office of Student Financial Services.

Isaac Crone, Italian and liberal arts honors junior, participates in the program and said he does not mind paying taxes on the forgiven loan because the cost incurred by the tax outweighs paying back the cost of the loan.

“If they could reform the program without the tax, I think it’d be great,” Crone said. “However, if they kept the tax, I wouldn’t drop the loan.”

A bill in the state Senate seeks to improve a zero-interest loan program that forgives loans for students who complete their degrees in a timely fashion.

The B-On-Time loan program was established in 2003 by a bill written by state Sen. Judith Zaffirini, D-Laredo. Zaffirini also authored the current bill to amend the program. The program provides zero-interest student loans that may be forgiven if students complete their degrees within four years for a four-year degree and five years for a five-year degree, maintain a 3.0 grade point average and do not exceed their degree plan by more than six credit hours.

In a statement issued to The Daily Texan, Zaffirini said the current legislation is a “shell bill,” meaning the bill does not include all intended elements and may be amended throughout the upcoming legislative session.

“Our goal is to ensure that more students who need help paying for college have access to this critical program,” Zaffirini said.

In its current form, the bill excludes students who attend community colleges and technical schools from the program. Zaffirini said the program has not been successful at two-year institutions because the program’s parameters are too narrow.

At UT, 954 students who enrolled in the B-On-Time program received an average loan of $5,955 during 2010-11, according to data provided by the Office of Student Financial Services. That year, the office issued almost $5.7 million in B-On-Time loans.

During the 2011 legislative session, the state reduced B-On-Time funding by $45.2 million. During the 2011-12 academic year, UT issued $3.8 million in B-On-Time funds to 595 students, averaging $6,392 per loan.

This year, 386 UT students received an average of $6,877 from the program out of a pool of about $2.6 million.

In March, the Texas Sunset Advisory Commission recommended increasing the yearly and credit hour graduation requirements for loan forgiveness and requiring the Texas Higher

Education Coordinating Board to set minimum credit requirements to obtain a loan through the program.

In response to the committee’s report, the Coordinating Board released a report in March recommending turning the loan program into a rebate program among other recommendations.

Efforts to increase participation in the program may not have the intended impact if federal law prohibiting the state and public institutions from marketing the program remains in place. In order to market the program, the federal government requires institutions to publish a preferred lender agreement that lists private lenders students may obtain loans from as an alternative to federal subsidized and unsubsidized loans.

Zaffirini said she is working with U.S. Sen. John Cornyn and other federal officials to request changes to federal regulations that limit institutions’ ability to market the program.

Thomas Melecki, Office of Student Financial Services director, said when the federal law was enacted in November 2011, it prevented additional state money for the B-On-Time program from being distributed to UT students.

“That really hurt us last year,” Melecki said. “If we had been able to educate students on the program, we could have dispersed another $2.8 million to students who needed the money.”

Printed on Wednesday, Dec. 5 2012 as: Zaffirini files outline of further loan specifics

Tuition is due Jan. 4, and for 56 percent of undergraduate students at UT Austin, that means relying on financial aid to help cover their cost of attendance.

Tom Melecki, director of the Office of Student Financial Services, said complex federal and state laws can both help and hinder students’ access to financial aid. A push to tie financial aid to timely graduation could also be coming at the University and state level, Melecki said.

Familiarity with how student aid is distributed could be the key to keeping student borrowing to a minimum, Melecki said.

“We try to go to grants and scholarships first, but the number of people needing aid is far greater than the amount we give out in grants and scholarships,” Melecki said.

In the 2011-2012 academic year, the office distributed more than $58.5 million in scholarships and $102.4 million in grants to undergraduate students, according to University OSFS documents. Students also took out more than $204.6 million in loans through the office.

“I can guarantee you that there is no way this office can fund more than a handful of students .. to have sufficient grant and scholarship aid to totally cover their costs,” Melecki said. “It means they are going to borrow.”

When borrowing, most students in the United States are unaware of the differences between the federal aid resources offered to them, said Matt Reed, program director of the Institute for College Access and Success.

“We do know from research in 2007-2008 that the majority of undergraduate borrowers did not understand the differences between the different types of student loans or their interest rates,” Reed said.

Former UT student Ashley Pierce said when she began at UT in 2002 at age 17, she was too young to qualify for a federal student loan because she had graduated from high school early. Her parents had to cosign loans from private lenders to finance her education.

“I had no way of knowing a 25 percent interest rate was bad,” Pierce said. “I had not bought a house or a car. I wasn’t even 18-years-old. As a result, I ended up with tons and tons of private student loans with astronomical interest rates that pretty much have no feasible plan for repayment.”

Pierce said her debt totals $38,000, and it grows every day despite her $60,000 annual salary.

“I have a great job and I’m a great citizen,” Pierce said. “I’m very responsible, but I have an astronomical amount of student loan debt just as a result of bad decisions.”

UT no longer recommends private lenders to students, Melecki said. Once students have exhausted debt-free resources, the Office of Student Financial Aid must advise them of federal unsubsidized and subsidized loans, Melecki said. The average student debt for UT undergraduates who graduated last year and who have taken loans was $25,192 for the last academic year, less than the national average of $26,600. UT made a total of $138 million in loans to students in the 2011-2012 academic year.

Melecki said the first loans students are advised to take are direct federal subsidized loans. These loans include Perkins Loans, which were funded by Congress. This program no longer receives annual government funding and is sustained by payments made by former loan recipients, Melecki said. This creates a revolving $8 million fund from which the University lends to its neediest students at a 5 percent interest rate. Students must begin paying the loan back six months after graduation. 

Students demonstrating financial need are also able to receive subsidized loans through the Federal Direct program, Melecki said. These loans have a 3.4 percent interest rate and don’t accrue interest until six months after the student graduates.

Unsubsidized student loans, which 14,083 students took out last year, have a 6.8 percent interest rate and accrue interest from the day the loan was disbursed. Students without demonstrated financial need can take out these loans.

Aside from these personal loans, parents of students can also sign for an unsubsidized loan at a 7.9 percent interest rate.

When parent loans were first created in the 1980s by the federal government, they were not intended for the extensive borrowing students utilize them for today, Melecki said.

“The envisionment was for parent and unsubsidized loans to be loans of convenience for fairly affluent families who need to meet a cash flow problem,” Melecki said. “The idea was that the unsubsidized and parent loans wouldn’t be used by those who were financially needy. We have a lot more financially needy people taking those loans now.”

For the 2011-2012 academic year, more than $66.4 million in parent loans were made to UT-Austin students.

Pierce said even financially savvy parents can fall prey to student loan debt.

“My parents are people who have perfect credit,” Pierce said. “They are homeowners. They are totally responsible adults, but I think even they didn’t realize what sort of hole we were digging into when we were signing these things every semester like it would be manageable to pay back.”

An increase in the cost of attendance, increased cost of living and decreased state and federal aid fuel the need for more loans, Melecki said.

A decade ago, the average cost of attending UT for an off-campus, in-state undergraduate was $5,340 in tuition, $7,478 for housing and $3,492 for other expenses per academic year, according to admissions documents. For the current academic year, the OSFS estimates tuition to cost between $9,346 and $10,738 per academic year, with housing costs estimated to be $10,946 for in-state undergraduates and other expenses estimated at $4,656.

Those costs directly affect the amount of debt students acquire, Pierce said.

“It seems insane that in math, the cost of going to schools continues to rise and the interest rates continue to get higher,” Pierce said. “If tuition goes up by 30 percent it isn’t fair and it doesn’t make sense for loan rates not to adjust to that.”

Meanwhile, the amount of state and federal aid available to UT students decreased by about $16 million from the 2010-2011 academic year to the 2011-2012 academic year.

In 2010 the federal government redirected $60 billion from  private student loans to government grants and loans. However, stipulations on that money may negatively impact some students, Melecki said.

State-funded loan programs were classified as private in the process, Melecki said. This bars financial aid counselors from advising students to ask about state loan programs even if they are less expensive than federal loans.

“We believe there should be an exception carved out for state loans as long as you can demonstrate that terms and conditions of the loan are better than the federal loan program,” Melecki said.

Texas’ College Access Loan program lends to students at a 5.25 percent interest rate that accrues from the day students take out the loan, Melecki said. However, because the interest is never capitalized by the state, the total cost often ends up being less than federal loan programs, Melecki said.

Additionally, the state offers the zero-interest rate B-On-Time Loan program to students demonstrating financial need. Students who complete 15 hours per semester and graduate with a B average or higher have their B-On-Time loans forgiven.

Current federal law prevents financial aid counselors from advising students to take advantage of the B-On-Time loan program, Melecki said. Students must ask about it directly. As a result, the office only distributed $3.9 million of $6.7 million allocated to UT for the program, Melecki said.

“If students don’t know about the program there’s no way it can work,” state Sen. Judith Zaffirini, D-Laredo, said. Zaffirini has proposed legislation for the 2013 legislative session that she hopes will ensure the B-On-Time loan program receives adequate funding instead of further cuts. In 2011, the state cut the program by 29 percent, from $157.1 million to $111.9 million, according to The Texas Tribune.

In the state legislative session set to begin in January, the large number of new legislators will play a big role in deciding whether or not to cut funding for higher education, Zaffirini said. In the 2011 session, legislators cut $92 million from the UT budget.

“The big issue is funding,” said Zaffirini, a UT alumna. “Everyone talks about equal access and opportunity, but the big issue is funding. I, for one, will prioritize to secure more funding for
higher education.”

Some higher education policy groups propose tying loan awards to on-time graduation rather than just academic performance. Zaffirini said she opposes such a change.

UT is also considering tying some of its gift aid to number of hours completed, Melecki said.

He said beginning in the fall semester of 2013, a UT pilot project will offer 200 freshmen loan forgiveness. One hundred of the students will be offered forgiveness in the amount of $1,000 on the principal, plus interest accrued if they complete 15 hours of coursework in their degree plan, Melecki said. One hundred students will be offered forgiveness in the amount of $2,000 on the principal, plus interest accrued if they complete 30 hours in the first academic year, he said.

Students graduating on time could save $12,975 if the program were extended four years, Melecki said.

Many students say the burden of taking on student loan debt is worth it. For media entrepreneur Rubén Cantú, taking loans to obtain a master’s degree from the McCombs School of Business made all the difference in launching his business, CORE Media Enterprises.

“I studied entrepreneurship and technology commercialization, and because of that experience I can sit down in front of a venture capitalist and talk business,” Cantú said. “I can do things that I never would have been able to do, or would have taken a very long time to do because of that experience.”

Pierce said in her case, a UT education wasn’t necessarily a stepping stone to a career.

“The joke of this whole thing to me is that I got my first really cool journalism job without my degree,” Pierce said.

In addition to using financial aid, students can also think of other ways to keep from borrowing greater amounts, said Jamie Brown, a UT financial aid officer.

“We see students every semester who have to take emergency loans to meet rent,” Brown said. “Then we have to sit down and ask if living in an expensive West Campus apartment is really affordable for them.” 

Anthropology senior Elizabeth Melville said living frugally was necessary to attend UT after she was denied sufficient financial aid in her freshman year. Melville had moved away from her mother’s home at the age of 16, and said she hadn’t received support from her since then. But since she had not been legally emancipated from her mother, many student aid officers said she could not file independently of her mother, whose income was higher than the amount needed to receive need-based aid.

“I didn’t even get enough loans to cover tuition,” Melville said. “My first few years at UT were really difficult saving up money for books and tuition.”

Melville said she worked a 20-hour on-campus job and picked up extra shifts when she could to make ends meet.

Melecki said working and living frugally to keep debt low will pay off later in life.

“UT is really just a way station to something greater,” Melecki said.

Printed on Friday, November 30, 2012 as: Tricky student loan rules lead to more debt

In 2011, UT financial aid administrators were prevented from promoting a state loan program that would forgive up to $7,100 in loan debt per year. The B-On-Time Loan Program may face changes if recommendations to transform it into a rebate system are approved once legislators fill the Texas Capitol in January.

The B-On-Time Loan Program offers students forgivable, no-interest loans if they graduate with a 3.0 GPA within four years and do not exceed more than six credit hours of the total required to complete their degree. Most UT degrees require 120 credit hours. The Office of Student Financial Services has been struggling with a federal gag rule enacted in 2011, said Thomas Melecki, director of financial services.

“Unless students call and ask about the program by name, we can’t offer it and a lot of our students don’t know about the program,” he said.

Qualifying students at four-year institutions can receive up to $7,100 per year. Students must repay the loan with a zero percent interest rate if they don’t meet the requirements.

Prior to the gag rule, B-On-Time loans were packaged into students’ financial aid awards.

The program’s funds are underused because most students are not aware the program exists and UT cannot promote the program openly or package it with financial aid awards, Melecki said. In order to promote the program, the University would have to disclose a Preferred Lender Agreement that includes a list of independent lenders, including banks, who offer private student loans.

“The B-On-Time loan is considered a private education loan even though it is coordinated through the state,” Melecki said. “We prefer to award students federal direct subsidized and unsubsidized loans that are more transparent and disclose interest rates and repayment requirements upfront.”

Figures obtained from the Office of Student Financial Services show UT awarded $3.9 million of $6.7 million allocated to the University for the program in the 2011-2012 biennium. Since the program was first created in 2003, Melecki said 59 percent of UT students have qualified for forgiveness.

In 2010, UT awarded 66 percent of the allocated funds. Before 2010, B-On-Time awards ranged from 78 percent to 98 percent.

Last year, the University received an initial allocation of $3.6 million for the program. An additional $3.1 million was then allocated to UT in October, less than two weeks before the federal law was enacted, leaving the University unable to release funds to students unless they had previously signed up for the program’s waitlist.

This semester, the University received $2.6 million to renew loans for 285 students and enroll 105 incoming students.

Melecki said there are 700 students on the waitlist who have called to specifically ask about the program. 

The B-On-Time program is funded through student tuition set-asides, or 5 percent of every student’s tuition that goes into the B-On-Time program – amounting to about $6.7 million a year. Each university then sends funds to the Texas Higher Education Coordinating Board, which administers the program at the state level. THECB allocates funding in tuition set-asides to each university with accompanied state funds.

In the upcoming legislative session, the coordinating board will recommend changes to B-On-Time, essentially changing it to a rebate system under which qualified students could receive a check after graduation.

THECB spokesperson Dominic Chavez said checks would vary by institution ranging anywhere from $1,500 at Texas A&M University to $22,000 at Texas Southern University, and students at smaller institutions would receive larger rebates.

“It takes the tuition-set asides of 65 students to fund one B-On-Time loan,” he said. “Our recommendation is to make the program more effective so more students can participate and give all contributors access.”

Current B-On-Time borrowers would continue to receive their loan until graduation if the THECB recommendation is approved, Chavez said.

Sen. Judith Zaffirini, D-Laredo, said she opposed THECB’s rebate-like program.

“I don’t understand the coordinating board’s logic,” she said. “Students need the money upfront. There is so much talk about incentivizing financial assistance, and this is it.”

Zaffirini authored the legislation that created the program in 2003 and said she would push to restore funding for the program in the upcoming session. Zaffirini formerly chaired the Senate Committee on Higher Education but now serves on it as a general member.

“Some may argue the program is unsuccessful because only 38 percent of B-On-Time loan students qualify for forgiveness, but that is higher than the state average of 27 percent graduating in four years,” she said.

As part of the University’s efforts to decrease the burden of college loans on students, a UT administrator presented a pilot program intended to generate faster loan forgiveness and increase four-year graduation rates to state senators.

Thomas Melecki, director of the Office of Student Financial Services, said the University has developed a pilot program that could help students repay student loans if they meet certain course credit completion standards. During a Senate Committee on Higher Education hearing Wednesday where legislators heard recommendations related to the upcoming legislative session, Melecki presented the new program and recommended the state establish financial aid program budgets years in advance.

“The program provides real positives for students in completing all their hours and getting themselves to graduation in four years,” Melecki said. “It allows students to borrow less and forgive or pay down loans while still in school.”

The program would select 200 incoming freshmen that have been awarded Federal Direct Unsubsidized Loans on the basis of financial need. Melecki said unsubsidized loans, with a 6.8 percent interest rate, are the most expensive type of loans students can take out.

Half of the group will be offered $1,000 in forgiveness toward the principal of the unsubsidized loan and additional forgiveness of accrued interest each semester if they complete 15 course credit hours that apply to degree requirements.

The other half of the group will be offered $2,000 in forgiveness and additional forgiveness for all interest accrued at the end of the academic year if they complete 30 course credit hours toward their degree.

Melecki said he estimates students who qualify for forgiveness for eight semesters will pay $13,000 less over the standard 10-year repayment period.

The program will begin next fall, and the University will provide results to the state legislature in two years, Melecki said. He said the program will provide data to measure whether it is possible to incentivize undergraduates to graduate in four years.

Melecki was not the only one who focused on the idea of incentivizing student performance through financial aid.

Sen. Judith Zaffirini (D-Laredo), committee chair of the Senate Committee on Higher Education, said financial aid programs need to motivate students with incentives to take more courses because they are not being advised to take more than 12 hours a semester.

“The easiest way to save money is to graduate faster,” Zaffirini said. “We need to get creative as to how we acknowledge these issues.”

Dan Weaver, assisting commissioner of education at the Texas Higher Education Coordinating Board, said students are taking too long to earn degrees and take more credits than are necessary to graduate.

“The essence [of our recommendations] is to encourage students to graduate on time,” he said. “We recommend capturing this essence as a tuition rebate instead of by providing loans that are ultimately forgiven.”

In a written testimony submitted to the committee, Melecki also recommended state appropriations from the legislature be approved two years in advance.

“Putting state financial aid appropriations on such a cycle would make it possible for institutions to receive their allocations every year in plenty of time to award state funds before May 1,” he wrote in the proposal.

In 2011, the Office of Student Financial Services delayed financial aid award notifications for students because of delays in the federal and state budget processes.

The University provided prospective freshmen with financial aid packages that did not include state financial aid but did not send these notifications until past the May 1 enrollment deposit deadline for freshmen to ensure their spot at UT.

Melecki said notifications included, on average, $7,000 less in TEXAS grants and Top 10 Percent Scholarships per student, an amount that was replaced by loans.

“Some of the loans offered to students were pretty significant and went up to $11,000,” he said. “I might have told my child that he or she needs to attend a less expensive university or a community college if I am a parent and I realize I am going to go $40,000 into debt. If you are from a family that does not have a big income, a $40,000 debt for a parent is prohibitively expensive.”

The University experienced a two percent drop in Hispanic student enrollment, a nine percent decrease in students from families with incomes less than $60,000 and a 14 percent decrease in first-generation students last year compared to fall 2010, according to figures obtained from the Office of Student Financial Services.

Printed on Thursday, September 13th, 2012 as: UT financial pilot plan to decrease loan burden on idebted students

Despite facing a staff shortage and a larger than normal incoming class, the Office of Student Financial Services managed to release more than $196 million in financial aid during the first two weeks of class — an increase of more than $5 million at this time last year.

OSFS director Thomas Melecki said some of the increase in financial aid came from the size of the incoming freshman class, which tends to bring a lot of scholarships with it.

Melecki said the Office of Student Financial Services also worked to process financial aid awards much faster than in previous years.

The majority of financial aid for fall has been released, and the office will continue to release awards throughout the semester.

“We deployed a greater percentage of our staff resources to ‘back office’ operations that resolved problems which, in the past, would have delayed the delivery of financial aid,” Melecki said, referring to situations including changes in financial aid that must be reviewed.

Grants and scholarships make up 39 percent of this year’s financial aid, with loans accounting for the other 61 percent.

Grants increased 4 percent since last year and loans decreased 4 percent.

Federal law prohibits OSFS from releasing financial aid to students until shortly before classes begin.

The office released $140 million Aug. 21 and 22 — the first two days that awards could be applied to tuition and fees this year.

“The best way to serve our students is by making sure they get their money on time,” Melecki said. “We think we have weathered the storm this year.”

The number of phone calls the office received during its peak season, from the day undergraduate fee bills go out on July 24 to Labor Day, totaled 98,711 attempted calls — an 8 percent increase from last year.

Melecki said 73 percent of attempted calls to the office ended with a busy signal while financial aid counselors, dealing with seven vacancies on its 30-member staff, answered 12,053 calls.

The office will be searching for ways to increase phone system capacity in the coming months and is working to fill those vacancies by October, he said.

The office attributes a large percentage of these calls to the University’s large freshman class, Melecki said.

“In our experience, new students and their parents call more frequently because they are not yet as familiar with all of the financial aid and student accounting processes and websites through which they can get information about the release of financial aid and whether it is applied to pay their tuition,” he said.

Esmer Bedia, New Student Services senior coordinator, said a mandatory Bevonomics course, a money management education program, is offered to students during freshman orientation by the Office of Student Financial Services.

The session covers how to maintain a budget and a savings account, but students are also presented with the resources and tools offered by the financial aid office.

Computer science freshman Pragati Prasad said the financial aid process has been overwhelming despite the information she received at the Bevonomics session at orientation.

“I am the oldest child in my family, and my parents are from India so they did not attend college in the U.S.,” Prasad said.

“They are not well-versed in loan language, and we have been learning together.”

The number of students visiting the financial aid office totaled 5,957 — a decrease of 750 from last year’s peak season. Students said the average waiting time in the office last Friday ranged from 30-45 minutes.

The Office of Student Financial Services must use current tuition rates to determine financial aid because the Board of Regents has yet to set a date for its 2012-2014 tuition setting meeting.

That means parents and University students may need to take out more in private loans next year if the UT System Board of Regents approves tuition increases at a Regents meeting with an undetermined date, said Student Financial Services director Tom Melecki. He said the office is working to get financial aid packages to recently accepted high school seniors by March 20 and to current students by April 9.

“If we award students financial aid on the basis of a higher tuition rate that does not materialize, then the students would be over-awarded and we would have to go back and reduce their aid,” Melecki said.

Melecki said if tuition is increased, it is possible that more parents will need to borrow federal direct parent loans to cover the cost.

“One of the reasons we believe that is because typically, even with the current cost, it is not unusual for a student to use all of their eligibility for a federal direct student loan,” he said. “We might have to ask mom or dad to take on a little bit more debt.”

On Dec. 15, President William Powers Jr. sent his recommendation to the Regents for the largest tuition increase the UT System will allow for the next two academic years. For in-state undergraduates, the recommended 2.6 percent increase translates into $127 more each semester in the next academic year. Every other student category would face a 3.6 percent increase. For out-of-state undergraduates, the increase will be between $560 and $642 more each semester next academic year.

Under state law, a percentage of tuition revenue must go towards need-based financial aid. Melecki said if the Regents increase tuition, then the Office of Student Financial Services will make adjustments to increase the number of University Tuition Grants given to needy students. He said the funding for these grants would increase by $2 million if the Regents approve Powers’ tuition recommendation. He said some federal loans are available that are not need-based.

Public relations junior Mathew Torres said he receives subsidized and unsubsidized loans that he puts towards food and rent. Torres said his father is overseas, so his mother provides the only source of income for the family. Torres said if tuition increases, he will most likely have to take out more loans from a private bank.

“It doesn’t make me happy, but if it’s what I have to do to get an education I’ll do that,” Torres said.

UT System spokesman Matt Flores said the UT System Board of Regents Office will not set a date for the tuition meeting until it thoroughly assesses Powers’ tuition recommendation.

“There’s a process, individuals look over the recommendations,” Flores said. “These aren’t decisions that are taken lightly.”

The Regents held a regular meeting Feb. 8 and 9 and a special called meeting on Feb. 24 when tuition rates were not discussed. The next regular meeting is planned for May 2 and 3. Flores said previously that the Regents have set tuition at both regularly set meetings and special called meetings depending on the year.

“We’re certain that it has to come soon,” Flores said. “Clearly it has to be done with enough time to get course schedules published so they’ll know how much they can expect to pay.”

Printed on Friday, March 2, 2012 as: Possible tuition raise would increase loan need.