Thomas Melecki

To better understand student earning and debt after graduation, the UT System will be gathering data about students who are one year and five years out of school and publish the findings on a new website, seekUT. 

Stephanie Huie, vice chancellor for the UT System Office of Strategic Initiatives, said her office was responsible for creating the seekUT site.

“I knew that there was a need for us to look at what happens to our students after they graduate,” Huie said. 

Thomas Melecki, director of Student Financial Services, was a member of the task force that led to seekUT’s creation. 

“I do think they did a really nice job with it,” Huie said. “This is a tool that, at least, could suggest what might be an affordable level of borrowing, especially if a student uses this in conjunction with some other tools that are provided by the U.S. Department of Education.” 

Huie said her office partnered with the Texas Workforce Commission and Texas Higher Education Coordinating Board to acquire the data available on the website. According to Huie, employers in Texas are required to file information about every employee’s wages to the Texas Workforce Commission. 

“We developed an agreement with our legal counsel within [the UT System] and within the workforce commission so that we could match the unemployment insurance with the student records so we could find out, of these students [who] graduated, where are they working and in what fields and how much money are they making, one and five years later,” Huie said. 

According to Huie, seekUT only provides information about students who find employment in Texas following their graduation, but not those who venture out of the state. 

“It’s very hard to track students once they leave the state,” Huie said. “We decided, for now, just to focus on Texas because we had such a large sample and sort of brainstorm and talk to different people about ways we might be able to capture the other students that leave at a later date.”

Melecki said users should be careful about the way they process the data available on seekUT. 

“Ten years of paying back a student loan, while difficult and could make me eat a lot of ramen noodles … might be a price worth paying for a 40- or 50-year career in something I love doing that I’ll get a great deal of satisfaction out of,” Melecki said, as an example. 

The President shakes hands with some of Manor New Technology High School's students as he made his way out of their gymnasium after delivering remarks on Thursday afternoon.

Photo Credit: Jorge Corona | Daily Texan Staff

Under a proposal made last week by the Obama administration in which universities nation-wide would be compared against one another for financial aid, UT officials said the University would rank well, resulting in increased financial aid for students. 

President Barack Obama’s higher education plan would rank colleges and universities and allocate financial aid according to the rankings. The plan, aimed to be in place by 2018, will be administered by the Department of Education.

The ratings system would use categories such as the percentage of financially-needy students admitted, affordability and other metrics to determine financial aid distribution, according to a White House statement. The ranking system would compare colleges and universities of similar missions, to fairly evaluate them within the same category. This would mean state universities and community colleges would not be compared side-by-side. The preliminary plan will need to be passed by both houses of Congress in order to take effect.

According to Thomas Melecki, UT director of Student Financial Services, the University stacks up well against its peer institutions. Compared to other state flagship universities, a large percentage of UT students receive Pell Grants, given by the federal government to low-income students who qualify.

The University also has a lower tuition rate than many of its peer institutions, In the 2011-12 school year, the University’s average in-state tuition was $9,790, which was lower than many other flagship universities such as the University of California, Berkeley, Ohio State University and the University of Michigan.

“There are a lot of things here that suggest to me that we would score very well on any kind of data the government puts together,” Melecki said. “The extent that that will turn into more and better financial aid for our students, that will be a huge help to our body.”

Student Government Administrative Director Joshua Tang said if the University bodes well under the ratings system, it would improve the value of a UT degree for all students.

“If we can incentivize better fiscal management of higher education and boost academic performance of the students who receive financial aid, I think that can go a long way to solving some of the educational insecurities in our country,” Tang said.

Under the Obama plan, graduation rates would also be factored into the proposed ratings system. In a statement last week, UT spokeswoman Tara Doolittle said the University’s focus on students’ long-term success will be rewarded when UT is ranked on the new system.

“We currently have initiatives in place to boost our four-year graduation rates, which are already the highest in the state, and our six-year graduation rates are on par with our national peers,” Doolittle said in a statement.

Doolittle also said the University was supportive of the incentive-based financial aid as long as the institutions were graded on appropriate data.

According to Melecki, a large number of UT students would benefit from more financial aid due to rising living costs in Austin.

“The cost of going to the UT-Austin keeps rising, not because of what UT-Austin is doing. What’s driving the cost of going to UT-Austin up is being in Austin,” Melecki said. “Austin is the most expensive city in Texas in which to rent.”

Melecki said that students should pay attention as legislation from ideas set forth in the Obama plan is debated in Congress.

“The president has begun a dialogue; the question is how that dialogue will end up,” Melecki said. “There may be changes in this that may or may not serve our student body well. [Students] need to pay attention to this.”

Under a new formula for the state’s B-On-Time Loan program, UT-Austin is estimated to receive $5.4 million from the state next year to help needy students — an almost $2 million increase from 2013 — while other UT System schools are set to see their funding decline.

For almost a decade, the B-On-Time Loan program has provided financial relief to students, but the schools participating in the program have not had an equal share of its funds. Every year, 5 percent of a Texas student’s tuition is set aside for the program. Students who apply for the program are granted a no-interest loan that is forgiven if the student graduates within four years with at least a 3.0 GPA.

According to the Legislative Budget Board, UT-Austin put up $31.4 million for the program but only received $27 million from 2007 to 2012. During that same time period, smaller schools, such as The University of Texas-Pan American in Edinburg, put up $5.4 million but received $7.3 million.

For the 2013-2014 school year, 715 UT-Austin students requested the loan but the school only had enough money to award 460, UT officials said. UT-Austin students borrow an average of $7,400 per year under the program.

The Texas Legislature changed the B-On-Time distribution this session and now requires universities to receive an amount proportional to what they have put into the program and restricts the program to two- and four-year universities.

Up until now, universities such as UT have essentially been donating money to other schools, said state Rep. Helen Giddings, D-Desoto, who advocated strongly for the program’s reform. 

The Texas Higher Education Coordinating Board, which oversees the program, will begin using this formula beginning in the 2014-2015 school year. Board officials repeatedly stated the current funding estimates are still preliminary.

Legislators also approved rules allowing UT to control the amount provided by a loan. Previously, B-On-Time loans had to amount to the average amount of state tuition, fees, books and class supplies per student, said Thomas Melecki, director of UT’s Office of Student Financial Services.

Melecki said these new rules will allow UT to provide more loans to students and bring significant benefits to students in the B-On-Time program if they fulfill graduation and GPA requirements.

“And even if student borrowers do not qualify for loan forgiveness of their B-On-Time loans, the loans have a zero percent interest rate, so the students repay only the amount they borrowed,” Melecki said.

However, the new funding formula is also decreasing B-On-Time funds for other smaller UT System schools. The University of Texas at Brownsville, which received $289,000 for the 2013-2014 school year, is estimated to receive $160,000 next year. Also, The University of Texas of the Permian Basin could see its funds decrease from $236,050 to $182,600, according to the Higher Education Board.

It is not clear whether this could create a crunch at these institutions, where tuition is less expensive than at Austin. At some institutions, such as The University of Texas at San Antonio, loans are under-utilized because students do not request loans. Federal law also prevents institutions from recommending loans not provided by the U.S. government.

At UT-San Antonio, about $100,000 for the program went unused in 2011, according to Lisa Blazer, associate vice president for UT-San Antonio’s Financial Aid and Enrollment Services.

“We’re not allowed to advertise these funds due to restrictions on alternative lending,” Blazer said. “They have to request it from us. That will explain why a small amount will not be spent.”

Statewide, about 36 percent of B-On-Time Loan funds went unused in 2011, according to the Higher Education Board.

Giddings said there are many issues with the program that have yet to be resolved. For instance, Giddings said $100 million collected for the program has gone untouched.

With the challenges faced by today’s students, Giddings said it is important for the Texas Legislature to responsibly work to make college education affordable and to continue resolving problems to ensure students graduate within four years.

“That’s a meaningful goal, and a goal we all ought to be focused on trying to achieve,” Giddings said.

UT students could see the interest rates on their federally subsidized loans double next month if the federal government doesn’t come to an agreement on how to contain rising student debt. 

Interest rates on federally subsidized Stafford Loans are set to increase from 3.4 percent to 6.8 percent July 1, which UT officials say will increase the average student’s debt by almost $2,600. The possibility has sparked a national debate and caused worry among higher education stakeholders around Texas who believe this burden will discourage students from pursuing college degrees. In the meantime, UT and state officials are urging students to graduate in four years to reduce debt.

According to state data, 85 percent of student aid in Texas comes from federal loans, which is 9 percent above the national average. The state currently ranks second in the number of students who take out federally subsidized loans. More than 460,000 Texas students owe the federal government a total of $1.69 billion. 

The average undergraduate student in the U.S. had about $26,000 in debt after graduation in 2011. 

Thomas Melecki, UT’s Office of Student Financial Services director, said the potential increase threatens UT affordability for many students. Melecki said doubling the interest rates would increase the total amount borrowed by UT students to more than $36.5 million. 

Melecki said the best way to borrow less money is to graduate in four years. UT currently
has a four-year graduation rate of 52 percent, the highest among Texas public universities, but hopes to increase it to 70 percent by 2016.

Student borrowers who graduate in four years average 29 percent less debt than those who graduate in five years and 67 percent less debt than those who graduate in six years, Melecki said. 

Surrounded by a crowd of students, President Barack Obama urged Congress this month to come to an agreement on a new student loan bill to avoid the automatic doubling. Obama criticized a bill the U.S. House of Representatives passed in May that would link student loan rates to how the economy is doing, meaning they could rise or fall every year. Obama has threatened to veto the bill because it does not lock-in rates, claiming it eliminates safeguards for low-income families.

“It could actually cost a freshman starting school this fall more over the next four years than if we did nothing at all,” Obama said. “The House bill isn’t smart, and it’s not fair.”

Dominic Chavez, senior director of External Relations for the Texas Higher Education Coordinating Board, said the board is concerned about the potential interest rate increase, as it would be another hurdle for financially needy students. However, Chavez said declaring a major early, planning coursework carefully and ending the practice of course-shopping may blunt the impact caused by the potential increase.

Chavez said the average Texas college student who graduates with a bachelor’s degree does so with 142 credit hours — 22 more than what is required for the average degree. 

If action is not taken in Washington, Chavez said raised interest rates may ultimately discourage Texas students from pursuing college degrees.

“Increasing the borrowing costs for students who want to attend college can, over the long-term, send a message that a college degree is too expensive,” Chavez said.

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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.”

Texas lawmakers are grappling with how to properly fund a state financial aid program that benefits thousands of UT students.

Current funding proposals to the TEXAS Grant Program, which supplies financial assistance to low-income students, remain unchanged from the previous legislative session despite enrollment growth.

State Sen. Kel Seliger, R-Amarillo, said he will co-chair a working group of the Senate Finance Committee focused on higher education funding that will examine how the state should fund the program. He said he hopes to allocate more funds to the program.

“It’s money that is very, very well spent, and the state gets a lot out of it,” Seliger said.

Math sophomore Daniela Benitez said she may have attended UT-Permian Basin instead of UT-Austin had she not received the grant. 

“Without that grant, I wouldn’t have that opportunity to become what I really want to be,” Benitez, who plans to transfer into the Cockrell School of Engineering, said.

The House and Senate budget proposals allocate $555.5 million for the upcoming biennium, which is the same funding level as the previous legislative session.

Texas public universities enrolled 577,000 students in fall 2012, which is an increase almost 20 percent of the total students from fall 2005, according to a report published by the Texas Higher Education Coordinating Board. The board projects that statewide enrollment will grow to 600,000 students by 2015 and 630,000 by 2020.

Thomas Melecki, director of the Office of Student Financial Services, said flat funding for the program while enrollment grows results in fewer funds to award new grants to incoming freshmen.

The program’s rules state that if appropriations to the program are not enough to allow awards to all eligible students, continuation awards, or awards to students who already receive the grant, must take priority.

Melecki said the University offered grants to about 1,600 freshmen last academic year. This year, that decreased to less than 1,400 freshmen, which was less than half of admitted freshmen who were eligible for the grant, Melecki said.

“That’s where we run into problems,” Melecki said.

Students eligible for an initial award must have an expected family contribution to their cost of attendance of $4,000 or less. To stay eligible for subsequent awards, students must maintain a GPA of 2.5 and complete 24 credit hours per academic year.

The Legislature allocated $50.7 million to 8,449 students at UT eligible for the grant during the 2012-13 biennium, according to information provided by the Office of Student Financial Services. During the 2010-11 biennium, 7,653 UT students received grants out of the $59.4 million allocated by the Legislature to the University.

Math freshman Luis Anaya said he planned to attend the engineering school at UT-San Antonio before he received the grant, which swayed him to attend UT-Austin and transfer into the engineering program.

“[The engineering program at UTSA] is on the rise but I feel like UT already had an established prestige and it’s a lot more competitive here, so I know that if I get a degree here, I know that I had to earn it and work for it,” Anaya said.

Published on February 11, 2013 as "Lawmakers pondering financial aid funding". 

Photo Credit: Chelsea Purgahn | Daily Texan Staff

With college affordability becoming a more pressing concern among state and higher education leaders, almost a third of UT undergraduates left the 40 Acres with more than $24,000 in debt during the last four years, according to figures obtained from the Office of Financial Services.

While the average graduating debt has dropped for UT students in the last few years, it reached an all-time high of $26,108 among students who borrowed money for college in the class of 2010. The average graduating debt was $25,191 for the class of 2012.

A variety of funding sources, including the availability of federal and state grants and college-specific scholarships, influence students from different financial backgrounds to borrow in varying degrees.

Thomas Melecki, director of the Office for Financial Services, said the majority of loan dollars borrowed by UT students are from federal loan programs that offer a variety of options to repay, defer or have a loan forgiven.

Last year, funding for federal direct subsidized and unsubsidized loans totaled $112.2 million for UT students.

“Don’t get me wrong, I’m a firm believer that students should borrow as little as possible,” Melecki said. “But I also believe they should not be afraid of borrowing what they need to get their degrees because, as the federal Bureau of Labor Statistics data show, the more education they have the more likely they are to earn more and the less likely they are to be unemployed.”

Students should think of taking out debt as if they were investing in themselves despite the negativity that surrounds student debt, Melecki said.

“I used to work in the loan business, and I will say the student body here is a good investment,” Melecki said. “But like any investment, you want to pay as little as possible.”

In most cases, the average debt borrowed by students is less for students from colleges who come from households with a high average household income, but colleges with students who on average come from lower-income households borrowed less than those with students from households with incomes that fall in the middle of the spectrum for May 2012 graduates.

For example, McCombs graduates came from families that had an average household income of $82,432 while social work graduates came from families with an average household income of $48,937.

Only 19 percent of 2012 McCombs graduates took out debt — the smallest percentage of borrowers among graduates from all colleges — while 40 percent of 2012 social work graduates borrowed. At the same time, McCombs graduates came from families with the highest average income household among other colleges and social work graduates came from families with the lowest average household income.

The number of social work students borrowing has increased steadily over the last four years with borrowers making up an average of 32 percent of every graduating class.

Social work senior Gwendolyn Cubit said she transferred to UT from Austin Community College in 2011 and has accrued more than $15,000 debt in less than two years while receiving $5,000 in scholarship funding every semester and even paying off some loans while still in school.

“I didn’t imagine taking out so much in loans when I started my undergrad, but I came from ACC where tuition may cost $800 a semester to UT where tuition is almost $5,000 a semester,” Cubit said.

Cubit said she is still worried about finding a decent job and paying back her loans despite obtaining a degree from UT.

“Attending and graduating from UT is viewed as prestigious so I do believe my degree was worth the debt, but then you leave with massive debt and can’t find a job in your profession,” she said. “Then you question if it was worth it. I think right now I do, but call me in a year and I’ll tell you then.”

The percentage of graduates who borrowed increased during the last four years for five colleges, including the School of Architecture and the School of Social Work while the percentage of graduates who borrowed decreased for six colleges, including the College of Liberal Arts, the McCombs School of Business and the College of Communication.

Another reason average debt varies across colleges may be the variation among college-specific scholarship programs that help students avoid debt. 

Last year, the College of Liberal Arts — the largest college on campus with almost 8,000 students — awarded $628,910 in scholarships. Meanwhile, the McCombs School of Business, with less than half of the population of liberal arts, awarded $1.1 million. Both totals do not include individual departmental scholarships.

The Jackson School of Geosciences graduating classes have the smallest percentage of borrowers with an average of 16 percent of borrowers over the last four years. Geosciences incentivizes its students to progress faster through its degree plan by automatically awarding merit-based scholarships that increase every year to students with qualifying grade point averages.

For example, a freshman with a 3.0 GPA receives $750 a semester while a freshman with a 4.0 GPA receives $3,000. A senior with a a 3.0 GPA receives $900 a semester while a senior with a 4.0 GPA receives $3,450.

Diana Orozco-Lapray, a doctoral student in the Human Development and Family Sciences Department, said she graduated from the College of Natural Sciences last year with almost $60,000 in student loans after five years as an undergraduate.

Orozco-Lapray said the debt she incurred was a good investment and is now pursuing her graduate degree at UT because of the funding offered by her department.

“I wouldn’t have forgone going to college just because of the loans,” Orozco-Lapray said. “Now that I don’t have to pay for graduate school, I feel a lot better though. The department funding I get now covers all my tuition expenses.”

Some students receive additional funding through scholarships that are not donated to a specific department and are awarded through the Office of Financial Services or through Texas Exes, the UT alumni organization, which gives out close to $1.9 million in scholarships annually. This year, the Texas Exes awarded 676 scholarships to students across the University.

Aside from college-specific scholarships, the Office of Financial Services includes loans as part of a student’s financial aid package when grants do not cover all of a student’s expenses. 

The Pell Grant is the University’s largest source of student grants. Last year, the University distributed $49.6 million in Pell Grants to 11,569 students.

TEXAS Grants, which provide half of the funding Pell Grants provide to students, were cut by 10 percent in the last legislative session and could face further reductions during the current legislative session. The Texas Higher Education Coordinating Board, which oversees financial aid programs for public institutions of higher education, recommended lowering the average amount students receive from $5,000 to $3,000.

Coordinating board spokesman Dominic Chavez said the board does not intend to make students take out more debt and hopes to avoid implementing its recommendation by pushing for more state funding for the program. 

UT is making its own efforts to incentivize graduating within four years by piloting several financial aid programs that intend to lower student debt as part of an initiative to increase four-year graduation rates to 70 percent by 2016.

Earlier this week, the University announced four new financial aid programs that will target students who are less likely to graduate on time by tying funding to timely degree completion. Funding for the programs totals $5 million and will be awarded to students starting next fall.

The Office of Financial Services will also implement a pilot program next year that will offer loan forgiveness for 200 incoming freshmen that have been awarded federal unsubsidized loans. The program will offer
students up to $2,000 in loan forgiveness if they meet course credit requirements that will put them on track to graduate in four years.

Chavez said he applauds the University’s early efforts to balance reducing debt and increasing graduation rates. He said student debt plays into a larger policy discussion to fundamentally bend the cost curve at the state and national level.

“We do recognize that we cannot continue to sustain this type of growth in tuition and fees without appropriate funding,” Chavez said. “We need to find a balance between sufficient investments from the state and student responsibility to graduate in a faster and more efficient manner. This is a shared responsibility model.”

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.

UT is filling a void in student financial aid with institutional grants after 60 students did not receive their Federal Pell Grants, a grant ranging from $555 to $5,550 for the neediest students, because of a change in federal policy effective this fall.

Thomas Melecki, director of Student Financial Services, said the University is still reviewing potentially affected students. He estimates UT will spend $250,000 in financial aid to students who were expecting Pell grants. Starting this fall, students nationwide can claim Federal Pell Grants for only 12 semesters instead of 18. The federal government implemented this rule to reduce spending on Pell grants by $11 billion over the next 10 years, cutting off students who had exceeded 12 semesters in school.

“We knew we had to act fast so these students wouldn’t be left without grant support they needed to pay tuition and other expenses,” Melecki said. “So we replaced their 2012-2013 Pell grants with grants from the University. By doing this, we made sure none of this year’s students who were counting on Pell Grants got hurt by the new law.”

Melecki said the U.S. Department of Education notified UT last spring. Beginning this past April, UT’s Student Financial Services published the information online and tried to notify students via Facebook and Twitter. The University is dependent on the U.S. Department of Education to inform it of those affected. Because UT does not have access to the Pell grants students receive from other colleges, it cannot easily come up with these names itself.

“The education department provided this information in early August, less than 10 days before UT-Austin Pell Grant recipients had to pay their fall tuition bills,” Melecki said.

While 60 students were affected this year, Melecki said he did not think too many UT students will be affected in the future because more than 80 percent of UT Austin’s undergraduate students graduate in 12 semesters. Melecki said the best way for students to avoid negative consequences would be to take 15 hours per semester.

Music studies junior Joey Ovalle said while he is on a Pell grant to help him pay for his college education, he does not think this reduction will affect him because he did not start taking out Pell Grants until a few years into his college education. But he does not think 12 semesters should be the maximum amount of time for students to use Pell grants.

“Only 12 semesters is going under the guise that you have everything figured out from the beginning of your college career,” Ovalle said. “I have a lot of friends who don’t like their majors now, but they can’t change it because they don’t think they can afford it.”

Brittany Lamas, a journalism junior who is also on a Pell Grant, said 12 semesters should be enough for any student to graduate.

“Even if you change majors, it should not take you more than six years to finish your degree,” Lamas said.

Printed on Friday, September 14, 2012 as: UT to fun tuition to fill Pell Grant gap

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