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Rep. Helen Giddings (D-DeSoto) filed a bill, HB 700, that would eliminate the state’s B-On-Time student loan program.

The B-On-Time loan is a state forgivable loan funded by 5 percent of student tuition, according to Thomas Melecki, the University’s director of student financial services. Students on the loan receive $4000 per semester. The loan requires students graduate in four years with no more than six credit hours than needed by their degree plan.

The House Higher Education committee left the bill pending after a public hearing held Wednesday. The bill would stop enrollment for the loan in September 2015, but current borrowers would be eligible for continued funding.

Under HB 700, funds previously used for the loan would be granted directly to the institution from which they were collected to establish other aid programs, such as grants, loans or work-study programs.

“In many cases, it’s virtually impossible for students to get out in four years,” Giddings said. “We believe that a better outcome will be received if universities are able to structure a financial aid program from these dollars that will meet the needs of students at their institutions.”

Portions of the funds go unused statewide, and universities are not allocated the full value collected from student tuition. Giddings said these factors motivated her to file the bill. In 2014, more than $11 million of the B-On-Time fund were not used.

Melecki said part of the discrepancy is because of universities’ inability to advertise the loan. B-On-Time is classified as a private loan, preventing universities from prompting the funding, Melecki said. Student’s must know about the loan and ask for it to be considered.

“The B-On-Time loan program is a fabulous program from a student’s point of view,” Melecki said. “But, with that gag-rule, there are too many students who don’t know about it, and, with the way the legislature has been sitting on B-On-Time money that is collected by the state, we send money down that our students spend in tuition that we never get back to help our students.” 

Roshni Varghese, applied learning and development senior and one of 716 students at UT using B-On-Time loans, said most people do not know about the loan.

“I actually told one of my friends about it when she was a senior in college, and she had never even heard of it,” Varghese said. “I’ve only had one other friend who has ever tried or gotten it, ever.

The House budget, as currently written, would cut B-On-Time funding by $25.3 million. The Senate budget would decrease it by $12.2 million.

“The Appropriations Committee does anticipate, in the House anyway, that the B-On-Time loan is just going to fund renewals,” said Giddings, a member of the Appropriations Committee. “If someone has already enrolled, we’re not going to jerk the rug out from under them.”

Varghese said the loan is beneficial for students, such as herself, who do not qualify for need-based loans and grants because of their parents’ incomes but are essentially paying their way through school.

“The good thing about the B-On-Time loan was that it didn’t matter if you technically needed it or not; it was still there for you to get,” Varghese said.

Student Government discusses the inability to inform students about the B-On-Time Loan at the general meeting Tuesday. According to federal law, SG is too closely affiliated with the University to recommend private loans.

Photo Credit: Fabian Fernandez | Daily Texan Staff

Student Government’s initial decision to inform students about the B-On-Time loan has been halted because, according to federal law, the organization is too closely affiliated to the University.

The B-On-Time program is a no-interest state loan that is fully forgiven if a student graduates on time with a GPA of at least 3.0. Currently, the University is not allowed to recommend private loans to students, including state loans, unless the student asks about the specific program.

In early April, SG Chief Justice Philip Wiseman and other SG members planned to raise awareness about the B-On-Time loan to make up for the University’s inability to recommend private loans. The SG members were later informed by Tom Melecki, student financial services director, that they would be unable to tell students about the loan because of the federal restriction.

“Under the federal law, SG is too closely affiliated as an institution-affiliated organization, and, as a result, any kinds of prohibitions that are placed on the University, by extension, are also placed on SG,” Wiseman said.

The University does have the option to promote these loans if they advertise a list of approved lenders to students, though the University does not use this method because it cannot guarantee the trustworthiness of independent lenders, according to Melecki.

According to Wiseman, a resolution in support of the bill, H.R. 3371, would provide students an opportunity to bring up the B-On-Time loans without SG recommending them.

The bill would amend the Higher Education Act so state institutions could provide information about state loans and allow universities to renew students’ loans without them having to reapply.

Wiseman said SG would begin a yearlong, strategic push to work with state representatives and raise awareness about the bill.

“We’re going to set the groundwork for something that could develop into a much larger, statewide campaign,” Wiseman said. “This is a minor setback at most.”

According to Melecki, there are currently more than 100 students on the waitlist for the B-On-Time program, and the University is obligated to reward the loan to students
who have already been in the program before giving it to students on the waitlist.

Melecki said students can also be informed about the program through the Texas Higher Education Coordinating Board, which sends out an email to students who need to renew their loan.

The Texas Higher Education Coordinating Board is a state agency that works with the Texas Guaranteed Student Loan program to promote the B-On-Time loan. Kristina Tirloni, Texas Guaranteed Student Loan program spokeswoman, said the agency may freely promote the B-On-Time loan, especially to high school students.

“It’s a great program because there’s a financial aid component, and there’s also the component of trying to advocate for the student to not only graduate on time, but with a pretty high GPA,” Tirloni said. “The benefit on the back end of the program is great for students.”

Photo Credit: Caleb Kuntz | Daily Texan Staff

You approach a car dealership. Unable to finance a vehicle, you are turned away. Unfortunately, the dealer failed to mention a loan program that would have allowed you to afford your new car, and, in all 50 states, the dealer would have committed a criminal offense.

But this very same practice is being applied to a student’s investment in higher education every day — albeit, legally. Because of an unintended consequence of the Higher Education Reauthorization Act of 1965, universities are unable to give students and their families the full truth about how they can finance a college education. Outside of Federal Direct Lending, a U.S. Department of Education loan program, it is illegal for University advisers to refer students to loans from private companies or loans from state run entities, such as the Texas B-on-Time loan, which forgives student debt (to those who qualify) if you graduate in 4 years with more than a 3.0 GPA.

Luckily for students, Rep. Ruben Hinojosa, D-TX Congressional District 15, has put into place efforts to fix the current loan predicament. Hinojosa has crafted proposed amendments which would allow schools the ability to inform students about all of the options available to them and lobbied for the legislation in Washington, D.C. Additionally, Student Government members, including me, are trying to raise awareness of the issue and assist legislative efforts in fixing this problem.

In their final months at the University, former SG Administrative Director Joshua Tang and Chief Justice Philip Wiseman are spearheading an effort to garner support for the proposed changes offered by Hinojosa’s office, an effort that I intend to continue after their graduation. Both Tang and Wiseman have traveled to D.C., done countless hours of research on the topic, stayed in close contact with Hinojosa’s office and, most importantly, begun to engage our campus on an issue that could truly impact students across the country. 

Students need to be made aware of as many options to finance their education as possible. Federally funded loans shouldn’t have a monopoly on the discussions between students and their advisers. Private loans and outside companies often provide services at affordable rates that would allow students to more feasibly pay for college. It is condemnable that students wouldn’t have access to knowledge about these options.

The proposed changes to HR 3371, which are set to be brought to the U.S. House floor in the upcoming legislative session, have tremendous bipartisan support. 

Members of Congress on both sides of the aisle can get behind the bill, particularly since this specific fix wouldn’t impact federal taxpayers, as programs like the Texas B-On-Time loan and others that the University currently cannot make students aware of are funded by the state or private companies. 

“Our record number of teenagers must become our record number of high school and college graduates and our record number of teachers, scientists, doctors, lawyers and skilled professionals,” Hinojosa said. And his efforts are a significant step in that direction. Allowing college advisers to offer more financial options is a fantastic way to expand student resources without costing the federal government any money at all — particularly in the current fiscal climate.

As the school year draws to a close, it is easy to think of summer plans and not federal legislation. However, it is important to acknowledge that Hinojosa, Wiseman and Tang’s efforts are gaining steam. As someone who follows national and state politics, I find it rare to see efforts that directly impact the lives of students. But every student needs to get involved. That way, we can call upon the Texas delegation in Washington, D.C., to get behind H.R. 3371 and support giving students and their families all the options in paying for a college education.

Dimitroff is a government sophomore from Houston.

Photo Credit: Chelsea Purgahn | Daily Texan Staff

Federal laws that restrict what loans advisers are allowed to mention to students mean that students are not provided with information that could save them money, according to Tom Melecki, director of Student Financial Services.

Federal law currently prevents institutions from recommending, promoting or endorsing private student loans, which are defined broadly enough to include loans offered by the state of Texas. One state loan program, the B-On-Time program, offers a no-interest loan that is fully forgiven if the student graduates on time for their degree with a GPA of at least 3.0. According to Melecki, advisers are not allowed to recommend this loan to students unless they specifically ask to be put on the waiting list.

Melecki said the restrictions on what information an adviser can share means many students never find out about options like the B-On-Time loan. According to Melecki, $32 billion in B-On-Time money went unused in Texas in 2012, though more of the money was accessed in 2013.

“The B-On-Time loan can support students in achieving on time graduation because if we can provide them with B-On-Time money, they wouldn’t necessarily have to go out and work and earn money [during college],” Melecki said, “They’d have more time to work on their studies.”

According to Karen McCarthy, senior policy analyst at the National Association of Student Financial Aid Administrators, one option provided to the University is to advertise a list of approved, independent lenders to students, with the hopes that those lenders recommend alternative loans. McCarthy said most universities choose not to use this option because they cannot guarantee the trustworthiness of the independent lenders. 

“[Universities] are kind of stuck between a rock and a hard place,” McCarthy said.

Melecki said independent lenders can be a risky option.

“Oftentimes, those loans turn out to be more expensive for students and certainly federal student loans,” Melecki said. “We don’t particularly want to be in a position of recommending to our students loans that may not be as good for them as the federal loans that are available to them.”

When the Higher Education Act preventing the information sharing was implemented in 2012, the state allocated the University more than $6 million in B-On-Time funds, but students only used 59 percent of the allocation. In 2013, more students accessed the loan and used 99 percent of the state allocation. Melecki said he was not sure how students became more educated about the loan but said he appreciated the increased interest. 

“What we want to do is be in a position where we can utilize this to the maximum extent every year,” Melecki said. “This is a fabulous loan program for students.”

A bill to amend the Higher Education Act is currently being reviewed by the House Committee on Education and the Workforce. Eight UT Student Government members are working to create an awareness campaign to lobby in support of the bill, H.R. 3371.

Philip Wiseman, government senior outgoing chief justice for the SG Judicial Court, said he has not heard any opposition to the bill from state representatives with whom SG has discussed the loan.

While the bill is in committee, Wiseman said he plans to inform students about the B-On-Time loan through postcards to families, social media and campus-wide emails.

“In the mean time, while the University is handicapped, we are going to serve as the liaison to the student body,” Wiseman said.

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. 

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.

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.”

“No qualified student should be prevented from attending the University for financial reasons,” declared UT’s Commission of 125, a group of prominent citizens who convened nearly a decade ago to determine how the University can best serve the state. 

UT-Austin administrators take this statement seriously. The University is working hard to hold down student costs. 

If you are an in-state undergraduate, your tuition increased at less than half the national average last year. Using the University’s flat-rate tuition plan, you are allowed to take 15 or more credit hours for the price of 12. Additionally, the University spends $100 million a year on merit-based scholarships and need-based grants, and David Laude, senior vice provost for enrollment and graduation management, recently announced $5 million in new pilot programs to encourage and support four-year graduation by forgiving student loans, expanding scholarships and creating more on-campus work opportunities.

Nevertheless, the cost of attending the University keeps rising. Why? Most UT students come from elsewhere in Texas. They must leave their homes to live in Austin, which is the state’s most expensive city to rent in. And while tuition may be frozen for two years, research indicates that student living costs will average about $15,600 next academic year — up 24 percent from just five years ago — which means students pay more while government financial aid programs deliver less. 

Data in the Office of Student Financial Services show that, in the last two years, federal and state cutbacks in five key financial aid programs have cost UT students almost $20 million a year. The Legislature cut the state’s TEXAS Grants, upon which the neediest students depend, by $7 million. Lawmakers also cut funding for Texas B-On-Time Loans even though 59 percent of these loans made to previous UT students have been forgiven because the students graduated in four years with GPAs of 3.0 or better. Additionally, Congress eliminated the federal summer Pell Grants that some students used to speed time to their degrees by taking year-round classes. It also eliminated two other programs through which almost 4,400 students supplemented their Pell Grants. 

Moreover, UT’s Federal Work-Study allocations have declined 25 percent in the last five years, eliminating more than 400 undergraduate jobs, most of which were on-campus. The University’s Texas College Work-Study allotment has also decreased, and federal financial aid soon may be subject to more reductions. 

Federal Work-Study could be downsized further if Washington implements spending cuts on March 1 to avoid the fiscal cliff. Pell Grants, on which more than 11,000 UT students rely, also face an uncertain future because next year’s federal budget is still not set. Under a law already on the books, the 3.4 percent interest rate on federal loans which more than 14,000 UT students receive will rise to 6.8 percent next year. Next biennium’s preliminary state budget includes flat funding for Texas College Work-Study, Top 10 Percent Scholarships, and TEXAS Grants as the Legislature struggles with demands on a state treasury stretched thin.

Still, the University and some state and national leaders hope to see increases in financial aid. UT President William Powers Jr. recently spoke of the need for more TEXAS Grants in his testimony to state lawmakers about the state budget. Legislative appropriations committees are looking into increased funding that could provide $5,000 TEXAS Grants to as many as 90 percent of the new students who are eligible for them, up from the current level of 30 percent. The Texas Senate’s Higher Education Committee favors consistent B-on-Time funding and expanding Texas College Work-Study. The state’s Higher Education Coordinating Board would amend state law so public universities may keep the tuition they must now send the state to help fund B-On-Time — ensuring that more than $6.5 million a year for B-on-Time stays at UT.

At the federal level, there is a growing consensus about the importance of keeping higher education affordable, and the Bill & Melinda Gates Foundation recently funded studies that recommend increasing Pell Grants and reducing student loan interest rates. 

Financial aid decisions by federal and state policymakers affect your UT experience. If you are one of the University’s 25,000 undergraduate financial aid recipients, they affect the affordability of your UT education. If you do not rely on financial aid, they affect the students with whom you live and attend class.

As a student, you are uniquely positioned to study pending decisions on financial aid and make your preferences known. You have a living, breathing understanding of these matters. Research skills you honed in courses and on term papers can help you inform yourself about the issues. You attend classes a few blocks north of the state capitol, so you can observe funding and policy decisions in person. You have access to student-oriented media, including The Daily Texan, so you can monitor what public officials say and do.

Whether you agree that qualified students shouldn’t be prevented from attending UT for financial reasons or whether you support or oppose additional financial aid, pay attention and participate. Your present, and your future, are at stake.

Melecki is the director of Student Financial Services.

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

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.