Tom Melecki

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.


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.”

Radio-television-film sophomore Carissa Bittle said that, at the end of every semester, she receives almost no reimbursement for textbooks she had paid hundreds of dollars for because her professors assign a new edition of the book every year.

“I bought three history textbooks. … One of them was loose-leaf, and [my professor] started using the new edition. … No one would buy it,” Bittle said. “If they’re going to require me to buy this, they should at least make it affordable.”

A bill currently up for debate in the Florida Senate would require undergraduate textbooks to be in use for at least three years at state institutions. Texas currently maintains no such policy.

According to an annual survey by the Office of Student Financial Services, in 2012-2013, students spent an average of $452 on textbooks — the highest it had been in five years of the office conducting the survey.

Tom Melecki, director of Student Financial Services, said he thinks it is important for textbooks to be up-to-date, but, if no crucial information changes between editions, he does not believe it is worth the extra money students are required to pay.

“I do think there is a balance that has to be struck between teaching outdated material and cost that students have to incur to get the high quality education they’re seeking,” Melecki said. “If there’s a small passage in one chapter that’s been updated, maybe that’s not the case.”

According to publishing company Scholastic, the four largest textbook publishers make a total of $4 billion per year in revenue. 

Government professor Brian Roberts said there is always new information being taught in his field that textbooks cannot keep up with, making immediate changes to textbooks unnecessary.

“I think, in the world of political science, there is certainly a place for classes to address certain current issues — whether that has to be in the textbook is a good question,” Roberts said. “There are core ideas about politics that do not require being repeated in the new edition every year.”

The Student Financial Services website includes a section called UT 4 Less that lists methods to limit student fees, including ways to “Slash Book Costs.” According to Melecki, the goal of the financial aid office is to do more than just award and distribute financial aid.

“I’d like us to be in a position to offer students guidance and counseling about how to be smart in their spending decisions,” Melecki said.

In response to President Obama’s fiscal 2015 budget, Republicans in the U.S. House of Representative proposed an alternative plan earlier this month, which included cuts to financial aid programs in higher education, including freezing the maximum Pell Grant at its current level for the next decade.

The proposal, which would begin on October, aims to cut overall spending by $5.1 trillion over the next 10 years. In order to accomplish this goal, the plan will eliminate eligibility for less-than-half-time students, stop financing the Pell Grant with “mandatory money,” adding a maximum-income cap for students to receive aid, and end student-loan interest subsidies for undergraduates while they are enrolled.

“Mandatory money” refers to the set amount of money the government is required to set aside for the Pell Grant. An interest subsidy on education loans ensures that a student will not be charged interest as long as he is enrolled in a university.

Student Financial Services Director Tom Melecki said taking away mandatory money from the Pell Grant will cut approximately 14 percent of the total money in the grant.

“Right there you’re shrinking the federal Pell Grants by a significant amount for our students,” Melecki said. “Even if the University weren’t to raise tuition at all in the future, like it hasn’t in the last three years, it would still be a time when inflation is driving up the cost of renting.”

Melecki said he does not believe the Pell Grant is currently giving enough aid to students. According to Melecki, even when taking inflation into account, the maximum federal Pell Grant available in 2012-13 covered 64 percent of tuition and fees at the average public institution — a decrease from 103 percent in 1992-93.

“It’s declining here, and it’s declining across the country,” Melecki said. “What’s happened lately is that Congress, for several of the last 10 years, kept the Pell Grant amounts the same from one year to another, but because of inflation, by keeping them the same, the purchasing power of the Pell Grant fell further and further behind.”

Economics senior lecturer Wayne Hickenbottom said he views the proposal as logical because going to college increases future income, making it rational to have to take out loans in order to reach that goal.

“It certainly seems that there’s a little more shifting of the cost of education over time to the individual as opposed to some governmental entity,” Hickenbottom said. “It fundamentally comes down to that if you believe what education does is increases your earning power to allow you to make more money in the future, then you’re the one who ought to be paying for that.”

A College Board report says the median annual earning for an American with a bachelor’s degree is $56,000, which is $21,000 higher than the median income for those with only high school diplomas.

Government senior Mariam Almasri, who is currently on financial aid, said while she does believe the government gives a fair amount of money to students, it’s often overlooked that the price of college encompasses more than just tuition, especially when it comes to housing.

“I would say they do give enough, especially to those who do need it,” Almasri said. “By putting [your living situation] off campus as on campus, that might determine how much more money you can get. … I think they should give money for off-campus housing.”

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.

The Obama administration announced the FAFSA Completion Initiative earlier this month, a plan that will aid the Department of Education in identifying students who have not finished their applications for FAFSA and help them do so.

The Free Application for Federal Student Aid — also known as FAFSA — is a form used by the Department of Education to determine the amount of need-based federal grants or federal loans a student might receive for college. In the 2011-2012 submission period, almost 22 million FAFSAs were submitted.

Tom Melecki, director of Student Financial Services, said there are a number of reasons students do not complete FAFSA, and among them is the students’ belief that they will not qualify for benefits.

“There are a lot of students who start the FAFSA, [and] then they have to ask their mom and dad to provide some data, and they say, ‘Don’t bother with that. We make too much money,’” Melecki said. “But, then again, it’s really difficult for them to know that.”

According to Student Financial Services, 64 percent of undergraduates submitted FAFSA forms last year, and 73 percent of those who applied received need-based financial aid. The total amount of need-based financial aid given in 2012-2013 was approximately $260 million, while the total amount of non-need-based financial aid given that year — including merit-based scholarships — was  around $82 million.

According to Melecki, FAFSA is operating better now than it has in previous years, but there are two things he said he would change: one would be to allow students to fill out the application two years prior to attending college, and the other would be to make the application a requirement.

“I’d be the first to admit that this might be a step too far, but I’d almost like to require every student to have to complete a FAFSA,” Melecki said. “There’s no institution in the country that does that, though.”

Journalism sophomore Ashley Lopez said the language found in FAFSA is enough to deter students from applying, but she believes everyone should fill it out, even if they are unsure whether they will qualify for aid.

“It’s confusing because it’s based off your parents’ tax info, and, if you haven’t looked at a W2 form or IRS forms, the terms are hard to understand,” Lopez said. “I think all people should [apply for FAFSA].”

Melecki said he is unsure whether Obama’s initiative will be successful and thinks there are alternatives to prompting more students to fill out the application.

“I think it would be even more effective if Congress would appropriate more money to put in the federal financial aid programs, so that students could equate completing the FAFSA with having a better chance of getting the best forms of federal student aid,” Melecki said.

National Association of Student Financial Aid Administrators (NASFAA) offered several policy considerations in a report released Wednesday that received mixed reviews from the UT community.

The report does not make recommendations, but rather puts forward broad policy considerations to generate discussion on key policy issues facing students.

One policy in the report considered federal government use of a “Student Loan Eligibility Index,” which would introduce minimal financial requirements that students must meet before receiving federal loans.

Director of the Office of Student Financial Aid Tom Melecki said the policy has the potential to benefit and harm the students depending on how it is applied and designed.

“We might actually close the door to college opportunity to some students who could still benefit because of the way they scored on their SAT/ACT test or GPA made them fall into some category where we’re making assumptions about them that we shouldn’t make because we don’t really know them that well,” Melecki said. “It could also protect students from taking out loans they should not take on. It depends on how it gets applied and designed.”

If students did not qualify under the “Student Loan Eligibility Index,” they would still be able to receive Pell Grants and other institutional aid, according to the report. Studio art junior Sian Paulin said she thinks the proposed system would be unfair even with the possibility of Pell Grant eligibility.

“Pell grants don’t cover everything,” Paulin said. “Even if they do get Pell grants but they still have more expenses to cover and have no other money to pay for it, you need loan money. If your GPA isn’t high enough then they have to pay out of their own pocket or take out a loan from a private bank with higher interest rates.”

Another policy consideration suggested student loan repayments through Income-Based Repayment plans for all borrowers. Melecki said the plan would tie the amount paid to the borrower’s income, where the amount due in a year would depend on income earned that year.

“The Income-Based Repayment makes a lot of sense to me [especially for] those early years when you’re getting out of school,” said Melecki. “When you can’t afford to pay a lot, it’ll suppress your payments. In addition you could opt out of the income based repayment if you wanted to pay off the loan quicker or endured a financial hardship.”

Journalism junior Rebecca Salazar said evaluating the repayment plan is a tough issue.

“I feel like on paper it sounds fair because if you make more you can pay more,” she said, “but then I don’t want to punish the people that make more to pay more.”

The report also considered an option for students to be told in advance whether they are Pell eligible and guarantee an award amount as early as students’ freshman year in high school. Other policies in the report included Pell Grant incentives based on credit hours for those who already qualified for the grant and the idea to allow financial aid offices to limit the amount some students may borrow.

“I think everything in here is worth exploring and thinking about,” said Melecki. “That does not mean that I think we should adopt everything in here. They make some really good points.”

Published on February 18, 2013 as "NASFAA addresses financial aid policy". 

Frances Bello works off campus at Burnet Self Storage.

Photo Credit: Marisa Vasquez | Daily Texan Staff

The start of the semester signals job-hunting season on the 40 Acres, and depending on what type of job students are looking for, the search may be more or less difficult than in previous years.

Since 2009, the number of students with work-study jobs has decreased by almost a quarter to almost 1,100 workers, but at the same time, the number of students employed on campus has increased by 822 workers to almost 11,000.

A shrinking federal subsidy is fueling the decline in work-study employment, said Tom Melecki, director of the Office of Student Financial Services. Since fall 2009, federal funding for work-study has decreased by 21 percent at UT, from $2.4 million to $1.8 million. Additionally, state funding has decreased 18 percent from $232,199 to $190,187 in the same time period.

Melecki said a greater allocation from the Texas Legislature could help offset the work-study losses.

“We hope the Legislature will dramatically increase appropriations for the Texas College Work-Study Program so we can fund more on-campus employment opportunities for students,” Melecki said.

The Texas Senate’s proposed budget for the 2013-2014 biennium allocates the same amount of funding to the program as it did in the last session — $7.5 million.

Work-study is a form of financial aid offered to students and funded by federal and state programs. Students who qualify are hired by the University but have 70-75 percent of their wages paid by the government, with the University paying the remainder. 

State Sen. Kirk Watson, D-Austin, serves on the Senate Higher Education Committee and said in a statement he supports a possible funding increase to state work-study.

Although the amount of work-study funding has decreased, total student employment increased on campus from spring 2011 to fall 2012, according to Student Employment Adviser Amy Greenspan.

“The perception is that it’s really hard to get a job on campus if you are not work-study, and I don’t believe that is an accurate perception because the number of students on work-study versus the number of students who are not speaks for itself,” Greenspan said.

The total number of students working on campus increased from 10,399 workers in spring 2012 to 10,941 workers in fall 2012, Greenspan said. Ten percent of them qualified for a work-study subsidy.

“We don’t have a really direct way of measuring, but the number of student employees is up, so one interpretation might be that as funding and budgets get tight people hire more students because it’s less expensive to hire students than a regular staff person,” Greenspan said.

According to Melecki, the University cannot legally eliminate a staff job and replace it with a student employee. A high turnover rate at the University might make it easier for students to find jobs formerly held by regular staff people, Melecki said.

In fiscal year 2011, UT eliminated 200 positions according to UT System documents. An additional 400 positions were projected to be cut in fiscal year 2012, although the actual number of positions eliminated could have varied, UT spokeswoman Tara Doolittle said. Some of the non-faculty staff positions could be held by students, Doolittle said.

Independent of the causes or effects of a shift in University staffing, financial aid officer Linda Morgan said research indicates working on campus has a positive impact on students’ academic performance.

“Studies have shown that students who work less than 20 hours per week in on-campus jobs tend to perform better in their schoolwork and graduate on time than their peers who are working off campus or are working more than 20 hours per week,” Morgan said.

Watson said this is why he thinks the state’s work-study program could be a target for more funding.

“From what I know about the benefits to students through work-study programs, this would be a primary place to look for additional funding,” Watson said.

The benefits of the work-study program to anthropology senior Elizabeth Melville include having a work environment that accounts for her class schedule.

“You don’t have that high stress level of having to sacrifice your class time for your job,” Melville said.

She said working at an on-campus job also gives her exposure to networking that other off-campus students might not have.

“Being in a library is something special,” Melville said. “When professors come in you get to learn who they are and network. There’s a constant focus on the academic world. I think with waitressing, there would be less of that.”

Melville said work also helps her manage her time.

“I am really glad I have a job because it helps you structure your life much more concisely, and it builds your work ethic,” Melville said. “It’s not just a way of making money, but also a way to develop into a person going into the workforce.”

Aside from benefits to students, work-study funds are critical to filling staff positions at UT because they reduce employment costs for each department, financial aid officer Linda Morgan said.

“You get a lot of bang for your buck,” Morgan said. “You could hire three work-study students for what it would cost to hire one non-work-study student. The reality is that some of the departments, even with the subsidy, cannot afford to hire three students.”

Morgan said 1,094 students received work-study positions in 2011-2012, which was more than 20 percent less than the number of students two years ago.

Money allocated from the American Recovery and Reinvestment Act helped bolster the program in 2009-2010, but the benefits of the program were short-lived. Cuts the following year resulted in UT ending its summer work-study program, which has not been reinstated, Morgan said.

“That was a fun year,” Morgan said. “It was essentially win, win, win all the way around, but the very next year it dipped below the line where we were before and has continued to go down ever since.”

As the number of students who take jobs at the University increases, it is important they find a job they can manage along with schoolwork, Melecki said.

Among dropouts responding to a University study that concluded in 2011, off-campus workers were more likely than their on-campus peers to say work negatively impacted their school performance. Just under 60 percent of students working off campus said their schoolwork was negatively impacted by work. The same percentage of respondents working on campus said their academic performance was unaffected by working while going to college.

Psychology senior Holly Chapman said balancing work and school is made easier by working on campus. 

“Since it’s basically a 9-to-5 job and you don’t have to work weekends, you can study then,” Chapman said. 

Journalism senior Frances Bello doesn’t have the luxury of a five-day workweek. Sunday is the only day she doesn’t work at Burnet Road Self Storage or attend UT. Bello said while she understands the convenience of working on campus, she feels her off-campus job will also provide a substantial benefit in the job market when she starts looking for a job after graduation.

“In general, having a job doesn’t give you as many options for extracurricular activities and internships,” Bello said. “If you’re off campus there is going to be even less of that, but I feel like employers are looking for some kind of job experience. There are advantages and disadvantages to working, but I feel like it’s genuinely going to help me find a job after I graduate.” 

Morgan said striking a balance between work and academics is essential to success at UT.

“Your full-time job is going to school and getting your degree,” Morgan said. “This job is meant to be less than part time, frankly. If you have extra time use it on your studies, but remember why you came to UT in the first place. Keep your eye on the prize.”

Images of Elizabeth Melville and Holly Chapman by Chelsea Purgahn and Pearce Murphy

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

University officials say UT could feel repercussions from the automatic tax increases and spending cuts set to kick in as part of the fiscal cliff on Jan. 2, 2013.

If the U.S. Congress does not act, the expiration of five tax measures will cause $500 billion in tax increases and $200 billion in spending cuts. The drastic financial repercussions could put the country on a fiscal cliff by depressing an already sluggish U.S. economy.

Tom Melecki, director of Student Financial Services, said Congress’ inaction could reduce a percentage of funding awarded to the Department of Education, which in turn distributes funds to the programs it administers, including student financial aid programs.

“There’s very little outlining current law about what happens to financial aid programs if we go over the fiscal cliff,” Melecki said. “We’re reading everything we can about what might happen in Washington, but we’re scratching our heads like everyone else. One of my concerns is that changes might take effect immediately.”

Melecki said there will be no immediate cut to Federal Pell Grants, the University’s largest source of student grants, but federal loans and work-study funding could see cuts when students return to campus in January if federal spending is reduced by the fiscal cliff.

In 2011-2012, the University received almost $237 million in federal funding for financial aid programs, $9.6 million of which was Pell Grants distributed to 11,569 students based on financial need. Funding for federal direct subsidized and unsubsidized loans totaled $112.2 million, and $2.1 million was awarded as work-study.

One proposal to avert the fiscal cliff involves increasing the federal subsidized loan interest rate from 3.4 percent to 6.8 percent, Melecki said.

Last year, 1,122 UT students had work-study jobs and earned $3 million. Federal funding for the work-study program, which Melecki said has been suffering reductions every year for the past six years, pays 70 percent of a student’s salary. The University is responsible for the remaining 30 percent.

“My office employs 25 work-study students,” Melecki said. “If there’s a cut back in federal money, I don’t think we can afford to take that up [from 30 percent] to even 35 percent to maintain the same number of jobs if cuts are made.”

Mary Knight, UT associate vice president of financial affairs, said the University has no definitive details about potential cuts but is aware of the possible impacts on student financial aid, research and payroll.

“Payroll tax changes, [including] social security and withholding taxes, could impact [or] reduce faculty and staff take home pay,” Knight said.

In 2010, the payroll tax was temporarily cut from 6.2 percent to 4.2 percent. The tax measure is set to expire at the end of 2012 and could cost the country $115 billion next year.

Federal research funding plays a vital role in research at higher institutions, but funding cuts related to the fiscal cliff could reduce grant money universities receive from major research agencies.

In 2011-2012, the National Science Foundation, the National Institutes of Health and the National Endowment for the Humanities awarded UT $166.4 million in research grants. The three government research agencies may each be subject to a 7.6 percent cut to mandatory spending and an 8.2 percent cut to discretionary spending.

“It is possible that funding for current federal grants could end before the research work is completed,” Knight said.

It is unknown if federal research agencies will implement cuts by eliminating existing grants, not providing new grants, providing less grants or cutting grants by a uniform percentage, Barry Toiv, vice president for public affairs for the Association of American Universities, said.

The Association of American Universities is a group of 62 public and private research universities, including UT, that advocates on issues important to research-intensive universities, including funding.

“What we do know is that considerably less research will take place,” Toiv said. “That is bad for long-term health advances, bad for national security and bad for the nation’s long-term economic growth.”