For Immediate Release: July 14, 2010

Texas Higher-Ed Students Face Ambition Tax

HOUSTON – In 2003, the Texas Legislature passed HB 3015 which deregulated tuition and required all public universities to set aside a certain percentage of every student’s tuition each semester to fund needs-based financial assistance programs for Texas residents.

This means that a Texas student paying $2,500 per semester in tuition will have $500 of their tuition set aside each semester for financial assistance programs under HB 3015. Students are obligated to pay into the fund even if they themselves receive some kind of financial aid. Over four years, the student will pay $4,000 into this program – a substantial amount considering that many students pay for college through student loans, requiring interest payments. In fact, if the student financed all of their tuition they would owe an additional $550 in interest on the tuition that was set asides for another student.

Tuition deregulation created two parts to tuition: statutory and designated.

Statutory tuition is the rate that the state mandates colleges to charge, and is the same for all public higher education institutions. It is currently $50 per semester hour for in-state students and $327 for out-of-state students. 15% of graduate and undergraduate statutory tuition is set aside and reserved for the Texas Public Educational Grant and Emergency Tuition and Fee Loans.

Designated tuition is determined by each institution. According to the Texas Education Code, there is no limit on how much designated tuition can be charged. Universities are required to set aside 15% of graduate and undergraduate designated tuition that exceeds of $46 per semester credit hour, and finances needs-based financial assistance programs selected at the discretion of each university. In the 2008-09 term $100 million in tuition was set aside from students for this purpose.

An additional 5% is set aside from undergraduate designated tuition to fund the Texas B-On-Time Loan Program. Set asides collected for this program go to the Texas Higher Education Coordinating Board, which controls the program. Although the B-On-Time program awards loans to both private and public institutions, only public institutions are required to set aside students’ tuition. This creates an unfair burden for students attending public institutions by forcing them to share the bill for other students attending private institutions.

Since 2003, tuition rates have increased 86%. As the costs associated with higher education have continued to rise, more students and families are struggling to pay for college and must find additional funding sources to meet the growing costs. Yet many of these same students are unaware that a significant portion of their tuition is used to provide financial assistance to other students.

Not all students benefiting from tuition set aside programs are legal Texas residents. In 2001 HB 1403 enacted a loophole for non-legal Texas residents allowing students seeking financial aid that are non-U.S. citizens, who are ineligible to apply for federal student aid, to meet the Texas state residency requirements and can complete the Texas Application for State Financial Aid (TASFA) in lieu of the FAFSA form. These students can then compete for state funds without being U.S. Citizens or legal U.S. residents and makes them eligible for financial aid programs including the Texas Public Education Grant, the Texas Grant, and Texas State Exemption Programs.

Students of Texas universities graduate with the 4th largest amount of average debt after obtaining a four-year degree in the country. Texas Commissioner of Higher Education, Raymund Paredes, says that the average Texas student graduates with about $20,000 in student loans- a figure he said has roughly doubled in the last decade.

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