Study on HB 3015 Tuition Set Asides

This document provides a brief history on tuition set aside practices in the state of Texas, studies the impacts to students at Texas Higher Education Institutions, and discusses areas for abuses and shortfalls of the tuition set aside program.

Background

Texas Legislature passed HB 3015 in 2003 which deregulated tuition and enacted requirements that all public universities set aside a certain amount of every student’s tuition each semester in order to fund needs-based financial assistance programs for Texas residents.

Prior to tuition deregulation in 2003, the state legislature mandated flat rate tuition for all public institutions. There are now two parts to tuition: statutory and designated.

  • Statutory tuition is the rate that the state mandates colleges 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 the Emergency Loan Program.
  • Designated tuition, on the other hand, is determined by each institution. According to the Texas Education Code, there is no limit as to the amount of designated tuition that can be charged. 15% of graduate and undergraduate designated tuition that exceeds of $46 per semester credit hour is set aside and goes to the University’s tuition grant account.

Another 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 private and public institutions, only public institutions are required to set aside students’ tuition to fund the program. This creates an unfair burden for students attending public institutions because they must provide the funding for the program, but both private and public universities have access to the funds.

Financial need is determined based on the student’s Federal Application for Financial Aid (FAFSA) and the estimated cost of attendance as established by each institution. Students seeking financial aid that are non-U.S. citizens, who are ineligible to apply for federal student aid, can meet the Texas state residency requirements under House Bill 1403 and can complete the Texas Application for State Financial Aid (TASFA) in lieu of the FAFSA form. Students who are eligible to complete the TASFA application can then compete for state funds without being U.S. Citizens or legal U.S. residents.

In June 2009, the Texas Legislature passed S.B. 1304 which requires public institutions to notify students of where their money is going. This bill, which took effect beginning the Spring 2010 semester, requires universities provide each student a notice regarding the specific amount of their tuition required to be set aside.

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.

Impact on Students

A closer inspection on tuition set aside practices reveals that these tuition set asides may represent a significant catalyst for these drastic cost increases.

To illustrate this theory, consider an undergraduate student at Texas A&M University:

  • The student will pay $2,5681 in tuition per semester (15 hour semester)
  • Over four years, the student will pay $20,545 in tuition of which $2,718 will have been set aside for needy students.
  • Having borrowed $20,545 for tuition, the student will make $28,3722 in cumulative payments ($540 in interest on the loan principle that was set aside for other’s).

So the student will have to pay an additional $3,258 to obtain their four-year degree due to the set aside tuition and interest on set aside portion of the student loan.

In 2003, the student would have paid only $1,3803 in tuition for the same 15 hour semester. This means that tuition has increased $1,188 at Texas A&M University since 2003. Of this $1,188 increase, $5134 (43%) is a result of the tuition set aside practice.

Set Asides by the Numbers

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