All in Good Time

By Andrew Roush in 40 Acres, March | April 2015, Special on February 27, 2015 at 12:00 pm | 7 Comments

Texas has one of the best student-loan programs in the country. So why can’t UT tell students about it?

The story behind Texas’ B-on-Time student loan program is complicated. It involves federal regulations, cushy relationships between lenders and financial aid officers, lots of unused cash, and, surprisingly, New York Governor Andrew Cuomo.

The state-funded program is a parent’s dream. It awards students zero-interest loans of up to $8,000 per year that are completely forgiven if students maintain a “B” average and graduate in four years. Even if the loans aren’t forgiven—grades slip, majors change—a no-interest loan isn’t easy to come by.  So why, in 2010, were only 3 percent of Texas students taking advantage of the program? Why, in 2012, did UT have over $1 million in program funds sitting unused?

The problems started in 2007, when Cuomo, then the New York state attorney general, was tasked with investigating financial aid practices across the country. His inquiry found that some officials, including financial aid officers at Columbia University, the University of Southern California, and yes, the University of Texas, owned stock in companies listed as their institutions preferred lenders, the list of financial institutions that universities provide students. The UT System followed up with a 33-page report, UT-Austin fired the offending financial aid director, and the campus ceased to designate preferred lenders.

Besides preventing future impropriety, the move made sense for UT. Unlike some college towns, which may support a handful of local banks, Austin has dozens of options, and the university didn’t want to seem to favor any.

But that’s only one part of the tangled knot of circumstance affecting the B-on-Time program. Since 2008, new federal rules have gone into effect which barred universities from promoting non-federal loans outside of their preferred lenders. Without disclosing any preferred lenders, UT couldn’t promote the B-on-Time program. Today, UT financial aid officers work under a gag order. One of the very best deals in higher education is going unused because of it, and students can only be told about it if they ask.

“We in the Texas Legislature created B-on-Time to promote timely graduation, ease the cost of higher learning, and increase higher education access,” says state Sen. Judith Zaffirini, BS ’67, MA ’70, PhD ’78, Life Member, Distinguished Alumna, whose 2003 Senate Bill 4 authorized the B-on-Time program. “Changing the federal preferred lender requirements will ensure those benefits reach more Texas students.”

Ten years after Senate Bill 4 passed, when the state’s higher education authority came up for its required Sunset review, some called for the program’s underutilized funds to be used elsewhere. Zaffirini and others fought to protect the program, but it’s still not being fully used, and some universities, like UT, end up paying more into the program than they’re getting out.

Potential solutions are in the works. Congressman Ruben Hinojosa, BBA ’62, represents a squiggly ribbon of land stretching from east of San Antonio down to the border known as District 15. Hinojosa introduced a bill in 2013 that would exempt institutions from the gag order when it comes to state-based loan programs. But aside from Hinojosa’s colleagues in the Texas delegation, the bill hasn’t caught on.

The move has been supported by a number of higher education organizations, not the least of which is the Department of Education. The federal renewal of the Higher Education Act this year may also stoke the flames, but the outcome is still unclear. Very few states have programs like B-on-Time, so few in Congress are aware of the problem.

Still, lawmakers on both the state and federal levels are working, alongside universities, to help end the gag order. When that will happen is still anyone’s guess.

Minnesota does have a similar, if less generous, program. And lucky for Texans, the House education chair, John Kline, represents the land of 10,000 lakes. Hinojosa, Kline, and others may just work the fix into the reauthorization act. But as with anything in politics, we won’t know how it ends until it’s over.

Illustration by Peter Arkle.

Tags: b-on-time, cost of college, financial aid, Judith Zaffirini, loans, Ruben Hinojosa, texas legislature, tuition