TXEXplainer: Tuition Set-Asides

By Rose Cahalan in Promote & Protect on June 13, 2016 at 9:17 am | 3 Comments

It’s been called vital aid for middle-class families, a hidden tax, and Robin Hood pricing. Lawmakers are arguing over whether to do away with it, but many UT students and their families aren’t even sure exactly what it is. It’s the practice of tuition set-asides, or the state-mandated funneling of a portion of tuition toward financial aid for needy students, and it’s generating some controversy in the Capitol.

What are tuition set-asides?

When a Texas resident student pays his or her tuition bill at a public university, some of that payment goes toward need-based financial aid for other students. This practice of setting aside a portion of all tuition for needy students is mandated by state law.

How’d this come to be?

You might be surprised to learn that students at Texas public universities pay two types of tuition: statutory and designated. Statutory tuition is set by the Texas Legislature and is $50 per semester credit hour. In 2003, the legislature gave universities the authority to designate their own tuition above that amount. When this change (also called tuition deregulation) occurred, some lawmakers worried that tuition would rise and increase the burden on working- and middle-class families. So with the passage of House Bill 3015, they amended the Education Code to require universities to set aside 15 percent of designated tuition exceeding $46 per credit hour for need-based financial aid.

What types of need-based aid do these set-asides fund?

The umbrella term “tuition set-asides” also includes some other types of aid: 15 percent of statutory tuition, or 6 percent at community colleges, is set aside for the Texas Public Educational Grant program. And until last year, 5 percent of designated tuition also went toward the B-on-Time Loan Program. The B-on-Time program is being phased out, however, and will gone by 2020.

How much does a typical student pay into these programs?

It depends on how many credit hours you take. Universities are required to tell students how much of their tuition bill was set aside for need-based aid each semester. At UT-Austin, students are informed via email. Here’s the email that one full-time student in the College of Natural Sciences received last semester:

Dear Student,

The University is required by State law (Sec.  56.014, Education Code) to
send this informational notice each semester.  A portion of each student’s
tuition must be set aside for need-based financial assistance to qualifying
students.  $314 of your Spring 2016 tuition was set aside for this
purpose.

This message is for informational purposes only.  No action or response
 is required.

Student Accounts Receivable
The University of Texas at Austin
fbic@austin.utexas.edu

And what do all those individual payments add up to?

For the 2013-14 school year (the most recent data available from the Texas Higher Education Coordinating Board), set-asides resulted in more than $172 million in grants, scholarships, and work-study aid to 84,896 Texas students. At UT-Austin that year, 9,878 students were awarded $22 million in grants and scholarships as a result of the set-asides.

So what’s the controversy?

Lt. Gov. Dan Patrick has been a longtime critic of tuition set-asides. In April, he called the law “nothing more than a hidden tax” and said, “We need to end the 20 percent set-aside next session.” Patrick argues that eliminating the set-asides would result in lower tuition.

State Sen. Kirk Watson (D-Austin) disagreed in a Texas Tribune op-ed. “That’s a false promise,” he wrote, adding, “Those in control of the Capitol have been happy to let students and families pick up more and more of the tab for higher education in recent years and contribute less and less state funding.”

Shawn Johnson is a 2016 graduate of the Texas A&M University School of Law and the founder of StopTexasSetAsides.org. Johnson has student debt of his own. “My wife and I recently had a child,” he says, “and we’ve been good about not having too many student loans, but when you’re paying off loans with childcare, a slow economy, trying to buy a house—programs like these are a big facilitator of the student loan bubble. I think we need to reexamine the set-asides as the best solution, and maybe we can come up with something better that won’t mortgage our children’s futures.”

How do the universities respond?

“These dollars help thousands of needy and deserving students attend UT universities,” UT System spokesperson Jenny LaCoste-Caputo said in a statement. “UT System leaders will gladly work with legislators and state leaders in a review of programs like these set-asides to ensure higher education at UT and in Texas remains of the highest quality yet affordable and accessible for students.”

In a 68-page letter addressed to Patrick and State Sen. Kel Seliger in March, UT System Chancellor Bill McRaven defended the university’s affordability efforts. The letter included this chart of net tuition by family income at UT-Austin. Net tuition is the amount that a student actually pays after financial aid, not including loans:

Tom Melecki was UT’s director of financial aid from 2008-15 and now runs his own business as a college affordability consultant. He’s in favor of the set-asides. “They provide relief from the middle-class squeeze,” he says, “because they benefit both middle-income students and lower-income students.” Melecki argues that even if eliminating the set-asides resulted in lower tuition, “You still have to think about the overall cost of college. That includes room and board, books and supplies—it costs well over $22,000 a year at the average Texas college these days. The median family income is about $52,000 a year, so you’re talking about more than 45 percent of a middle-income family’s income would go to college. Without things like the tuition set-aside, even middle-class families are going to find it’s unaffordable to get a bachelor’s degree in Texas.”

During the last two legislative sessions, lawmakers proposed several bills (including S.B. 444  and H.B. 587) to end the set-asides, but they didn’t make it out of committee. What will happen in 2017 is anyone’s guess.

Editor’s Note: The Texas Exes takes no position on tuition set-asides.

Tags: affordability, Dan Patrick, Kirk Watson, politics, tuition, tuition set-asides