As part of the University’s efforts to decrease the burden of college loans on students, a UT administrator presented a pilot program intended to generate faster loan forgiveness and increase four-year graduation rates to state senators.

Thomas Melecki, director of the Office of Student Financial Services, said the University has developed a pilot program that could help students repay student loans if they meet certain course credit completion standards. During a Senate Committee on Higher Education hearing Wednesday where legislators heard recommendations related to the upcoming legislative session, Melecki presented the new program and recommended the state establish financial aid program budgets years in advance.

“The program provides real positives for students in completing all their hours and getting themselves to graduation in four years,” Melecki said. “It allows students to borrow less and forgive or pay down loans while still in school.”

The program would select 200 incoming freshmen that have been awarded Federal Direct Unsubsidized Loans on the basis of financial need. Melecki said unsubsidized loans, with a 6.8 percent interest rate, are the most expensive type of loans students can take out.

Half of the group will be offered $1,000 in forgiveness toward the principal of the unsubsidized loan and additional forgiveness of accrued interest each semester if they complete 15 course credit hours that apply to degree requirements.

The other half of the group will be offered $2,000 in forgiveness and additional forgiveness for all interest accrued at the end of the academic year if they complete 30 course credit hours toward their degree.

Melecki said he estimates students who qualify for forgiveness for eight semesters will pay $13,000 less over the standard 10-year repayment period.

The program will begin next fall, and the University will provide results to the state legislature in two years, Melecki said. He said the program will provide data to measure whether it is possible to incentivize undergraduates to graduate in four years.

Melecki was not the only one who focused on the idea of incentivizing student performance through financial aid.

Sen. Judith Zaffirini (D-Laredo), committee chair of the Senate Committee on Higher Education, said financial aid programs need to motivate students with incentives to take more courses because they are not being advised to take more than 12 hours a semester.

“The easiest way to save money is to graduate faster,” Zaffirini said. “We need to get creative as to how we acknowledge these issues.”

Dan Weaver, assisting commissioner of education at the Texas Higher Education Coordinating Board, said students are taking too long to earn degrees and take more credits than are necessary to graduate.

“The essence [of our recommendations] is to encourage students to graduate on time,” he said. “We recommend capturing this essence as a tuition rebate instead of by providing loans that are ultimately forgiven.”

In a written testimony submitted to the committee, Melecki also recommended state appropriations from the legislature be approved two years in advance.

“Putting state financial aid appropriations on such a cycle would make it possible for institutions to receive their allocations every year in plenty of time to award state funds before May 1,” he wrote in the proposal.

In 2011, the Office of Student Financial Services delayed financial aid award notifications for students because of delays in the federal and state budget processes.

The University provided prospective freshmen with financial aid packages that did not include state financial aid but did not send these notifications until past the May 1 enrollment deposit deadline for freshmen to ensure their spot at UT.

Melecki said notifications included, on average, $7,000 less in TEXAS grants and Top 10 Percent Scholarships per student, an amount that was replaced by loans.

“Some of the loans offered to students were pretty significant and went up to $11,000,” he said. “I might have told my child that he or she needs to attend a less expensive university or a community college if I am a parent and I realize I am going to go $40,000 into debt. If you are from a family that does not have a big income, a $40,000 debt for a parent is prohibitively expensive.”

The University experienced a two percent drop in Hispanic student enrollment, a nine percent decrease in students from families with incomes less than $60,000 and a 14 percent decrease in first-generation students last year compared to fall 2010, according to figures obtained from the Office of Student Financial Services.

Printed on Thursday, September 13th, 2012 as: UT financial pilot plan to decrease loan burden on idebted students