Leaders in the Texas House are looking to phase out an incentive-based student loan program and redirect its funding toward a larger financial aid program that is based on need.
House Appropriations Committee Chairman John Otto, R-Dayton, said funds designated for the loan program called B-On-Time sometimes go unused because under federal law, universities are not allowed to advertise it. The B-On-Time program, which served about 8,000 students in 2013, offers a $4,000 loan every semester that is interest-free and forgivable if a student graduates on time with a 3.0 GPA. Instead, Otto wants to direct money toward the TEXAS Grant program, which helped about 70,000 students in 2013.
“We think TEXAS Grants and giving institutions flexibility is a better solution than B-On-Time,” Otto said.
Proposed budgets in both the House and Senate decrease funding for the B-On-Time program, which was allocated $80.5 million in general revenue funds for the current two-year budget cycle. The proposed Senate budget cuts that by $12.2 million. The proposed House budget cuts that by $25.3 million and would move part of that to the TEXAS Grant program, which received $652.3 million in general revenue funds in the last two-year budget cycle.
Currently, public universities in Texas set aside 5 percent of students’ tuition for the B-On-Time program every year. In the past, students have not always been able to reap all the money their university set aside.
“Why am I making universities set aside tuition that they can’t utilize? If their students are not the successful ones, then I’m essentially picking winners and losers,” Otto said.
The movement to phase out the program has support from House Speaker Joe Straus.
“The state shouldn’t collect tuition dollars just to sit in the state treasury,” Straus said in a statement. "There are better ways to make college more accessible and affordable.”
Under the proposed House budget, funds allocated to the B-On-Time loan program would be for current enrollees only — new applicants could not apply. The proposed Senate budget would cease funding new applicants from private universities, but new students from public institutions could still apply.
Under both budgets, students already on the B-On-Time loans would continue to receive money.
Sen. Judith Zaffirini, D-Laredo, said she would like to see funding for the B-On-Time loan program continue. Zaffirini, who wrote the bill that created the program in 2003, said it helps middle-class families who may not qualify for need-based scholarships.
“This is such a wonderful program; it is truly the state’s only incentive program,” Zaffirini said. “I don’t understand why anyone would phase it out, because it’s excellent.”
Almost 40 percent of students who have been on the B-On-Time program since its inception have had their loans forgiven, according to data from the Texas Higher Education Coordinating Board.
In a statement, Texas Higher Education Commissioner Raymund Paredes said he supported fully funding both programs.
Disclosure: Raymund Paredes is a major donor to The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.