Senate panel takes step toward repealing college financial aid law

A Texas Senate committee on Wednesday took the first step toward eliminating a state rule that requires universities to use a portion of their tuition revenue to fund scholarships and grants for poor students.

Republican Senate leadership has called the rule a hidden tax on students and made the rule's repeal a top higher education priority for 2017. But uncertainty remains over how much of an effect, if any, the change would have on universities' tuition costs and financial aid offerings.

Many university officials said Wednesday that they would continue to fund the program even if state law changes. 

The Senate Higher Education Committee voted 4-2 to move forward Senate Bill 18, which would change the law. The legislation was filed by the committee's chairman, Sen. Kel Seliger, R-Amarillo, and has strong support from Lt. Gov. Dan Patrick. If the bill passes the Senate, its future in the House is uncertain. 

The idea has generated strong opposition among Democrats, who say it will make it harder for needy students to attend college. But Seliger downplayed its significance Wednesday, saying there is nothing in his bill that forces universities to stop setting aside the money. Nonetheless, he expressed frustration over the redistribution of money that critics say raises costs for middle-income students. 

"While we should be focused on college affordability, we should not do it for some students on the backs of others," he said. 

If tuition set-asides were completely eliminated and universities passed those savings on to students, the average annual tuition bill would decline by a little under $460. But almost 106,000 students would lose some financial aid in 2018, according to the Legislative Budget Board. That would amount to almost $240 million in lost scholarship funds.

Most of that money goes to students with annual family income under $50,000. 

The odds of all that money disappearing are slim, however. University representatives said in a hearing Wednesday that they see a need to recruit and retain low-income students.  

"I can't imagine they would simply abandon any desire to help these students stay in school," said Raymund Paredes, commissioner of the Texas Higher Education Coordinating Board.

Representatives from the University of Texas at Austin, Texas A&M University, the University of North Texas, the University of Houston and the University of Texas at Arlington all testified at the hearing. All but A&M said they hoped to keep using the set-aside money to fund scholarships. A&M said it couldn't commit to anything, but that it values the students who receive scholarships from set-aside dollars. 

But Democrats said they were worried about the long-term effects of Seliger's bill. Schools might not eliminate those scholarships right away, but they are struggling because of cuts in per-student state funding and demands from lawmakers to keep tuition costs down. The current version of the Senate's 2018-19 budget calls for hundreds in millions of dollars' worth of cuts for universities. If those continue, the schools might one day feel forced to plunder into the dollars used for scholarships, Democrats said. 

Sen. Royce West, D-Dallas, highlighted that worry when he asked a representative from Texas Tech what her school would do with tuition set-aside money if the state eliminated the rule.

"Our plan at this point is to continue to use it for financial aid," said Martha Brown, vice chancellor for government relations at the Texas Tech University System.

West then asked why she said, "at this point."

"We don't know where we are headed with [the budget]," Brown replied. 

Read more of our higher education coverage:

• Texas students spend millions of dollars each year on community college courses that four-year universities won't give them credit for. State lawmakers want to change that.
• The A&M System Board of Regents has voted to increase its out-of-state tuition at its College Station flagship by up to $200 per credit hour.

Disclosure: The University of Texas at Austin, Texas A&M University, the University of Houston, the University of North Texas, the University of Texas at Arlington and Raymund Paredes have been financial supporters of The Texas Tribune.  A complete list of Tribune donors and sponsors can be viewed here.