UT Austin Offers Student Loan Incentive

Posted on Oct 28, 2012

In an effort to increase their four-year graduation rate, The University of Texas at Austin is testing out a program that rewards students with significant student loan forgiveness if they graduate on time.

It may not seem like a big deal to finish college in four years, but only half of UT-Austin's students graduate in four years, and about 80 percent graduate within six years. Students who graduate in four years borrow 27 percent less than those who graduate in five years.

The accumulation of student debt—especially for students who graduate late or not at all—has become a serious concern for educators and government policymakers. Default rates are rising, and those who succeed in paying their higher education loans must often suffer significant financial hardship along the way.

The university will randomly select 200 students from the incoming Fall 2013 class who are involved in the Texas Interdisciplinary Plan. The plan offers additional advising and academic support to about 900 students who receive unsubsidized loans. The group of 200 students will be split in half and each will receive different incentives. The first half will be offered $1,000 loan forgiveness plus interest accrued if they pass 15 hours of their degree requirements by the end of each semester. The other half of the test group will be offered $2,000 in forgiveness plus interest accrued, if they complete 30 hours of degree requirements by the end of the academic year. Current tuition at UT-Austin is $9,792 per year.

A portion of tuition set-aside funds will fund the program. Tom Melecki, Director of Student Financial Services at UT-Austin, says, "If it proves successful and we extend the program over four years of enrollment, we estimate that the total amount forgiven will be a little more than $8,000 per student by that, in the long run, this will reduce the amount students must repay after graduation by more than $12,000."

University financial aid administrators are hoping that the program at UT-Austin will help even more students than Texas' already popular B-On-Time Loan. B-On-Time offers interest-free loans to Texas undergrads and they are forgiven is the student maintains a B or higher GPA within four years.

In an effort to increase their four-year graduation rate, The University of Texas at Austin is testing out a program that rewards students with significant student loan forgiveness (Link to Student Loan Issues PRACTICE AREA page) if they graduate on time.

It may not seem like a big deal to finish college in four years, but only half of UT-Austin's students graduate in four years, and about 80 percent graduate within six years. Students who graduate in four years borrow 27 percent less than those who graduate in five years.

The accumulation of student debt—especially for students who graduate late or not at all—has become a serious concern for educators and government policymakers. Default rates are rising, and those who succeed in paying their higher education loans must often suffer significant financial hardship along the way.

The university will randomly select 200 students from the incoming Fall 2013 class who are involved in the Texas Interdisciplinary Plan. The plan offers additional advising and academic support to about 900 students who receive unsubsidized loans. The group of 200 students will be split in half and each will receive different incentives. The first half will be offered $1,000 loan forgiveness plus interest accrued if they pass 15 hours of their degree requirements by the end of each semester. The other half of the test group will be offered $2,000 in forgiveness plus interest accrued, if they complete 30 hours of degree requirements by the end of the academic year. Current tuition at UT-Austin is $9,792 per year.

A portion of tuition set-aside funds will fund the program. Tom Melecki, Director of Student Financial Services at UT-Austin, says, "If it proves successful and we extend the program over four years of enrollment, we estimate that the total amount forgiven will be a little more than $8,000 per student by that, in the long run, this will reduce the amount students must repay after graduation by more than $12,000."

University financial aid administrators are hoping that the program at UT-Austin will help even more students than Texas' already popular B-On-Time Loan. B-On-Time offers interest-free loans to Texas undergrads and they are forgiven is the student maintains a B or higher GPA within four years.

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