As Texas higher ed tuition rises, financial aid is covering less and less

_{*Editor’s note: This story is part of an occasional series about how Texas and Texans pay for college. Read part one, on the recent rise in tuition, here.}

When it comes to paying for college, Ricardo Gutierrez receives about the best help that Texas has to offer.

Still, it sometimes feels like his future at the University of Houston is hanging by a thread.

The state’s most generous financial aid program, the Toward Excellence, Access and Success Grant, or TEXAS Grant, pays his tuition. And he uses a federal Pell Grant and scholarships from UH to take care of his textbooks and fees, plus a little extra.

But he still lives at home with his parents in southeast Houston to save money, waking up at 5:30 a.m. each day to take his brother to high school and his mom to her job as a legal assistant downtown. After a full day of classes, he drives home to study until around 11 p.m. Then on Fridays, Saturdays and Sundays, he works eight hours per day at a movie theater to pay his phone bill, fill his gas tank and help his family afford groceries.

“It’s difficult,” he said. “I find myself not being able to hang out with friends and do social activity much. I’m either working, at school or doing homework.”

Texas leaders know that helping students like Gutierrez get through college is key to the state’s economic future. But as he teeters on the edge of not being able to pay, the assistance the state offers continues to shrink in scope. Multiple financial aid programs have been phased out or targeted for elimination by the Legislature in recent years. And the TEXAS Grant, the state’s main tool for helping low-income students, doesn’t pay for nearly as much as it used to.

The grant program was created to cover the full price of tuition and fees for poor students. Now, thanks to enrollment growth and rising tuition, it only takes care of an average of 58 percent of those costs. This year, lawmakers are looking at tweaking it again to possibly pay out an even smaller share, while leaning toward not adding the funding necessary to make sure that all eligible students receive it.

Meanwhile, concerns about educating the next generation of Texans are growing. Tuition keeps rising, and about 60 percent of the state’s schoolchildren are economically disadvantaged.

For Gutierrez, a sophomore at UH’s honors college, less help could have dramatic consequences. He wants to be a doctor, but he doesn’t want his mom or dad, who works at Home Depot, to have to chip in. So if his patchwork system of scholarships, grants and part-time work gets disrupted, there won’t be many other places for him to turn.

“It’s worrisome,” he said. “For a lot of people, finances are the one thing that determine whether they pursue college or not.”

Dwindling help

Texas’ financial aid challenges don’t simply come from an unwillingness by the state to spend money on the programs. Lawmakers have funneled billions of dollars into grants and interest-free loans in recent years. But in a common trend in Texas higher education, the number of new students has overwhelmed the system.

The TEXAS Grant program exemplifies the situation. It’s supposed to be open to students who took high school coursework that prepared them for college and whom the federal government believes can’t expect their parents to pay for more than 60 percent of their tuition and fees. In 2000, the first year of the program, the grant covered full cost of tuition and fees for all 6,108 recipients.

By 2015, more than 66,000 students were receiving grants. And the average cost of tuition and fees at a four-year public university in the state had climbed from under $3,000 in 2000 to about $8,500.

The amount disbursed has climbed from $14 million to $329 million in 2015. But that still hasn’t kept up with demand. So as time has passed, state leaders have approved a series of tweaks to the program.

In 2005, students attending private universities were excluded. In 2012, the state set a $5,000 target for grant payouts — an amount far less than average tuition and fees. Then in 2013, it phased out community college students and, in an acknowledgement that the state couldn’t pay for everyone who qualified, created a “priority model” of determining who gets a grant.

With the average award now covering less than two-thirds of a recipient’s tuition and fees, state law requires universities to make up the rest with scholarships and other grants. But as the gap between a TEXAS Grant and the total tuition and fees bill grows, schools will have to devote more money to filling the void. That means less scholarship money is available for recipients’ other expenses — or for other students.

Experts warn that many students need help with more than just tuition. An undergraduate who lives on campus at the University of Houston can expect to spend about $24,605 per year on his or her education, according to federal data. With tuition and fees covered, that still leaves more than $15,000 on educational and housing expenses. That’s more than half the average family income of a TEXAS Grant recipient.

“You can cover tuition and fees, and it can still be unaffordable for a student to attend a Texas public college or university,” said Tom Melecki, the former director of the University of Texas at Austin’s financial aid office.

There’s limited data on how much other aid TEXAS Grant students are receiving. But Melecki said that in his experience, many students who receive the grant are already working jobs and have maxed out their other scholarship and federal grant opportunities. Some have even reached the limit for how much they can borrow through federally subsidized student loans, Melecki said.

“So there really isn’t any other place for them to go to replace that money,” he said.

No help coming

Many education leaders agree that more help is needed. But it’s unclear from where it will come. Entering the current legislative session, the Texas Higher Education Coordinating Board asked for an additional $78.3 million for TEXAS Grants. That would have allowed 85 percent of students who qualify for a grant to receive one.

Without that money, only 57 percent of eligible students would receive a grant by 2019, the Coordinating Board warned. The House has so far turned down the request. The Senate’s version of the budget would add $45 million.

Slowly, the state is realizing that the current model of helping students pay for college “will be very difficult to sustain in the future,” said Raymund Paredes, the state’s higher education commissioner.

Some worry that TEXAS Grants could soon meet the fate of other popular state financial aid plans. In 2007, the state created the Top Ten Percent Scholarship, which aimed to keep students who graduated in the top of their Texas high school classes from leaving for out-of-state universities. In its first year, the scholarship paid $2,000 per year. But by 2015, funding hadn’t kept up with growth, and the annual award had shrunk to $735 — an amount so small that lawmakers decided it wasn’t worth keeping the program alive.

In 2003, the state created the B-On-Time Loan, an interest-free loan that was forgiven if the recipient graduated within four years with a B average. Lawmakers decided to phase that program out in 2015, saying they had trouble marketing the loan.

And an old program designed to help middle class students still looms over budget discussions.

From 1997 to 2003, the state operated what was once known as the Texas Tomorrow Fund, which allowed parents of young children to prepay for tuition at current rates that would be valid even if costs rose by the time their kids reached college. As tuition increased, the cost to the state spiraled out of control, forcing lawmakers to cut off enrollment.

Still, the state is on the hook for the nearly 60,000 families that signed up before that change — and it doesn’t have the money set aside to follow through. According to its annual report, the program’s unfunded liability was $617 million. Sometime soon, lawmakers will have to make up for that, or default on the promise it made to those families.

“It’s clear that we are getting to the limits of what the state is willing or able to do” in paying for financial aid, Paredes said this week.

Reaching a breaking point?

Meanwhile, one financial aid program that has avoided such pressure is being targeted for elimination this year. Since 2003, the state has required universities to set aside for financial aid 15 percent of any revenue from tuition increases. Therefore, as costs have gone up, so has the amount of money the schools save for scholarships.

But at the urging of Lt. Gov. Dan Patrick, who calls the program a “hidden tax,” some senators are trying to repeal that rule. It’s unclear what effect that action would have — many schools say they would probably still continue the set asides. But if the practice ended, more than 100,000 students would lose a combined $239 million in scholarships, according to a Coordinating Board estimate.

Meanwhile, lawmakers and higher education officials seem to be reaching a consensus that the cap should be lowered for how much students receive from TEXAS Grants. Senate Higher Education Committee Chairman Kel Seliger, R-Amarillo, has filed a bill that would prevent students from collecting more than the cost of tuition, fees and textbooks minus whatever they receive from a federal Pell Grant. The goal, he said, is to prevent fraud. If grant money doesn’t go toward tuition or fees, there’s no way to make sure that it is being used for true educational expenses, he said.

But in a hearing, he also said the bill is designed to “spread things out as far as possible.” If the amount of a TEXAS Grant is capped, the state will be able to offer grants to more students, he said.

That goal was applauded by Paredes and other higher education leaders. With so many people struggling, Paredes said, “the most important thing is to make sure you give needy students enough to go to school.”

“You can’t cover all of their expenses, but at least give them the minimum to enroll in a university,” Paredes said.

But some Democrats questioned whether the assistance is getting so small that students won’t be able to afford the total cost of attending college.

“What I worry about is where is the cutline,” Sen. Kirk Watson, D-Austin, said at a recent hearing on the issue.

“I don’t know what the cutline is,” Paredes answered. “But I know this: We are getting close to it.”

That’s true for Gutierrez. When he graduated high school, he was leaning toward attending the University of Texas at Austin. But even though he was eligible for a TEXAS Grant, he couldn’t afford the flagship school. So he instead decided to stay close to home.

Now, every hour of his day is carefully plotted to get him to medical school — a goal he has held since his mom signed him up for a “Mini Med School” summer camp in his middle school days.

“I want to help people,” he said, adding that he sees himself working as a pediatrician or in an emergency room.

But any change, any loss of financial aid, could push that dream out of reach. If he has to work more hours, his grades might suffer. But if his income dips, he might not be able to stay in school.

“I’m looking at the angles, and I am looking at the obstacles in my way, and I’m just trying to tackle them one at a time,” he said.

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