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As universities provide more aid, they look to replace tuition set-aside

New rules making it harder to fulfill commitments

IOWA CITY — Iowa’s regent universities did not get the requested state funding this year to create a financial-aid program for their neediest resident undergraduates, so the schools are hashing out plans to fulfill scholarship and grant commitments this fall through other sources.

The University of Iowa, Iowa State University and the University of Northern Iowa in the past provided much of their institutional financial aid through a practice called tuition set-aside — redistributing some student tuition dollars to other students as need-based and merit-based aid. But the state Board of Regents last fall voted to phaseout the practice over several years, after it drew criticism from some legislators and parents.

The Legislature this session took the additional step of passing a bill prohibiting the use of tuition money from Iowa resident undergraduates to be used for student aid, however it does allow the universities to use tuition revenue from non-resident students as aid.

And while the Legislature did not fund the regents $40 million request to create a need-based grant program for Iowa students at the universities, lawmakers said the schools can use state appropriation dollars to provide aid to Iowa undergraduates.

Funding student aid

The universities are now working out exactly how to fund the aid commitments made for 2013-14. It likely will be a mix of non-resident tuition revenue, general state appropriations and private fundraising, financial aid officials said. As an example, in 2011-12 the UI distributed $46 million in aid to undergraduates through tuition set-aside, ISU distributed nearly $57 million and UNI almost $13 million.

“We don’t really want to rely completely on the non-resident students” to replace tuition set-aside, said Roberta Johnson, ISU financial aid director. “We’re going through intensive budget modeling right now to make sure we have the dollars we need to cover the financial aid commitments that were already on the streets in March before the legislation was passed.”

For UNI leaders, relying heavily on non-resident tuition to fund aid commitments isn’t much of an option, since their out-of-state enrollment is less than 10 percent, much smaller than at the UI and ISU.

“We don’t have the luxury that Iowa and Iowa State do of having large non-resident tuition dollars to use. It makes it more difficult for us,” said Joyce Morrow, UNI financial aid director. “We’ll have to figure that out. No student will go without what we’ve committed to them.”

Need increasing

The changes come at a time when the universities are providing more institutional aid than ever and have more students applying for financial help, several officials said.

Total student financial aid — including loans, scholarships or grants from the federal or state government, and from the institutions, as well as other sources — topped $1 billion in 2011-12 at the UI, ISU and UNI, an increase of 32 percent in five years, according to the most recent financial aid report to the regents.

When looking only at the financial aid provided by the universities, that total increased 56 percent in the past five years, hitting $375 million in 2011-12.

Several UI students who receive university-provided scholarships say the money makes a big difference for them, sometimes several thousand dollars a year.

UI senior Logan Hood receives a UI tuition scholarship, which covers nearly his full in-state tuition each semester. He took loans his freshman year, but was happy to receive the scholarship — based on grades and financial need — after that.

“It’s helped a lot,” said Hood, 21, an economics major from Clinton. “It’s allowed me to do a lot of different things at the university, like the Campus Activities Board, things I’m more passionate about, instead of working 30 or 40 hours a week, because I’ve had these scholarships.”

The increase in total financial aid awarded in recent years is driven in part by enrollment growth at the UI and ISU — more students means more students applying for and getting aid. But officials say they also are seeing more students who demonstrate need, likely driven by the economic downturn, which affected parents’ ability to help pay.

“We have been getting calls from families we probably likely hadn’t been hearing from between 2000 and 2008,” said Mark Warner, UI financial aid director.

Statewide, the number of federal financial aid applicants whose expected family contribution was zero rose dramatically in recent years. In Iowa, 73,711 federal student aid applicants in 2012-13 had an expected family contribution of zero toward their college education, a 68 percent increase from five years prior, and a more than 200 percent increase in the past decade. Those figures count Iowa residents who applied for federal aid, regardless of where they attend college.

That growth partly can be attributed to more adults returning to school — a population that often has less saved for their studies, said Heather Doe, associate director of marketing and communications for the Iowa College Student Aid Commission. But the trend also mirrors what financial aid officials hear from families about their ability to contribute to college costs, Doe said.

“It peaked when the economy was really struggling. We talked to more and more that just couldn’t put money away for college,” she said.

That’s also reflected in the number of Pell Grant recipients at the UI, ISU and UNI, officials said. Federal Pell Grants are awarded to the neediest of students — the cutoff for eligibility this year was an expected family contribution of just less than $5,000. The number of students receiving Pell Grants grew almost 37 percent at ISU in the past five years, 26 percent at the UI and 18 percent at UNI.

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