Regents want to eliminate tuition set-aside for student aid within five years

UPDATE: The use of tuition set-aside to fund student aid at Iowa's state universities will end within five years, to be replaced with money raised by the university foundations and hopefully, regent leaders say, by state funding for the neediest Iowa students.

The plan was unanimously approved by the state Board of Regents Wednesday.

Regents leaders say they want to work with legislators to have the state establish a new funding source to replace the tuition set-aside dollars that were going to Iowa resident undergraduates on a financial need basis. The tuition set-aside money that was going to other students - out-of-state students and those getting money based on academic merit, for example - will be replaced with money raised by the university foundations, Regents President Craig Lang and President Pro Tem Bruce Rastetter said.

The tuition set-aside program distributed more than $144 million in tuition revenues in Fiscal Year 2011 to undergraduate and graduate students in the form of need-based and merit-based financial aid, but it came under fire from some legislators and parents in recent months who said they weren't aware of the program and didn't feel student tuition dollars should subsidize other students.

Lang and Rastetter said a new board financial aid committee will work in the coming months on a plan to end the tuition set-aside program within five years and replace that money with the two other funding sources. The committee in the next 60 to 90 days will have more information about how much money will need to be replaced by state funds and how much will be replaced by dollars raised via the university foundations.

“We believe that the taxpayers of Iowa should continue to support more strongly the need-based tuition,” Lang said. “We believe Iowa tax dollars should follow Iowa students.”

The additional state funding for financial aid for Iowa's neediest undergraduates at the state universities will be a priority in the board's legislative agenda next year, Rastetter said. The separate line-item of funding would not take away from state funding that goes to students at Iowa's private colleges or funding to the community colleges, Rastetter said.

The regents would “use those dollars to lower in-state tuition on an in-kind basis,” he said of the state money.

The combination of the two funding sources is important to have a long-term program to replace tuition set-aside, Rastetter said. The discussion of the program in the past months has been helpful in defining the program and detailing where the dollars go, he said.

Lang said he's hopeful the Legislature will work with regents leaders to fund the line-item request. If the needed money can't be found in one year, the regents also could phase in smaller amounts of state funding during the five-year period to replace those tuition set-aside dollars.

In fiscal year 2011, more than $144.4 million, or 21.3 percent of tuition revenues, were set aside and awarded to undergraduates and graduate and professional students as need-based and merit-based aid. A total of just more than $100 million was awarded to 25,583 undergraduate students as financial aid through the program at the University of Iowa, Iowa State University and the University of Northern Iowa.

The regents voted unanimously to form a new committee on student financial aid that will develop recommendations and a five-year plan to eliminate the use of tuition set-aside as a funding source for student aid.

Lang said it wasn't public pressure that led regents to eliminate the tuition set-aside program. He said the discussion in recent months showed there wasn't a clear understanding of how the program worked, so board members wanted to find out what was happening and discuss what they expected from the program.

“In many cases, we thought we were increasing the amount of support for in-need and it wasn't happening, that support wasn't there in the way it should be,” he said.

The board and the universities cannot backtrack on the aid it provides to Iowa students, Regent David Miles said, so it's important to stress this will be a replacement of funds with a different source.

“I want to underscore the importance from my perspective for the board and state to not take any steps backward whatsoever in terms of providing access and affordability to the neediest students in our state,” Miles said. “The program accomplishes good and important things that are essential to the state of Iowa. I'm very supportive of finding other ways to go about it, but I think it's other ways, not backing away from the commitment this board has historically had.”

Lang said he's received many emails from parents asking for an immediate end to the tuition set-aside program. Lang said that's not possible, given that students rely on the money for the coming academic year. But he said the board will work to end it within five years, sooner if possible.

Rastetter said the board has worked with legislators and university leaders on the importance of being transparent about where the dollars go. There is a critical need for a state program to provide state funding for in-need students, Rastetter said, alongside the commitment from the universities and school foundations.

“The net result should be to lower in-state tuition, make in-state more affordable and accessible to all Iowans,” he said.

The board expects to hear the first report from the new financial aid committee at the September meeting, with a final report expected in October.

State regents discussed the tuition set-aside program at the March and April board meetings. Board policy, adopted in September 2004, requires the UI, ISU and UNI to set aside a minimum of 15 percent of tuition proceeds for student financial aid. Prior to 2004, the universities used a portion of tuition revenues for financial aid as a practice as far back as 1989, officials say.