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Tuition set asides: Texas higher education’s hidden tax

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A new college semester kicks off this week for students across Texas. Rising college costs continue getting well-deserved attention, but unknown to many students in public higher education institutions – not all of their tuition paid is used to fund their collegiate experience thanks to a state-mandated mechanism called tuition set asides.

In 2003 the 78th Legislature made significant changes regarding college tuition rates. Prior to this session, the legislature had regulatory authority to set tuition and generally called for charging the same rates at public institutions across the state. With this change, deregulation occurred leaving public universities authority over a large portion of the total tuition charged.

An undergraduate student’s tuition rate comprises a statutory rate determined by the legislature for both resident and non-resident students as well as an additional designated rate imposed on any graduate or undergraduate, resident or non-resident student, that the institution’s governing board considers necessary for the effective operation of the institution. This second rate varies by institution.

No maximum limit is set on the designated tuition amount a university can charge. Amounts can vary based on program, course level and the academic period. Tuition deregulation became effective Sept. 1, 2003, and by spring 2004, universities were increasing designated tuition rates.

Along with deregulation, this bill contained another provision allowing institutions to “set aside” a portion of tuition payments for needs-based financial assistance programs.

Per Section 56.011 of the Texas Education Code:

“The governing board of each institution of higher education shall cause to be set aside not less than 20 percent of any amount of tuition charged to a resident undergraduate student under Section 54.0513 in excess of $46 per semester credit hour.” An amount of 15 percent is similarly assessed to resident students enrolled in a graduate or professional degree programs.

The Stop Texas Set Asides website accurately calls this practice a hidden tax.

In an August 2013 posting, Texas Conservative Republican News provided this analysis of tuition set asides:

You probably think I am kidding but I am not. In TEXAS of all places there is an Obama-Style share the wealth program that requires students going to college to pay thousands of dollars in extra tuition to pay for other people’s college tuition assistance. It does not matter if you are working double jobs to pay your way through school, you still get to pay for someone else. Even if a Texas college student is getting student loans to pay for school, they still have to pay extra for someone else. In other words, a Texas student getting student loans has to borrow money and pay interest on a loan in order to pay thousands of dollars in extra tuition so that someone else can go to college for free!

A follow-up article discussed how the bill came to pass. Most concerning, it received major support for both sides of the political aisle!

While 2009 brought SB 1304 which requires colleges’ disclosure to students of their individual tuition set aside amounts, few people realize the practice occurs.

The notification pictured above is based on a student load of 12 hours and a 20 percent set aside rate.

Upon reviewing the undergraduate tuition set aside percentages of eight Texas institutions (Texas A&M University, University of Texas at Austin, Texas A&M University – Central Texas, University of Houston, Stephen F. Austin State University, Texas Tech University, University of Texas at El Paso and the University of North Texas), 20 percent appears the common rate currently used.

College costs continue on the rise prompting students and their families to question the risk and value a higher ed experience provides. Recognizing the hidden tax lurking in tuition bills is information the public should know.

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