Senator Eliot Shapleigh - El Paso, Texas

Students head to class on the University of Texas at El Paso's campus

Gov. Rick Perry's call for college students who don't graduate on time to repay grant money might discourage low-income and some Hispanic students from pursuing higher education, some critics say.

The governor is seeking an overhaul of the state's financial aid programs, with the goal of encouraging more students to graduate faster. His plans include more money for loans and additional requirements for those receiving grants.

The grants, which typically don't have to be repaid, would become zero-interest loans for those who do not graduate within the specified time of their certificate or degree program. No other state has such a policy that penalizes students who take longer to earn a degree, education experts said.

The proposal's critics said they worry about students from poor families losing access to universities at a time when state leaders, including Perry, are promoting greater enrollment.

State Sen. Rodney Ellis, a Houston Democrat, said that lawmakers debated financial aid at length during the previous legislative session, producing the consensus "that we cannot add more restrictions and rely on more loans if we hope to close the gaps and open the door to college to more Texans."

Ellis would rather see an expansion of the TEXAS Grants program, which provides money for those who show financial need and complete the required coursework in high school or at a community college. About 25,000 eligible students did not receive the grant last year for lack of funds.

"The bottom line is we're trying to get more high-tech graduates, and we need to get them in the door," said Jeremy Warren, a spokesman for Ellis. "Our competitors are doing a better job."

Emphasis on grants
Other states rely more on grants because the federal government is the primary provider of student loans. New York, for example, spent $910 million, or $47 per capita, in grant aid in 2005, according to the National Association of State Student Grant and Aid Program's most recent survey.
Texas, meanwhile, spent $362 million, or $16 per capita.

Donald Heller, an associate professor at Pennsylvania State University's Center for the Study of Higher Education, said several states are trying to be more innovative with financial aid — to get more from their investment — but few are considering more loans.

"If your goal is ensuring access, grant aid is the best mechanism after low tuition," Heller said. "If you say 'loan,' you're scaring the very people you're trying to attract."

Grants, not loans, influence a prospective student's decision to enroll, two University of Texas System attorneys wrote in a recent report on financial aid strategy to a federal commission. Loans and on-campus jobs, however, may increase retention and graduation rates.

In response, U.S. Education Secretary Margaret Spellings called for increased spending on need-based Pell Grants.

Perry has proposed increasing the overall outlay for financial aid $362.8 million, or 60 percent. Fewer dollars would be allocated for grants, while the interest-free B-on-Time loan program would grow from $20.7 million to $405.3 million a year.

Under the four-year-old program, the state forgives the loans for students who graduate in four years with a B average. The program was conceived as a way to help middle-income students and parents to pay tuition and fees.

The vast majority of new students will be Hispanic, according to population projections. Yet an aversion to loans is common among students from first-generation college, immigrant or low-income backgrounds, researchers said.

National surveys show that needy Hispanics are less likely to borrow than other ethnic groups. For example, students graduate from the University of Texas at El Paso, where four-fifths of the enrollment is Hispanic, with the lowest average indebtedness among public research institutions in the country.

Long way around
Short on cash, many students leave school for semesters at a time to work or take fewer classes because the textbooks are too expensive, causing them to graduate in eight, nine and even 10 years, if at all, experts said.
The reasons behind the loan phobia, observers say, include lack of knowledge about financial aid, fear of debt and sticker shock.

"It's not that they won't take loans, but they're reluctant," said Deborah Santiago, vice president for policy and research at Excelencia in Education, a nonprofit based in Washington, D.C. "When they see that tuition is $20,000, which is as much as their family makes in a year, they fear the implications of not finishing."

Jesus Vigil, a University of Houston student who receives a TEXAS Grant, said tying more requirements to aid would not send a welcoming message to the state's poorest students.

"I don't know anyone who graduates in four years," he said. "It could hurt some people. The University of Houston is a commuter school, and nearly everybody works."

Vigil is on pace to earn a bachelor's degree in communications in five years despite working two jobs to help with the mortgage on his mother's house. "If it weren't for those grants," he said, "I wouldn't be able to afford college."