BOG Caps Tuition Revenues Used for Financial Aid

In a reversal of its own policy, the UNC System Board of Governors last week voted unanimously to place a 15 percent cap on the amount of tuition revenue that can be applied to need-based student financial aid.

This could have a dramatic impact on Carolina’s unique claim — known as “100 percent of need” — that meets the full documented need of students who qualify for financial aid, based on a federal formula, and 60 percent of that comes in grants and scholarships rather than loans. UNC officials believe that no other public university can make that claim.

Currently, 38 percent of Carolina undergraduates borrow money to cover college costs. With the new cap, that could rise over the next four years to between 50 and 55 percent, according to Shirley Ort, associate provost and director of scholarships and student aid. Ort said that was a “conservative estimate.”

The matter was not discussed in the full board’s meeting on Friday. Ort said there was “very little” discussion of it in a committee meeting the day before.

The BOG in 2000 told the campuses that when approving campus-based tuition increases, they must set aside part of the revenue from the increase to mitigate the impact on students receiving aid. Each campus was to establish its own policy, then seek review and approval from the BOG. The Carolina trustees got approval to set its set-aside at 35 percent and later to 38 percent.

UNC now spends 20.9 percent of tuition revenues on financial aid. It is one of five universities that is over the cap, so the amount of tuition revenue it can spend on financial aid is frozen until future tuition increases push it below the cap.

And because UNC is over the cap, it would not be able to set aside any revenues from a tuition increase to fund aid until it gets down to the cap.

“For the last 15 years, through very considered policies, both related to tuition and related to financial aid, both the BOG and the trustees of the campuses have established an equilibrium such that we could provide access and affordability so the citizens of this state could attend a university of their choice without regard to family ability to pay,” Ort said. “That legacy is now at risk.”

Ort added: “I can’t help but think about the [favorable] position the University is in now because of having acted in good faith on everything the system has asked us to do to be open and accessible to everyone in the state. So it’s a reversal of policy.”

The BOG also approved a new four-year tuition increase guideline that caps annual increases for the system’s 16 universities at 5 percent — the previous plan had a 6.5 percent limit.

The financial aid cap comes not long after a major shift in the board’s political affiliation. Prior to July 2013, the BOG had 19 Republicans, 14 Democrats and two unaffiliated members; when new members took office the board had with 29 Republicans, two Democrats, two unaffiliated members and two for whom party affiliation could not be determined. The change reflects the Republican majority in both houses of the N.C. General Assembly, each of which elect eight members to four-year terms every two years.

Legislators and BOG members have for several months expressed concerns that full-paying families are helping carry the load for aid recipients. They say that parents of students in the system have been surprised to learn that they were, in effect, subsidizing those who qualify for aid.

“I don’t think the Board of Governors understands how much this change will harm middle-income families,” Ort said. She referred to families that have incomes above the qualification levels for state and federal higher education grants. “They’ll be asked to borrow more.” The current median household income level for students receiving aid is $60,000.

On the question of maintaining the 100 percent of need policy, Ort said, “Unless there’s an institutional intervention, I don’t think we can do that.”

Steve Farmer, vice provost for enrollment and undergraduate admissions, said he thought need-based financial aid would be an emphasis in the University’s coming capital campaign. “But campaigns take eight to 10 years, and the impact of this will be felt long before that.”

Chancellor Carol L. Folt sounded more optimistic.

“I believe Carolina must remain a place of opportunity for all students who earn admission, regardless of their ability to pay,” Folt said in a statement. “We’re determined to find ways to continue to offer our financial aid programs to all students who need them because our commitment to affordability and accessibility remains central to our mission.”

Forty-three percent of UNC students qualify for and receive financial aid. Currently, the average debt at graduation of students who borrow money is $17,000, well below the national average of $29,000. Ort estimated that average at Carolina could rise to $33,000 under the new cap.

“We’re assuming state and federal grants won’t go up,” she said.

Ort and Farmer were concerned that Board of Governors members who proposed the cap did not seek input from the University. “The working group didn’t ask Chapel Hill what Chapel Hill thought of this proposal,” Farmer said.

“There was no invitation to hear from any of the campuses Thursday or Friday,” Ort said.

“It was apparent the decision had been arrived at earlier.”

Hannah Gage ’75, a former chair of the BOG who still serves on it, was the only member who spoke up after the Friday vote. “I don’t think anybody has any idea” of the impact on Carolina and four other campuses which are over the cap,” she said. “The full board didn’t have the benefit of being fully informed.”

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