UNC board proposes plan to limit tuition dollars for financial aid | The News & Observer


By Jane Stancill

August 1, 2014

CHAPEL HILL — A new four-year tuition guideline for the UNC system would cap tuition increases at 5 percent annually and would substantially limit tuition-funded financial aid for needy students at some campuses.

The plan would cap at 15 percent the amount of tuition revenue diverted to financial aid for lower-income students. That would essentially freeze tuition-funded financial aid at N.C. State University and UNC-Chapel Hill, which already exceed the 15 percent threshold.

A committee of the UNC Board of Governors approved the plan Thursday. The full board is expected to vote on Friday.

The vote represents a philosophical shift for the board, now dominated by Republicans. Previously, the board allowed campuses to raise tuition, as long as they provided a healthy set-aside to cover the cost for low-income students. The new board members have complained for months that they don’t like the practice of charging middle-income families and using part of that money to subsidize the tuition for lower-income students.

Others have warned that the move represents a departure from providing an affordable education for all students.

Shirley Ort, UNC-CH’s associate provost and director of scholarships and student aid, said many middle-income students now receive financial aid through tuition funds. Those students generally are not eligible for federal or state aid, she said. Ort estimated that the cumulative indebtedness of lower-income students at the university could double in a matter of four years, from $17,000 to $33,000.

“I’m keenly disappointed,” she said. “The action this morning is going to result in considerably more borrowing among all students who have need of financial assistance in order to be able to afford Carolina.”

With no new state or federal funding on the horizon, the only sources for future financial aid will be donor-funded scholarships and student loans. Five campuses – Elizabeth City State, Fayetteville State, N.C. State, UNC-CH and Winston-Salem State – exceed the 15 percent threshold of tuition revenue going to need-based financial aid. UNC-CH currently earmarks 20.9 percent of its tuition proceeds to financial aid – about $19 million over the 15 percent threshold.

‘Unfairly apportioned’

Champ Mitchell, a board member who advocates for the financial aid limit, said some North Carolina families had mortgaged their homes and dipped into their retirement funds to afford higher education. The UNC system, like most public universities, has raised tuition at more than twice the rate of inflation, while state residents are seeing income growth at 1.7 percent, he said. He called that “abusive.”

“The question isn’t, should we have need-based aid?” he said. “The question is, how do we fairly apportion the burden? and it has become unfairly apportioned to working North Carolinians, so we’re going to try to, over time, change that situation.”

Mitchell said the financial aid set-aside had represented 25 to 30 percent of campus tuition increases in the past few years. The new strategy should help curb overall tuition growth, he said.

The overall 5 percent cap on tuition increases is lower than the previous four-year plan, which allowed campuses to request up to a 6.5 percent tuition hike each year.

But some board members suggested to UNC chancellors that they are reluctant to approve any tuition increases unless there is a serious need on the campuses.

“There is a desire by a lot of people on the Board of Governors to see if we can provide a great product for our students without raising the price,” said John Fennebresque, the new chairman of the board.

Steve Farmer, UNC-CH’s vice provost for enrollment and undergraduate admissions, said the campus is concerned about cost and student debt. UNC-CH now meets the full documented financial need of its students; it has received national recognition for its affordability, routinely ranking at the top of best-buy lists.

Graduates of UNC-CH today are no more indebted than students 15 years ago, in real dollars, Farmer said. Tuition-backed financial aid is a critical part of that equation, he said.

“I don’t know of any other school in the country that’s been able to do that,” Farmer said. “We have worked really hard over time to do it. We would not have been able to do it without being able to return a share of tuition that students pay back to students in the form of need-based aid.”

Carolina Covenant

The campus has a program called the Carolina Covenant, which provides a debt-free education to the lowest-income students, who make up about 12 percent of the first-year class. But Farmer said an additional 30 percent of undergraduate students qualify for financial aid – middle-income students who are, for example, the children of firefighters and teachers.

Ort said the new policy’s result will be a hit to the UNC system’s affordability, and ultimately, public support for the university.

“This university is great because the taxpayers have invested in it, with the belief that their children would have access to a high-quality education, independent of financial need,” Ort said.