IOWA CITY, Iowa — The Iowa Board of Regents asked lawmakers Wednesday to create a $40 million program to provide financial aid to low-income students as part of a plan to phase out the tuition dollars used for that purpose.
The regents met in Ames to discuss recommendations from a committee charged with eliminating a practice of using up to 15 percent of tuition revenue for financial aid at Iowa's three public universities. The practice, known as tuition set-aside, came under fire earlier this year for forcing middle-class students to subsidize their classmates with financial aid and merit scholarships.
In response, the regents promised to eliminate the subsidies in June. They appointed a committee of university officials to come up with a strategy for doing so without compromising access to the University of Iowa, Iowa State University and the University of Northern Iowa.
The plan unveiled Wednesday would essentially substitute state tax dollars for tuition dollars that provided about 14,000 undergraduate students from Iowa with $37 million of financial aid during the last school year. To sell the public on the plan, the regents say they would lower tuition rates after the program is running in 2014 by the amount of funding that lawmakers provide for financial aid.
The plan also calls on the university's fundraising foundations to launch five-year campaigns to raise more money for merit scholarships and financial aid for students. Specific goals for those campaigns are still being developed.
The plan would eliminate the board policy, approved in 2004, that requires the universities to use at least 15 percent of tuition money for grants and scholarships. The practice of using tuition for aid had been done dating back to the 1980s. By last year, the universities were using about 21 percent of their tuition revenue, or $144 million, for grants and scholarships.
The main reason the universities have relied so heavily on tuition revenue to help some students and families pay their way is because Iowa lawmakers have largely channeled taxpayer-funded aid to students at private and for-profit schools. Iowa ranks last in the percentage of state need-based grants going to students at public universities, only 8.5 percent of the total, said Diana Gonzalez, the board's chief academic officer.
The regents did not vote on the full plan Wednesday, and said they would do so during their meeting next month. But they did vote to submit a request to Gov. Terry Branstad and the Legislature for $39.5 million for the new financial aid program.
Based on their discussion, the plan appears to have wide support on the nine-member board that governs the universities. Regent David Miles called the plan "a very strong move in the right direction."
"It not only protects access and affordability for our neediest students, but improves access and affordability for middle-class Iowans," he said.
Regent Bruce Rastetter said he wanted a more specific commitment from the foundations to raise money, which would show lawmakers that universities were doing their part to help students. And he suggested the promise to reduce tuition for all in-state undergraduate students would have a powerful appeal.
The regents also voted to ask for a separate $40 million funding increase to maintain operations at the universities. With that level of support, they said the would freeze tuition rates for the 2013-2014 school year. Branstad and lawmakers will decide on funding levels next year.