It seems like an obvious observation, but for many students it’s counterintuitive: the longer someone stays in college the more expensive student loans become. According to data from the University of Texas at Austin, the average amount borrowed by students who graduated from the university in four years is $19,112.
For students who graduated in five years from the Texas school, the average amount borrowed was $24,568, and for students who graduated in six years the average amount borrowed was $31,911. In an attempt to shorten the time it takes students to complete a degree and reduce their student loan burdens, UT-Austin unveiled a new pilot program that encourages students to complete their degree in four years by forgiving portions of their student loan debt.
The Texas university will select 200 incoming freshman entering the school in the fall of 2013 who are receiving Federal Direct Unsubsidized Loans. Half of the selected students will be offered $1,000 in loan forgiveness, principal plus interest, if they successfully complete 15 hours of required courses by the end of each semester.
The other half will be offered $2,000 in forgiveness, principal plus interest, if they successfully complete 30 hours of required courses by the end of the academic year. The school estimates that it will cost approximately $8,000 per student, but the program will reduce the amount the students have to repay after graduation by more than $12,000.
No new state funds will be required for the program; instead UT plans to use a small portion of its designated tuition set-aside to finance the initiative. The Texas Education Code allows universities to use tuition set-aside funds for school based student aid as well as student loan repayment assistance.
The university will provide the Texas Legislature with a copy of the pilot’s results in the fall of 2014.
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