Paying for college: Texas student loan programs offer more options to students

It’s summertime in Texas, and for students that means sleeping late, lounging by the pool, enjoying backyard barbecues, and generally taking it easy. Or maybe it means the opposite: a summer job that gives you work experience and money to spend (and hopefully save) in return for your sweat and sacrificed leisure time. Or maybe you’re managing to work and grab a little leisure time with your summer vacation.

Whatever your summer holds, chances are that college and financial aid applications are not yet high on your list of things to think about. But it’s never too early to start planning your education beyond high school, and when it comes to figuring out your financial aid situation, the sooner you start preparing, the better.

Texas student loan programs
Along with scholarships, grants, and federal student loans, Texas students should know that the state also offers two student loan programs — the Texas B-On-Time Loan Program and the Texas College Access Loan Program. Both offer favorable terms and benefits, and have the potential to help you fill the gap between your initial financial aid package and the cost of attendance.

The Texas B-On-Time Loan Program
The Texas B-On-Time (BOT) Loan Program provides zero-interest loans to Texas undergraduate students. Since the program is designed to encourage Texas students to complete college in a timely manner while meeting high standards, the loan can be converted to a grant for students who meet certain requirements.

Specifically, for loan forgiveness, students must graduate with a 3.0 grade point average (on a 4.0 point scale) and must:

  • Finish within a specified length of time after they enter school (two calendar years for programs at public or private 2-year institutions, four calendar years for most bachelor’s degree programs, and five calendar years for programs that require a longer period of study), or
  • Finish with no more than six credit hours beyond what is required to complete their degree or certificate.

Either way, this program is a good deal for Texas students. If you qualify for forgiveness, great — you won’t have to pay back the BOT loan, and graduating within the specified time period may mean that you start working and earning a paycheck earlier than you would have otherwise. If you don’t qualify for forgiveness, you’ve still financed part of your college education with a zero-interest loan, and you literally can’t get a better interest rate than that.

Note that the BOT program is not an entitlement program. It is dependent on funding from the Texas Legislature and is currently funded at a level that does not meet the full demand for loans.  Availability of funds at a particular school is based on whether the school is participating in the program and the amount of appropriations the school has received. So, applicants for these loans are strongly encouraged to apply early.

For more information and to apply for a BOT loan, go here.

The Texas College Access Loan Program
When you apply for financial aid for college using the Free Application for Federal Student Aid, or FAFSA, the Department of Education estimates how much you and your family can afford to spend on your upcoming year of education, also known as your expected family contribution, or EFC. Your school then subtracts your EFC from the cost of attendance (COA). This difference between your COA and your EFC is your financial need. Your school tries to meet your need, depending on your eligibility, by awarding grants, scholarships, and/or federal student loans. For many students, the amount of aid awarded by the school is not enough to fill the gap between cost and aid. Moreover, sometimes the EFC is more than a family can pay out of pocket, which makes paying for college difficult.

The Texas College Access Loan (CAL) Program is designed to help with this situation. Families may use the CAL to make up part or all of the gap between cost and aid, or even to replace what they are expected to pay (the EFC). While families do not have to demonstrate financial need, be aware that either the student borrower or a loan cosigner needs to demonstrate a good credit record to be eligible for the loan.

Students who qualify for the CAL can enjoy benefits they might not receive from privately issued loans, such as a fixed interest rate of 5.25 percent, a six-month grace period after the borrower leaves school, no interest capitalization, and several repayment plan options.

For more information and to apply for a CAL Program loan, go here.

What do schools say about these programs?
Two of the state’s public flagship universities speak to the advantages of the Texas state loan programs.

“The state loan programs are an important part of the available resources for students to pay for college.  They are often overlooked despite the fact that they are usually offer better terms than other loan programs, particularly the B-On-Time Loan.  Interested students should contact their financial aid office regarding how to apply,” says Joe Pettibon, Associate Vice President for Academic Services at Texas A&M University.

Dr. Tom Melecki, Director of Student Financial Services, the University of Texas at Austin, also believes strongly in the programs. “Both the B-on-Time and CAL programs offer terrific loans to Texas students.  In fact, their interest rates and some of their other terms and conditions are superior to many of the Federal Direct Loans on which our students rely,” says Dr. Melecki. “And B-on-Time loans have the added advantage of motivating students to graduate in four years with solid GPAs, which fits right into my institution’s plan to increase its four-year graduation rate.  Given the debt burdens so many students are taking on to get degrees, it would be great for the state to consider expanding B-on-Time and making it easier for Texas students to learn about and access B-on-Time and CAL loans.”

If you want more information about the Texas state loan programs, you can contact your college’s financial aid office or call the Texas Financial Aid Information Center (TFAIC), a free public service call center available to all Texas students and families wanting to pursue a higher education. The TFAIC’s toll-free number is (888) 311-8881. TFAIC representatives are available Monday through Thursday from 8:00 a.m. to 6 p.m., and Fridays from 8:00 a.m. to 5:00 p.m., Central Time.