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Univ. of Texas to Test Incentives for On-Time Graduation

Two hundred incoming freshmen at the University of Texas at Austin next fall will have an added incentive to finish their degrees in four years.

A portion of their student loans will be forgiven if they keep up with a full-time load.

The pilot program is designed to encourage on-time completion and was inspired by Texas' B-on-Time Loan program, which offers interest-free loans to undergraduates who are Texas residents, according to a press release from the university. With the state program, loans are forgiven for those who graduate with grade point averages of B or better within four years of starting college.

This new program in Austin would reward progress toward a degree.

Of the 200 students in the pilot, half would be offered $1,000 in forgiveness on the principal of their federal direct unsubsidized loans, plus interest accrued each semester that they earn 15 credits. To test another approach, the other 100 would be given $2,000 in forgiveness, plus interest accrued, if they successfully complete 30 hours of applicable degree requirements by the end of the academic year.

The total amount forgiven could be $8,000 per student over the course of their four years of study.

At the 51,000-student campus, 52 percent of students graduate in four years and nearly 80 percent in six years. Among those who borrow (about half the student body), the average debt upon graduation is about $24,500, according to Tom Melecki, the university's director of student financial services.

The hope is to accelerate completion and save students money. The university would actually lose revenue by getting students through quicker, but its motivation is to increase its four-year graduation rate, which the Texas Board of Regents has mandated be raised to 70 percent with the next graduating class of 2016.

Students at UT Austin who graduated in four years borrow about $19,000, compared to $24,500 for those who graduate in five years, and $32,000 for students who take six years.

"What we are trying to do is get students to adopt the behavior of completing 15 hours a semester to be on track to graduate in four years," said Melecki. "We are trying to see if we can blast our students out of the 12- or 13-hour-semester culture."

On average, UT students take 13.27 credits a semester.

The pilot loan-forgiveness program will be paired with the Texas Interdisciplinary Plan, which makes sure students taking a full load get necessary academic support.

If successful, the pilot program could be expanded to help 3,200 students per year, the financial-aid office estimates. The pilot will be paid for with a portion of the state funds designated for tuition set-aside.

In fall 2013, students will be chosen at random among the pool of those taking out need-based, financial-aid loans, said Melecki.

The school will report results to the state legislature in fall 2014.

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