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The Daily Tar Heel

Financial aid fund drying up

Committee works to slow spending

An important source of student aid money could run out in as little as three years if legislators can’t find a way to halt its rapid depletion.

Escheat money, which is handed over to the state government when private property goes unclaimed, has been spent faster than it has been replaced in recent years.

In fiscal year 2008-09, $127 million of need-based grants awarded to 55,287 UNC system students were paid for by escheat funds, said Richard Bostic, principal fiscal analyst in the Fiscal Research Division of the N.C. General Assembly.

All schools in the UNC system participate in the escheat grant program, and UNC-system students receive grants ranging from $200 to $3,700, he said.

An N.C. General Assembly committee on state-funded student financial aid will start discussing how to stop overusing escheat funds in March.

It is expected to come up with a recommendation on how to stall spending by the time the legislature convenes in May.

N.C. Sen. Richard Stevens, R-Wake, chairman of the committee, said if the committee fails to come up with a recommendation, students could suffer.

“If we are unable to make up the difference, it would theoretically reduce the amount of student aid available,” Stevens said.

Shirley Ort, associate provost and director of scholarships and student aid at UNC-Chapel Hill, said that escheat depletion would leave state funded grant programs without enough money.

“If they don’t continue or find an alternative source, it would mean less money for students,” Ort said.

It’s difficult to tell how much that could impact UNC financial aid because there is no indication yet of what the legislature will do, Ort said.

Trouble began in fiscal year 2004 when the state began dipping into the actual escheat fund to supplement general fund dollars toward student aid.

Traditionally, only the interest accumulated on escheat funds was used to provide student aid, Stevens said.

The fund’s diminishing balance has become a major problem since then.

The state treasurer wants to retain at least $200 million of escheat funds to repay individuals who try to claim their money, Bostic said.

The funds are projected to fall to $200 million by the end of the 2010 fiscal year.

Bostic said that most of escheat money goes to the UNC system, though some other programs also receive money from that source.

N.C. Rep. Ray Rapp, D- Madison, who leads the committee with Stevens, said that legislators’ ultimate goal is to streamline the student aid system and find other sources of funding to slow escheat spending without reducing student aid.

Rapp said that some scholarships and grants are currently underused, and money could be pulled from those programs and dedicated to those that need it most.

It could still be a couple months before concrete recommendations are made, but legislators have indicated that the issue of the dwindling escheat fund is a top priority.

“There is an 800 pound gorilla in the room,” Rapp said. “That’s the escheat fund.”

Contact the State & National Editor at stntdesk@unc.edu.

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