Ivy Tech finance officials expect to learn this week if the state Department of Revenue has found an initial batch of students whose state tax refunds can be seized to pay past-due college bills.
Ivy Tech hopes to recapture part of an estimated $12 million to $15 million a year in lost revenue systemwide by signing up to to take part in Indiana’s state tax intercept program for the first time.
An analysis of Ivy Tech
student accounts in the Columbus/Franklin region alone has uncovered 1,088 students with an estimated $804,659 in bad debts, school officials said Tuesday.
Now, the goal will be to identify which of those students have state tax refunds headed their way and divert that money to pay their school bills.
“This is a significant number of folks,” said Chris Ruhl, Ivy Tech’s chief financial officer.
The state’s intercept program, used most often to track down parents who owe overdue child support, now is being used by some public universities and community colleges.
Ruhl said about 80 percent of the money owed to Ivy Tech is tied to federal financial aid programs where students haven’t lived up to their commitments after getting Title IV money or Pell Grants at the start of the semester to pay for their studies.
When students drop out or drop classes, colleges have to repay the federal government for unwarranted federal aid, and students are supposed to reimburse the school.
“Obviously, every dollar is precious to us,” Ivy Tech’s chief financial officer said. “Every organization, especially ours, wishes to collect every dollar we bill.”
Ruhl estimates the school is owed about $30 million over the last three years, largely from students who didn’t complete their studies and were supposed to pay back federal financial aid.
Ruhl said Ivy Tech decided about six months ago to try to recoup some of the money by getting state help to block students with college debt from getting their state tax refunds starting this year.
Instead, the money is to be shifted over to Ivy Tech to settle the students’ accounts.
Students interviewed Tuesday as they went to class weren’t aware of the new collections policy, although they had split opinions on it after learning the details.
“I’ve got mixed feelings about it,” said second-semester nursing student Debbie Neubold.
“I don’t want the school to be in a financial bind because of these bad debts. But if a person is having trouble paying (Ivy Tech), they probably are having trouble paying other bills, too.
“It could be a hardship if they were counting on that state tax refund to pay the mortgage next month or pay medical bills,” she said.
Monty Craig, a second-year computer information systems student, was more supportive of Ivy Tech’s methods.
If bad debts went uncollected, the community college might have to raise tuition at some point to make up for its losses, Craig said.
“At least this way, the school can get some of its money back,” he said.
“The school may be a nonprofit, but it has operating expenses, and it needs revenue to stay in business.”
Until now, Ivy Tech had been using collections agencies to go after students who owed the school money.
That effort typically would bring in about $900,000 to $1.1 million a year in recaptured dollars, Ruhl said. The community college has more than 30 campuses.
The Ivy Tech finance officer figures a few key percentages may work in the community college’s favor with the new strategy.
First, a large percentage of Ivy Tech’s students have jobs; therefore, they have some income and probably file state tax returns.
Next, roughly two of every three state tax returns are due a refund on average, Ruhl said.
He isn’t sure how much money Ivy Tech will see from the state tax intercept program.
But other schools and agencies that have tried similar tactics, such as Purdue
University, have collected anywhere from 25 percent to 50 percent of what they were owed, Ruhl said.
Indiana University-Purdue University Columbus doesn’t have a program similar to Ivy Tech’s for collecting student debt based on tax returns.
“We may explore it in the future, but have no plans to do so currently,” said Susan Sullivan, IUPUC, director of communications and marketing.
Since people file state tax returns at different times through mid-April or perhaps later, if they get an extension, Ivy Tech won’t see all of its collections pour in at once.
Also, students identified among those who owe Ivy Tech money will have 30 days to appeal before tax refunds can be taken away.
“It will be interesting to see how much money we recoup,” Ruhl said.
The state will notify Ivy Tech once per week when there’s a match of names for students who owe the school money who also have a tax refund about to be mailed.
Every little bit helps, Ruhl said of collection efforts.
“We felt like every dollar lost was another dollar we couldn’t spend on academics,” he said.
Ivy Tech already bars students from registering for classes if they owe money to the school, and no student is allowed to graduate until debts are settled, even parking tickets.
The Associated Press contributed to this story.