Iowa state universities have a new plan to reduce tuition for the state’s low-income students: raise money from private foundations. According to an article by Jens Manuel Krogstad in the Des Moines Register:

Foundations for the state’s public universities could for the rest of the year negotiate a plan to raise private money that would pay out $7 million each year in merit scholarships, said Iowa Board of Regents President Craig Lang.

“We’re asking foundations to focus more money on educating the student, rather than on buildings,” Lang said. “The foundation response has been positive. They all want to make a difference. I’m just waiting for them to say how can you make it work within the system you have.”

Foundations for University of Iowa, Iowa State University and University of Northern Iowa, which apparently distributed some $33 million in student aid last year, are looking raise money from private donations, which, as Lang explained, generally don’t pay for scholarships.

It seems risky to fund scholarships on the generosity of donors, who can be fickle and are themselves subject to financial downturns; if donations don’t come in does that mean the colleges distribute fewer, or less generous, financial aid? They’re public colleges; they should consistently affordable to everyone in the state.

This is, however, preferable to the alternative. As I wrote back in June, since the 1980s Iowa state schools have used a peculiar financial policy known as “set-asides,” whereby state schools used a portion of tuition revenue to fund scholarships for students who couldn’t afford that tuition. Last year the three universities mentioned above spent more than 20 percent of their tuition funds on financial aid. Many critics suggested, with some justification, that the set-asides were responsible for higher colleges costs.

If this policy is going to end, and the colleges will no longer be using the revenue to fund scholarships, does that mean tuition will go down? [Image via]

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Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer