In a move that could dismantle financial barriers to college for low-income students, the University of Texas will give full scholarships for tuition and fees to in-state students with household incomes of $65,000 or less a year beginning in fall 2020.

A $160 million endowment created Tuesday after a UT System Board of Regents vote means that an estimated 21% of new and enrolled undergraduate students will automatically be given free rides at the state's flagship public university. If it were applied now, 8,600 in-state students would qualify for free tuition.

Further, the endowment will provide tuition assistance to any in-state student with a family income of $125,000 or less — an estimated 5,700 additional students.

"This is the type of program that will truly help Texas families in a meaningful way," regents Chairman Kevin P. Eltife said.

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Low-income students, often those who are first-generation college attendees, have long faced barriers to higher education. The UT tuition assistance could be the boost some students need to obtain a college degree.

"Low-income, well-prepared high school graduates will be even more likely to be drawn to the Austin quality of life and the powerhouse UT-Austin university resources, if tuition and fees are functionally zero," said Drew Scheberle, the Greater Austin Chamber of Commerce's senior vice president of education. "We know that higher education's upfront cost can be an inhibitor to university enrollment. The UT regent decision can take cost off the table for highly prepared young people statewide."

The program is only for UT-Austin students, including transfers. Out-of-state and graduate students, who had rallied for more support earlier this year, are not eligible for the program. State law mandates that 90% of UT's student body come from Texas.

The $160 million endowment will supplement federal and state tuition assistance programs already in place for lower income students.

That money comes mainly from oil and gas royalties from the 2.1 million acres in West Texas granted to the UT and Texas A&M University systems in 1876. The total size of the UT System's endowment is $22.3 billion — nearly the same as Zimbabwe's gross domestic product, according to the International Monetary Fund.

"I think everybody understands that affordability is an issue," UT President Gregory L. Fenves said after the vote. "We want to be accessible to students who may not be able to afford … tuition."

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The creation of the endowment comes after UT dedicated $7.5 million annually to tuition assistance for middle-income students in 2016. In 2018, Fenves launched the Texas Advance Commitment program and added $5 million to the annual fund. That made tuition free to all in-state students with family incomes of $30,000 or less.

The new endowment will add an estimated $8 million more in annual funding to the program from the endowment's estimated investment returns.

Tuesday's announcement comes after UT has been criticized for not using more of the endowment to aid students with tuition and other expenses. Student loan debt for Texas graduates has risen in recent years, according to the Federal Reserve Bank of New York. The average UT student graduates with $24,883 in student loan debt, ranking it generally on the cheaper side for a public university, according to a recent study from LendEdu.

The creation of the UT tuition endowment was part of a one-time $250 million transfer to the system's Permanent University Fund. The board also allocated $83.3 million to the Texas A&M System. How that money will be spent has not yet been decided, according to Laylan Copelin, A&M vice chancellor for marketing and communications for the system.

“We will discuss with our regents how best to spend this money for the benefit of our students,” Copelin said in an emailed statement.

Texas A&M University has had a similar program in place. The Aggie Assurance Program covers the tuition for students whose families have an adjusted gross income of $60,000 or less. The program paid the tuition for 6,726 students in 2018, Copelin said.