Republicans on Capitol Hill are increasingly taking aim at nonprofit colleges and universities in major legislation.
The tax-reform bill that Republicans are negotiating would make significant changes to federal student aid programs and the taxation of university endowments, alarming higher education advocates.
“If you wanted to come up with a plan to make college more expensive, undermine access for higher education and our ability to produce bright young graduates, who are going to go on to produce enormous contributions to the economy and its long-term vitality and vibrancy … you’d do what the House bill does,” said Steven Bloom, director of government relations at the American Council of Education (ACE).
{mosads}Meanwhile, House Republicans recently unveiled a new bill, called the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act, which would make further changes to higher education policies.
“With six million unfilled jobs and over a trillion dollars in student debt, simply reauthorizing the Higher Education Act will help no one. A hard truth that students, families, and institutions must face is that the promise of a postsecondary education is broken,” said Rep. Virginia Foxx (R-N.C.), chairwoman of the House Education Committee, and Rep. Brett Guthrie (R-Ky.), chairman of the higher education and workforce development subcommittee, in a joint statement.
“We need a higher education system that is designed to meet the needs of today’s students and has the flexibility to innovate for tomorrow’s workforce opportunities. The PROSPER Act is higher education’s long overdue reform.”
Here’s a look at the some of the key policy moves Republicans are considering and how they would affect different groups.
Students
Most of the tax-reform provisions that affect students or colleges are contained in the House version of the bill.
One of the biggest policy changes relates to student loan payments. Borrowers are currently allowed to deduct up to $2,500 of any interest paid on student loans, but the House bill would eliminate that deduction.
The bill would also tax tuition waivers received by some grad students who teach classes or conduct research for universities in exchange for free tuition. Students already have to pay taxes on the housing and living stipends, which can also be valued at tens of thousands of dollars. (This provision could reportedly be something that gets struck from the final tax legislation.)
Another provision in the House bill would expand the American Opportunity Tax Credit, which families can claim for up to $2,500 of qualifying expenses, from four years to five.
But even as it expands that credit, the House bill would eliminate the Lifetime Learning Credit, which is targeted for lower-income students and can be used by those who spend more than five years in college.
The PROSPER Act could also have a big impact on students.
The proposal eliminates the Federal Supplemental Educational Opportunity Grant, which helps lower-income undergraduate students afford college. The grant amounts range from $100 to $4,000 per year, based on financial need.
The bill would also raise interest rates for millions of student loan borrowers per year by winding down the Federal Perkins Loan Program, which offers low-interest loans to students in need. It also puts new limits on programs that help graduate students or parents obtaining loans on behalf of their children, which critics say would push them into the private market and make the loans more expensive.
If the bill became law, it would make big changes to loan forgiveness programs. It gets rid of the public service loan forgiveness policy, which impacts individuals and their families who end up in public service jobs — such as police officers and public school teachers — or at select nonprofits. Currently, if a person makes payments on a student loan for at least 10 years, the remaining balance could be forgiven, should the person end up in a qualifying job.
And while Republicans’ higher education reauthorization would keep in place a repayment option that ties a borrower’s monthly payment amount to their income, it would eliminate options for having loans forgiven.
“The impact on students is very big and very negative. When we see a [Congressional Budget Office] score, we’re going to see tens of billions of dollars that leaves the system. That money leaving the system is money leaving students’ pockets,” said Jon Fansmith, also a director of government relations at ACE, which represents roughly 1,800 presidents at higher education institutions and executives at associations with ties to colleges and universities.
The Senate will be drafting its own version of the higher education bill, with a goal of releasing it early next year.
For-profit colleges
The higher education bill from House Republicans would roll back many of the regulations that the Obama administration sought to impose on for-profit colleges.
The bill would nix the gainful-employment rule that conditions a school’s access to federal student aid on whether students find decent-paying jobs after graduation. The bill would also prohibit the secretary of Education from creating similar rules in the future.
Also on the chopping block is the 90-10 rule, which requires for-profit colleges to take in less than 90 percent of their overall revenue from federal student aid programs.
“This proposal offers important reforms that emphasize good jobs and quality careers for our nation’s students,” said Steve Gunderson, president and CEO of Career Education Colleges and Universities, the trade group for for-profit colleges, in a statement. “The Higher Education Act has become our nation’s workforce investment strategy. It is imperative to update in ways that produce future skilled workers enhancing U.S. competitiveness, and ultimately, our nation’s economy.”
The PROSPER Act would also create a single definition covering for-profit and nonprofit institutions, aiming to create parity, which experts say could create unintended problems for regulations and policies already on the books that are based on the separate definition.
Colleges and universities
In the House’s version of tax reform, private colleges with endowments valued at $250,000 per full-time student would be subject to a 1.4 percent excise tax. The Senate version places the same tax only on larger endowments, those valued at $500,000 per full-time student.
Both the House and the Senate bills scrap a rule that allows taxpayers to write off 80 percent of the amount paid on tickets to college sporting events, which is currently allowed as a charitable deduction.
Two other elements of tax reform do not apply specifically to colleges and universities, but have the potential to have a large impact on them.
Both the House and Senate tax bills nearly double the standard deduction for taxpayers, which could prevent many taxpayers from itemizing. Charitable donations to colleges may drop as a result, critics say.
The House and Senate bills also cap the amount of state and local taxes that people can deduct at $10,000. Eliminating the deductions could lead to fewer tax dollars going to community colleges and public schools.
Meanwhile, the House GOP higher education reauthorization bill makes a point to center federal student aid on what happens to students once they graduate.
In an effort to provide more accountability, the legislation would require institutions to pay back a portion of federal student loans if borrowers do not.
Furthermore, the bill would require all colleges and universities that primarily serve minorities and receive at least $600 million per year in grants to graduate or transfer 25 percent of their students.
Republicans want to increase the role of apprenticeships in higher-education learning by dedicating more than $180 million to apprenticeships that last two years or less. Many apprenticeships, however, last more than two years.
The GOP bill also touches on subjects that have been of major debate on college campuses: free speech policies and dealing with sexual assault cases.
The bill requires colleges to make clear areas in which free speech may not occur in an effort to undermine limited “free speech zones.”
On sexual assault issues, the bill rolls back advisory policy established by the Obama administration on how to investigate and adjudicate sexual assault allegations. The rollback, according to The Wall Street Journal, is aimed at providing more due process for both the accusers and the accused.