Republican tax plan would deal financial hit to U.S. universities

U.S. President Donald Trump talks about a newly unveiled Republican tax plan with House Republican leaders in the Cabinet Room of the White House in Washington
U.S. President Donald Trump talks about a newly unveiled Republican tax plan with House Republican leaders in the Cabinet Room of the White House in Washington, U.S., November 2, 2017. REUTERS/Carlos Barria

November 2, 2017

By Lisa Lambert

WASHINGTON (Reuters) – The Republican tax plan unveiled on Thursday stirred anger at U.S. universities, which said its proposals to tax endowments of private institutions and repeal a deduction for student-loan interest payments would hurt institutions and students.

The bill in the Republican-led House of Representatives would increase students’ cost of attending college by more than $65 billion between 2018 and 2027, according to an analysis by the American Council on Education (ACE), the lead lobby group for higher education.

The plan “would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” ACE President Ted Mitchell said .

House Speaker Paul Ryan, the most powerful Republican in Congress, told a news conference the tax plan would allow the typical family of four to save around $1,182 a year, which could go toward college savings.

The plan would establish a 1.4 percent tax on the earnings of large, private-school endowments. It would also scrap a deduction for interest paid on student loans, which congressional analysts said would increase federal revenues by $47.5 billion over 10 years, if other smaller tuition-related tax breaks also end.

President Donald Trump and fellow Republicans have locked horns with colleges and universities, which they say force liberal values on students.

Private college endowments total $350 billion, according to the National Association of College and University Business Officers (NACUBO). The tax would only apply to endowments with at least $100,000 in assets for each student enrolled.

Since most universities must balance their budgets, they may raise tuition or cut programs and financial aid in order to cover a new tax, said NACUBO Federal Affairs Director Liz Clark.

Princeton University uses earnings from its $22 billion endowment to provide aid to more than 60 percent of students and pay for academic programs, facilities and research, said Bob Durkee, vice president and secretary at the New Jersey school.

Families with incomes below $160,000 pay no tuition, he said. Those with incomes less than $56,000 also forgo paying room and board.

Ending the interest deduction would hurt people’s ability to afford an education, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

“For us, it’s one thing to talk about whether these funds are the most effective use of government money to help people afford college,” he said. “But it’s another to use them as an offset in an unclear tax overhaul.”

(Reporting by Lisa Lambert; Editing by Peter Cooney)

  • lawrence Smith

    great idea!!!!!!!!!!!!!!!!!!!!!!!!!!

  • One_way

    So? Schools sit on huge endowments and live off the interest!mall the money should go to help students! Schools refuse so tax it!

  • FoolIggy

    Make no mistake about it; American Universities are just tax-exempt business machines OPERATING to entertain the well-connected swamp rat politician & well connected business tycoons while making a very few University hierarchy administrators RICHER.

    Fun & games with lavish travel, lavish meals, out of sight expenditures thru booster groups and special interest slush funds that are all tax-deductible for the well healed while the politically well-connected federal, state, and local officials and their families enjoy the “private VIP life while being treated like Kings & Queens for their ‘personal assistance’ in university matters!

    ‘Education’ is way down on the list of priorities for most major campuses.

    As the media has shown, college students and their liberal far-left teachers promote their own agendas while credit hour requirements grow, expenses and salaries grow, and productive educational results diminish with ever increasing requirements for students to ‘extend’ their stay on campus to complete their degrees!

    In general, American businesses are looking less and less to traditional big time colleges for the next crop of employees and more to the smaller schools that focus on specific educational needs of society rather than gamesmanship and name dropping credentials found at these bigger institutions!

    Universities are trending towards a ‘right to exist’ at any expense rather than providing REAL VALUE to the American Taxpayer and their families who pay the HIGH COST OF INEFFCIENCY!

  • Tripmom53

    Maybe if these same Universities would stop admitting illegal immigrants and foreign students over American citizens, and lowering standards and academic requirements to do so, we would actually care about them being taxed more. But….no.