The GOP’s tax rewrite hits higher education hard, but new legislation House Republicans are crafting will likely go even farther to worsen the damage.
As The Wall Street Journal reports, the House education committee recently gave a preview to its new legislation, a long overdue reauthorization of the Higher Education Act (HEA). Like recent tax bills passed by the GOP-controlled House and Senate, this proposed rewrite of HEA will have the effect of further constricting learning opportunities for students, adding to the costs students and families take on for education, and steering more public money for learning to private businesses.
Days after the House and Senate passed their tax bills and the Journal broke its story about new legislation being drafted in the House, Moody’s Investor Services, the esteemed bond rating firm, announced it was “revising the 2018 outlook for US higher education to negative from stable.” Among the rationales Moody’s gave for its decision was “looming changes in federal policy or funding.”
Taxing Higher Ed
Between the dueling GOP tax bills in Congress, the House version is decidedly more damaging to higher ed. But in nearly every instance, the purpose of the proposed changes to existing tax law in both bills seems to be aimed solely at finding revenue sources from higher ed, to offset huge tax deductions given to wealthy families and corporations, rather than to improving learning opportunities for students or lowering the costs of colleges to individuals and families.
For instance, the House bill would make college employees whose spouses or children attend their employer institutions tuition-free report the tuition benefit as taxable income. And employer-provided education assistance would also become taxable, whereas it’s currently tax-exempt up to $5,250 per year.
Similarly, while the Senate plan continues to allow a deduction for student loan interest on federal tax returns, the House plan would eliminate the deduction. While the Senate plan continues to not count college tuition waivers as taxable income, a common benefit for students enrolled in graduate programs, the House version would.
“Any tax changes to tuition support for graduate students could also negatively impact graduate enrollment and research levels since research is a key component of many graduate programs,” notes Moody’s in its ratings announcement.
Both bills apply a 1.4 percent excise tax to private school endowments. In the Hose bill, the tax kicks in when the account is valued at $250,000 per full-time student. The Senate raised that level to $500,000 per student. Colleges that will likely be hit with taxes on their endowments insist their investments are being used to help support tuition costs for low-income students who attend their institutions and for facility improvements.
Both bills also take away tax deductions for interest paid on “advance bonds” colleges use to refund their debts at more manageable levels, and the House version also eliminates tax-exempt private activity bonds that lower the cost of building for colleges. This change was another negative influence on Moody’s downgrade.
Remaking Higher Education
But while GOP tax plans resemble deliberate attempts to strip money away from colleges and universities, without providing any benefit to students and families, new legislation being introduced by House Republicans is arguably worse. If what the House proposes for the Higher Education Act resembles what eventually passes, it will remake higher education along very narrow perceived needs of the “work force,” limit financial supports for students, and give advantages to for-profit private providers.
According to the Chronicle of Higher Education, a primary purpose of the remake of the Higher Education Act being introduced by House Republicans – branded the Promoting Real Opportunity, Success and Prosperity through Education Reform (PROSPER) Act –is to address the “skills gap” that supposedly exists between what colleges teach and what employers need.
The Journal quotes North Carolina Republican Representative Virginia Foxx, chairwoman of the committee that drafted the proposal, claiming that because much of what colleges and universities teach is “irrelevant” to employers, federal programs should be more supportive of apprenticeships and programs that have come to be called “competency based” education, a nebulous new buzzword often used to describe education that emphasizes the learning of discrete skills rather than broad realms of knowledge.
Political leaders have grown fond of using recent reports finding there are 6 million unfilled jobs in America as proof that higher education no longer aligns with the needs of employers, but those pronouncements about unfilled jobs fail to note, as this report by NPR does, that much of the problem lies with employers inflating their required qualifications and scrimping on wages. As numerous studies show, the so-called skills gap is a myth, and a college degree in liberal arts or other non-technical subjects is as relevant as it ever was.
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Likely, what Foxx and other Republicans call a need to teach relevant skills generally means steering more students into for-profit education programs that promise quick employment without ever fulfilling that pledge.
For-Profits Are ‘Winners’
As the Journal reports, “One of the biggest winners in the new higher-education legislation is the for-profit college industry, which faced new regulations under the Obama administration. The rollback of those regulations has been under way since President Donald Trump took office. The reauthorization proposal goes a step further by prohibiting future action by the Education Department on what is known as the gainful-employment regulation.”
The gainful employment requirement is basically a check on schools that claim to provide degree programs that lead to employment to actually live up to that pledge. More often than not, for-profit institutions don’t.
“Blocking the gainful employment rule means that more students will enroll in programs that will ruin their financial futures,” writes David Halperin in the Huffington Post.
Students in these for-profit college programs, he explains, are often people on the edge of desperation – veterans, single mothers, immigrants, and low-income students from disadvantaged communities who are lured into these programs by “false promises” about landing a great job.
“Many will enroll in programs that aren’t strong enough to help them succeed,” Halperin says. “Even if these students graduate – and many don’t – and even if they get the job they dreamed of – and many won’t – they may not earn enough to pay down their loans, because the tuition was just too high.”
Borrowers Are ‘Losers’
While for-profit providers are “winners” in the Republicans’ proposed bill, the big “losers,” according to the Journal, are student borrowers, especially those wanting to take advantage of the federal government’s public service loan forgiveness program, which allows borrowers who work for nonprofits or government agencies to have their remaining loan balances dropped after they make 10 years of payments. These borrowers, except those grandfathered into the program, would lose this tax advantage.
Other losers include students who run up larger debts to complete their advanced degree programs and student loan debt holders who end up in professional careers that are not top payers.
For students who run up larger debts, such as graduate students in advanced degree programs, the bill proposes “unspecified limits for borrowing by graduate students and parents of college students.” The Journal reports, “The change could cut into enrollment and potentially siphon off billions of dollars a year from universities.” This need to find financial resources for college would tend to, again, go to for-profit lending institutions.
The bill would also, according to the Chronicle, “scale back” the breaks given to student loan debt holders in the federal government’s income-based repayment plans. Student borrowers who want to benefit from the federal government’s income-based repayment program will see their current basis of 10 or 15 percent of discretionary income changed to 15 percent of discretionary incomes. Rather than getting debt forgiveness after 20 or 25 years, college student loan holders, under the new bill, would have debt forgiveness based on as long as it takes “to cover the amount they would have paid under a 10-year standard repayment plan,” according to the Journal. That will increase long-term indebtedness.
War Without End
“There is a long road ahead,” Politico reports, regarding the revision of the Higher Education Act. “The Senate won’t start its rewrite until next year. But the upper chamber’s process has already gotten off to a more bipartisan start, with the Senate education committee holding a friendly hearing on simplifying the application for federal student aid and talking about working together on the rewrite.”
Nevertheless, it’s clear the Republican “war on learning” being waged at all levels of education, including higher ed, didn’t end with the tax bills.