November 2, 2017 / 11:20 PM / 2 years ago

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

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.

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

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

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