What’s New
Republicans in Congress — and the White House — are hoping to pay for big tax cuts in part by imposing levies on wealthy colleges and slashing funding for a wide swath of higher education. Lawmakers took a key step toward doing so on Thursday morning, passing a major budget bill through the House of Representatives.
The Details
The bill, widely seen as the primary legislative vehicle for enacting President Trump’s agenda this year, takes yet another shot at so-called elite higher ed — namely, Ivy League institutions and other private colleges with large endowments. Many institutions in that group are already reeling from Trump’s directives to freeze and even terminate billions of dollars in research grants.
But the legislation will also harm low-income students everywhere, the American Council on Education (ACE) argued.
Provisions in the “One, Big, Beautiful Bill” would:
- Hike taxes on college endowments, using a four-tier system topping out at a 21-percent rate for institutions like Harvard University. The calculation of a college’s endowment value-per-student would exclude international students, ensuring Columbia University and the University of Pennsylvania would qualify for a higher tax rate.
- Further limit who’s eligible for Pell Grants. Students would have to take 30 credit hours per academic year, typically five courses per semester, in order to receive the maximum award. Part-time students taking fewer than 15 credit hours per academic year — like many students at community colleges — wouldn’t be eligible for Pell at all.
- Cap some student loans and place more stringent requirements on income-based repayment plans. Grad PLUS loans, which allow graduate and professional students to borrow unlimited amounts, would be eliminated. Parent PLUS loans, which allow parents of undergraduate-student dependents to borrow unlimited amounts, would be restricted.
- Require colleges to pay back some of students’ federal loans when the students fall into default, in a risk-sharing model.
The loans portions of the bill are meant to address “the root cause of high college costs,” Rep. Tim Walberg, chair of the Education and Workforce Committee and a Republican from Michigan, said in prepared remarks. Meanwhile, the endowment tax is fair play for “woke universities” that “operate more like large commercial businesses more than centers of higher learning,” Rep. Jason Smith, Republican of Missouri and chair of the Ways and Means Committee, said in a statement.
But the proposal that colleges pay back some student loans “will unduly penalize the very institutions serving the largest numbers of those students who struggle most in the labor market: low-income, first-generation, and underrepresented student populations,” Ted Mitchell, ACE’s president, wrote in a letter Wednesday that was co-signed by 18 other higher-ed organizations. As for the endowment tax, it’s “effectively a scholarship tax,” Mitchell wrote.
In a sign of just how widely the budget bill affects higher education, even institutions that are often seen as quite different from the public and nonprofit private colleges that make up the majority of the sector have lobbied against it, including for-profit colleges, as Inside Higher Ed reported. In addition, Hillsdale College — a private nonprofit known for its connections to the Trump administration — has opposed the endowment tax.
“We ask no special favor. We only ask that our independence be respected,” Larry P. Arnn, Hillsdale’s president, wrote in City Journal, the publication of the Manhattan Institute, a right-wing think tank. Politico later reported that Hillsdale may face a 1.4-percent tax on its endowment, or it may be eligible for an exemption in the bill for religious institutions.
What to Watch For
The bill now heads to the Senate, where it’s expected to see changes. Mitchell’s letter indicates ACE and other groups will continue to lobby for revisions.
