As congressional Republicans explore methods to reduce federal spending, new proposals are surfacing that could significantly impact higher education. Among these suggestions are the taxation of college scholarships, the elimination of student loan repayment plans, and a considerable increase in taxes on university endowments.
The U.S. House Committee on Education and the Workforce is actively examining options to potentially overhaul student loan programs, which may limit access to federal financial aid for students.
One notable change under consideration could affect the repayment of student loans. Current options, including the recently introduced SAVE plan, which allows borrowers earning below 225% of the federal poverty line to pause payments, may be scrapped. The SAVE plan has already faced challenges and was previously put on hold. Other repayment structures, including an income-based payment cap, might also be at risk.
Additionally, lawmakers are proposing alternative methods for borrowers to recover from loan defaults. At present, borrowers have a singular chance to rehabilitate their loans. The suggested reform would allow this opportunity to occur twice, potentially saving the government millions, although specifics on the savings remain unclear.
The timeline for these proposals is uncertain, with potential considerations as early as this spring. The budget reconciliation process could allow Republicans to push these initiatives through Congress strictly along party lines. However, achieving consensus may still be daunting in a closely divided House.
Current tax exemptions for scholarships and fellowships may also be altered under new proposals, compounding financial challenges for students and their families, according to advocates.
“There has been significant progress in reducing higher education costs,” stated a representative from the Association of Public and Land-Grant Universities. “However, if we move forward with these proposals, we could see increased financial burdens on students and their families.”
Additionally, the Tax Cuts and Jobs Act, which imposes a 1.4% tax on specific private nonprofit college endowments, might see its tax rate increase to 14% with a broader range of schools subjected to it.
Further proposals include fines for colleges that infringe upon students’ rights under Title VI of the Civil Rights Act, which safeguards against discrimination. Such investigations have historically concluded with settlements that focus on training and policy reforms.
As these discussions unfold, stakeholders in higher education are closely monitoring the implications of these potential legislative changes.
