Proposed Cuts to Higher Education Funding
House Republicans are exploring significant changes to student loan programs, taxation of scholarships, and university endowments as part of efforts to offset the cost of extending tax cuts implemented during Donald Trump’s first term. These proposals, still in the early stages, have alarmed higher education advocates who see them as ideological rather than a response to economic necessity.
Potential Changes to Student Loan Repayment Plans
The U.S. House Committee on Education and the Workforce has suggested overhauls that could limit access to federal student aid. Among the plans on the chopping block is the Biden administration’s SAVE plan, which allows borrowers earning less than 225% of the federal poverty line to forgo payments and prevents interest from compounding for those making timely payments. The plan has already been put on hold due to legal challenges. Additionally, lawmakers are considering giving borrowers a second chance to rehabilitate defaulted loans, a move that could potentially save the government millions.
Possible Tax on Scholarships
Currently, scholarships and fellowships used for tuition and related expenses are tax-free. However, under a new proposal, these awards could be taxed, increasing financial burdens on students and families. Higher education advocates warn that such changes could drive up the overall cost of attending college and reverse progress made in making higher education more affordable.
Higher Taxes on University Endowments
Another proposal would dramatically increase taxes on university endowments. The existing 1.4% tax on certain private nonprofit institutions, which generated $244 million in 2022, could be raised to 14% and expanded to include more schools. Lawmakers are also considering imposing financial penalties on universities that violate students’ rights under Title VI of the Civil Rights Act, particularly in cases related to antisemitism on campuses.
Uncertain Future for These Proposals
The timeline for these proposals remains unclear, though they could surface as early as this spring through budget reconciliation, a process that allows measures to pass with a simple majority. However, with Republicans holding a narrow majority in the House, pushing these policies through will not be easy. As debates continue, the future of student financial aid and university funding hangs in the balance.
