An ally of president-elect Donald Trump has released a plan for lowering college costs by threatening wealthy universities with a big tax hit if they don’t spend more on lowering tuition rates.
Rep. Tom Reed of New York endorsed Trump in March 2016, making him one of the earliest GOP congressmen to align with him. Last week, he was announced as a vice chair of Trump’s presidential transition team, giving him some degree of influence on the incoming administration’s priorities.
In a release Monday night, Reed showed that one of those priorities may be trying to lower college costs by placing pressure on wealthy universities to kick more money toward middle class students.
Reed’s plan includes the passage of the REDUCE Act, which would levy a 30 percent tax on all college endowments larger than $1 billion if the schools which possess them don’t use the endowment returns for tuition relief. The bill would affect the several dozen universities — public and private — that have massive endowments that are currently almost totally tax-exempt.
“This provision will specifically help students who often fail to qualify for grants or federal aid due to their families’ income levels,” Reed’s plan says.
Reed has proposed taxing endowments before, but the Republican victory in the most recent election and his status as a Trump ally give his proposal a better chance of passage. Reed’s office says the measure could be folded into a general reform of the tax code, a priority of House Republicans in 2017.
Even if passed, though, the bill would only help students at a few dozen large and wealthy institutions. While Harvard University has a gargantuan endowment of more than $35 billion, most schools are far less flush. The University of Oregon, for instance, educates tens of thousands of students each year, but has an endowment of just $750 million and wouldn’t be affected by Reed’s proposal.
Besides the endowment bill, Reed proposes a whole battery of laws intended to slash college costs. Some are targeted at students, such as a bill that would let students refinance student loans to lower interest rates and another making Pell Grant awards more flexible. Others are targeted at universities, such as one that would require colleges to submit plans for keeping tuition costs contained, rewarding them if they successfully do so and penalizing them if they do not. Another proposal, based on a bill first proposed in 2015, would cut off student loans and Pell Grants from schools and programs with low graduation rates and poor job outcomes, and use the saved money to fund competitive grants for more successful schools.
“Colleges must have a stake in the post-graduation successes of their customers,” Reed’s plan argues.
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