Washington – Minnesota's most prominent colleges and universities are raising alarms about the tax overhaul that Republicans are pushing through Congress, saying it would make it harder to offer financial assistance to low-income students, fund research and pay for academic buildings.
A provision in the plan, which the House is expected to vote on Thursday, would strike a tax deduction for student loan interest that could have an outsized impact on Minnesota. The state ranks fifth in the nation for the size of residents' student loan debt; 69 percent of Minnesotans with at least a bachelor's degree have college debt, at a median level of $25,989. (The Senate version of the proposal preserves the deduction.)
"That's the biggest piece here that you kind of go, 'Whoa,' " said Larry Pogemiller, commissioner of the state's Office of Higher Education. "These people are struggling already — why would you make their life more miserable?"
Republican lawmakers are racing to pass $1.5 trillion in tax cuts as part of a major overhaul they say will spur economic growth, lift household incomes, and simplify the tax code. And they believe that Americans will come out ahead in the end, as businesses invest in more jobs and the doubling of the standard tax deduction offsets the elimination of many smaller tax breaks.
Yet colleges and universities say that America can't grow its economy without a well-educated workforce, and that the proposal being debated in Congress makes higher education even less affordable and accessible.
Minnesota Private College Council President Paul Cerkvenik said the measures "just seem counter to what we want to try to do in higher education, which is to try and keep costs down." The organization represents 17 colleges that teach 40,000 undergraduate and 17,000 graduate students.
The House GOP plan proposes to eliminate private activity bonds, which the Minnesota Higher Education Facilities Authority relies on to help finance academic buildings, dorms and other campus infrastructure projects. Such bonds are currently tax-exempt and often cover 80 percent of a project's cost. The agency said bonds it issued in the last year have saved over $21 million in interest costs for schools.
Those bonds helped finance major building projects at Augsburg, Carleton and Gustavus Adolphus in recent years. The authority recently closed on a bond issue to finance a theater at Macalester and refinance outstanding bonds, and it estimates that the tax break will save the St. Paul college $3.9 million.
As Congress wrangles over the details, the agency's executive director, Barry Fick, said he's working to accelerate private activity bond issues for two colleges that had been planned for 2018 and 2019.
"That's basically to get it done so we don't have to worry about having taxable debt," Fick said.
Since its inception in the 1970s, the authority has issued over $2.7 billion in bonds for Minnesota's private colleges and universities.
The House bill "seems to combine a sort of randomness in the areas in which it looks for revenue and also what appears to be a genuine animus against higher education," said Brian Rosenberg, president of Macalester College.
He raised concerns about the addition of a 1.4 percent excise tax to income on college endowments greater than $250,000 per full-time student. That fund helps support financial aid for students, according to Rosenberg, who believes there's nothing to stop the government from eventually increasing such a tax after it gets passed.
"I think it's taking money away from students and it's a very, very bad precedent," Rosenberg said.
Carleton College President Steve Poskanzer questioned why lawmakers would tax the endowments of private colleges more than those of public universities. He estimated that the proposed new tax could cost Carleton up to a half-million dollars a year, estimating that would be 10 fewer students that Carleton could offer financial aid to annually.
"Maybe [lawmakers] thought it would be politically attractive to go after private colleges as opposed to public colleges, but there's no reason to treat private, nonprofit education differently," Poskanzer said.
Universities fear the plan will tax the tuition assistance that enables many graduate students to afford advanced degrees and conduct important academic research. The Association of American Universities has voiced concern that eliminating those tax breaks would have serious consequences on research into lifesaving medicines and technologies that could bolster national defense and economic competitiveness.
That would have sweeping implications for the University of Minnesota, the state's top research institution.
"Grad students play a central role at a research university — they're part of the reason why we exist," said Scott Lanyon, vice provost and dean of graduate education at the U.
He said graduate students are enrolled in 200 departments and pay tuition of $16,700 a year. And especially with rising levels of debt for undergraduate education, Lanyon noted, this might cause people to second-guess whether they want to attend graduate school. That's especially true for students who are from underrepresented and poorer backgrounds, he noted.
"That's much more of a barrier to people who might have wanted to pursue a graduate degree — the bar just got higher," Lanyon said.
At the College of St. Benedict, President Mary Hinton is determined to get the message to the public.
"At St. Benedict, we're seeing an economic bifurcation unlike any we've seen in the past, where our highest income families have incomes over $200,000 and where our lowest economic quintile has incomes of around $25,000 a year," Hinton said. "How do we make certain that both of these groups have access to a high-quality education?"
She added: "It's an important moment in higher education for us to use our collective voice and help our Congress people and the public to understand that we want to work with and for families to make a college education possible."
Maya Rao • 202-662-7433