Higher Education Group Says Bill Targeting Donations Is Bad Policy

The latest bill targeting wealthy colleges and universities would cover a percentage of all students’ attendance costs for colleges with endowments over $1 billion (approximately 136 public and private colleges nationwide) is obligatory.

The Changing Expectations of Learning, Loans, Giving and Graduation (COLLEGE) Act was introduced to the Senate in early August by Republican Senator Rick Scott of Florida.

Under the bill, universities with endowments of $10 billion or more, including Harvard, Texas, Yale, and Stanford, would have to cover 75% of their students’ tuition. high income or low income. Universities with endowments of $5-10 billion should cover 50%, and universities with endowments of $1-5 billion should cover 25%. These colleges enroll many students who don’t need money. Many of their students do not receive the help they need.

“For too long, state and federal leaders have taken a misguided and failed approach to governing the public institutions of higher education. And as a result of mismanagement, millions of Americans are saddled with pilings of student loans to get their degrees, and are unprepared for good, well-paying jobs in the real world. No,” Scott said in a press release.

A spokesperson for Scott said the bill would require wealthy colleges to “get in the game” using donations to cover the cost of attendance for all students.

However, universities are severely restricted in how donations can be used and are highly dependent on donor requests. As a result, the bill would effectively create what Stephen Bloom, vice president for government relations at the American Council on Education, described as government price controls over attendance fees at wealthy private and public colleges. Become.

Most of these well-endowed colleges are already using some of the donation money to help students cover the cost of attending. accounted for 47% of charity spending in 2021.

“I don’t think the federal government should tell private companies what prices they should set,” Bloom said. based on understanding.”

Under the bill, the university would not be required to use endowments to cover the necessary portion of attendance costs, a spokesperson for Scott said.

“Universities will need to look to other billion-dollar endowments,” the spokesperson said.

Many higher education experts called the bill bad policy. They say they are unaware that universities must follow strict rules when using endowments. A common misconception is that the fund functions like a bank account, allowing the university to receive the money and spend it as it pleases. However, when a university receives donations, the donor often provides a set of rules that the university must follow.

“Unfortunately, the endowment section clearly demonstrates a lack of understanding of how the university functions and is structured. , often restricted by donors for specific purposes,” said Pedro Ribeiro, senior vice president of communications for the Association of American Universities, which represents the nation’s leading research universities. “Proceeds generated by these donations can only be used according to the donor’s wishes.”

Universities like Harvard, for example, with more than $40 billion in endowments, are required by federal law to contribute about $57,000 per student per year, and that tuition goes beyond room and board. This is effectively reduced to approximately $18,000 per student, including (Harvard did not comment when asked by email. Inside higher education About accounting. )

Higher education experts also say the bill would require universities to provide equal amounts of aid to both low-income and high-income students, thus making college affordable for those who need it most. It states that it is not an efficient way to serve.

“The bill makes no distinction between low-income and middle-income or wealthy students, so aid that forces educational institutions to pay is highly regressive,” Bloom said.

For example, at Harvard, 55% of students already receive financial aid, averaging about $53,000 annually. But many Harvard students are wealthy. 67% of the student population comes from the highest income households and 15% come from the top 1% of families. Some say the bill would disproportionately distribute aid to high-income students who need it less than others.

Republican attacks on well-to-do colleges are nothing new. In 2017, Republicans passed a tax reform bill that imposed her 1.4% excise tax on the net investment income of private colleges with more than her $500,000 in assets per student. The tax has affected nearly 100 of her colleges and universities, sparking fierce opposition from colleges subject to the tax, such as Harvard, and even congressional lobbying.

Unlike the controversial 2017 endowment tax, which only affects private universities, this will also address large donations from public universities.

The measure also requires colleges with more than $1 billion in endowments to notify the Department of Education of any increase in attendance fees and explain the tuition increase. In 2019, Scott called for all colleges that raise tuition and fees to be denied federal aid.

“There is no reason for colleges to raise student fees by any means. We cannot allow that,” Scott said in 2019.

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