The tax code overhaul proposed by House Republicans would curtail or end key tax benefits for college, including the deduction for interest paid on student loans.
The bill, unveiled last week, aims to simplify the tax code—and filing taxes—by eliminating many deductions. But it’s sending alarms bells through higher education, and are mobilizing to oppose the legislation. Here are a few reasons why:
Deduction for interest paid on student loans. Currently, borrowers whose income falls below specific limits set each year can deduct up to $2,500 of that interest. The bill ends this deduction as of 2018. The average amount of interest deducted by eligible taxpayers in 2015 was about $1,100, according to the Los Angeles Times.
Tax break for university employees and their families. Right now, the discounted tuition available for the children of college employees doesn’t count as income. Under the Republican proposal, it would.
Employer-covered tuition. Currently, if employers foot some of the bill for employees to attend college, beneficiaries don’t have to count that money as taxable income if it’s less than $5,250. They would under the tax proposal.
Tax on big private-college endowments. The bill would impose a 1.4 percent excise tax on the investment income of private universities whose endowments are worth more than $100,000 per full-time student. The National Association of Independent Colleges and Universities estimates that this provision would affect about 150 institutions.
Backers of the Republican bill have argued that doubling the standard deduction will offset the loss of other deductions.
But higher education advocates fear that eliminating the tax deduction for interest on student loans will put a bigger squeeze on people who already have heavy debt burdens, and could affect young people’s decisions to attend college.
Ted Mitchell, the president of the American Council on Education, said that these and other proposals in the tax bill would discourage college-going.
“Taken in its entirety, the House tax reform proposal ... would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” he said in a statement when the bill was released.
Mitchell noted that figures supplied by the House Committee on Ways and Means show that the bill would boost the cost of attending college by more than $65 billion between 2018 and 2027. “This is not in America’s national interest,” Mitchell said.
CNBC questioned the basis for activists’ worry that ending the student-loan interest deduction would affect college-going, citing a 2015 study of the student-loan-interest deduction that found it had no impact on college-going.
Studies also show that the biggest student-loan debt burden is carried by graduate students.
The National Association of College and University Business Officers predicted that the tax package, if approved in its current form, would undermine the financial stability of higher education institutions and drive up their costs, making a college education less affordable.
Want to know more about how the tax proposal would affect K-12? See what my colleague Andrew Ujifusa has to say on the Politics K-12 blog.
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A version of this news article first appeared in the High School & Beyond blog.