University endowments may be used to offset student loan debt
'It’s fundamentally wrong for wealthy universities to sit on the sidelines with their massive endowments while they continue to increase their tuition and contribute to our nation’s ballooning student debt,' the congressman said.
The bill was sponsored by Ohio Congressman Dave Joyce to counter student loan debt.
Ohio Congressman Dave Joyce (OH-R) proposed a bill to hold wealthy universities accountable for exasperating student loan debt by increasing the tax levied on endowments.
The “Higher Education Accountability Tax Act” (HEAT Act) was introduced on Sept. 19 in response to President Joe Biden’s plan to cancel up to $20,000 in student loan debt. Rep. Joyce slammed the Biden administration’s debt cancellation as a “bailout” that increases the burden put on taxpayers.
“It’s fundamentally wrong for wealthy universities to sit on the sidelines with their massive endowments while they continue to increase their tuition and contribute to our nation’s ballooning student debt,” Rep. Joyce told Campus Reform. “Unfortunately, President Biden’s student debt cancelation plan gave these institutions the greenlight to keep raising tuition with the knowledge that if one day their students can’t pay back their loans, they’ll just be forgiven and other taxpayers will be forced to foot the bill.”
The HEAT Act would increase the annual tax on universities’ endowments from 1.4% to 10%. Additionally, it increases the number of universities required to pay the tax. All private universities with an endowment greater than $250,000 per student would be eligible, slicing the amount down from $500,000.
The act will impact 65 colleges and universities, according to the press release.
Additionally, the bill will tax university endowments 20% should schools increase attendance costs “above the rate of inflation over the preceding three years.”
[RELATED: WATCH: Students don’t want to push loan forgiveness on taxpayers]
“My bill holds these institutions accountable for their role in the absurdly high cost of higher education in America and incentivizes them to use the profits from their endowments to prevent their students from assuming unsustainable levels of debt,” Joyce said.
Campus Reform reported in June that 27 of the top 30 U.S. universities planned to raise tuition costs for its students.
In Virginia, Republican Governor Glenn Youngkin is encouraging universities to freeze tuition rates to give students and families relief in the face of record-high inflation rates, which peaked at 9% this summer.
The increase in tuition cost over the past two decades has outpaced the rise in inflation, the press release claimed. A US News report of top national universities found that tuition and fees at private institutions increased 134%. Tuition and fees at public universities increased 141% of out-of-state students and 175% for resident students.
Inflation increased 65% between July 2002 and July 2022.
The HEAT Act is cosponsored by Texas Congresswoman Mayra Flores (TX-R) and Congressman Byron Donalds (FL-R).
“Elite universities should not be profiting off our students and federal student loans. Instead of helping the next generation of professionals in America, they are harming them with increased costs and decades of payments,” Rep. Flores told Campus Reform in a prepared statement. “Universities continue to increase their rates on the backs of students and taxpayers, it is time to get tuition costs under control.”
The Penn Wharton Budget Model reported in August that $10,000 in debt cancellation per borrower would cost approximately $300 billion. From this estimate, the National Taxpayers Union Foundation reports that the Biden administration’s plan could cost each taxpayer up to $2,500.
Campus Reform contacted Donalds for comment. This article will be updated accordingly.
Follow @Alexaschwerha1 on Twitter.
