Oregon Alliance of Independent Colleges & Universities
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News Release
Trump tax scheme attacks nonprofit colleges, hurts neediest students - 11/03/17

Salem, OR -- Provisions in the new tax cut plan announced yesterday at the behest of President Trump and the U.S. House Ways and Means Committee will be devastating to students at Oregon's independent colleges and universities.

"One in three students at Oregon's nonprofit, independent colleges is eligible for Pell grants, which means they face significant financial challenges," said Kristen Grainger, president of the Oregon Alliance of Independent Colleges and Universities. "This proposal adds to students' existing financial pressures and raids the resources of nonprofit organizations that, for years, have served a worthy and humanitarian purpose. The bill uses those resources to backfill gaps in the federal budget caused by other tax cuts."

In part because of generous institutional financial aid, three of five students at Oregon's private, nonprofit institutions finish their undergraduate degrees in four years, compared to public universities, where three of five students take six years to complete. Moreover, twenty-eight percent of students at Oregon's independent, nonprofit colleges and universities graduate with zero debt.

Among the most concerning provisions:
o The elimination of the Student Loan Interest Deduction: For students, the student loan interest deduction is incredibly important as they are starting their careers and student loans payments. The federal government already makes a profit on student loans, this would just be an additional tax on students who must borrow to pay for college.

o The elimination of Sec. 127 -- Employer-Provided Education Assistance: The bill eliminates much-needed assistance to working students by giving employers incentives to provide tuition assistance benefits. Most recipients of this benefit are non-traditional students trying to improve their skills and workplace mobility. Colleges, businesses, and labor organizations all support this important benefit that allows employers to invest in their workforce, while allowing employees the ability to advance their education and experience.

o The elimination of Private Activity Bonds: Qualified 501(c)(3) private activity bonds provide favorable terms for private, nonprofit institutions, such as colleges, universities, and hospitals, resulting in considerable cost savings and enabling colleges and universities to use those savings for educational purposes. Private institutions employ bonds only after close scrutiny of risk and financial plans, and manage them prudently. If an institution holds such tax-exempt debt, it is required to meet significant post-issuance disclosure and compliance requirements. Low-cost access to capital helps keep private colleges and universities strong, enabling them to keep expenditures low so they can focus on the work they do for the public good and the students and families they serve.

o New excise tax on endowments: Endowments are critical to sustaining student access and affordability. It also supports components vital to Alliance-member institutions' respective missions as charitable nonprofit organizations and the delivery of a high quality, affordable education: financial aid, excellent teaching, research, faculty, student retention and success programs, libraries, and facilities.

Endowments function for private colleges similarly to the full faith and credit of the states do for public colleges. The Chronicle of Higher Education today listed three of Oregon's nonprofit, independent colleges that would be potentially affected by the excise tax: Lewis and Clark College, Reed College, and Willamette University. But there is significant concern that this sets a terrible precedent for taxing nonprofit funds and, if revisited by Congress in the future, could be expanded to affect other charities.

"The federal government should not take for itself donations private citizens gave to IRS-approved charities to advance important causes they believe in," Grainger said. "If this can happen to Oregon's small independent colleges, it could happen to other nonprofits too."

"Every dollar spent from the endowment reduces the cost paid by students and their parents -- and Oregon taxpayers," Grainger said.

According to a 2017 study* conducted by the TIAA Research Institute for the Council for Independent Colleges, a bachelor's degree from a public institution is 6.4 times more costly to state taxpayers than a bachelor's degree from a private institution. For example, if the undergraduates at Alliance member schools were instead enrolled at state institutions, their undergraduate degree completion would cost taxpayers an estimated $166 million. So every time an Oregon student chooses a private nonprofit institution instead of a public one, it saves the state money because that student's education is primarily paid through private college tuition and donor dollars, as opposed to state tax revenue.

"Bottom line: between the tax on nonprofit college endowments and the elimination of tax credits that support students, this proposal makes it even harder for students and families to afford college," Grainger said. "That's a move in the entirely wrong direction."

*The Cost-Effectiveness of Undergraduate Education at Private Nondoctoral Colleges and Universities: Implications for Students and Public Policy. Zumeta, William; Huntington-Klein, Nick. Council of Independent Colleges https://eric.ed.gov/?id=ED569209