Tennessee Colleges, Universities Concerned about GOP Tax Plan

News Sentinel, November 13, 2017 | Go to article overview

Tennessee Colleges, Universities Concerned about GOP Tax Plan


"The only way someone could remain as a graduate student is if they had a partner that was willing to support them."

Jamie Greig

Teaching assistant in communications and information at UT

Colleges and universities in Tennessee are raising concerns about proposed Republican tax plans, which, if passed, could include a tax on the endowments of private colleges and tuition waivers for graduate students.

The proposed changes were presented in a House plan Nov. 2.

A Senate version of the legislation, presented Thursday, includes the same excise tax proposal on large private college endowments but does not include the provision that would treat graduate student tuition waivers as taxable income.

The American Education Council estimated earlier this month that if everything asked for in the House version of the legislation passes, it would increase the cost to students of attending college by more than $65 billion between 2018 and 2027.

"Taken in its entirety, the House tax reform proposal would discourage participation in post-secondary 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," the council said in a statement condemning the plan.

Criticism of the Senate plan has been slower though the tax on endowments has remained a sticking point in higher education.

Tax on private endowments could hurt student access, schools say

The proposal listed in both plans would place a 1.4 percent excise tax on endowment earnings at large private schools where endowment assets exceed $250,000 per student.

In Tennessee, the proposal would only affect Vanderbilt University, though officials at smaller schools and the University of Tennessee say they are concerned it could open the door to taxes on their endowments down the road.

In a statement on the House tax reform package, Vanderbilt Chancellor Nicholas Zeppos called the plan "misguided" and said it would threaten Opportunity Vanderbilt, an undergraduate financial aid program that meets 100 percent of a student's financial need with packages that do not include loans.

Since 2009, more than 9,800 students have received aid through the program.

"The proposed excise tax on certain university endowments is a damaging provision that would tax donor funds, make college more expensive, and reduce support for academic programs and research," Zeppos said. "Under the proposal, Vanderbilt's endowment would lose an estimated $7 million a year - the equivalent of supporting about 104 students on full cost-of-attendance scholarships."

Marjorie Hess, president of Rhodes College in Memphis, echoed those concerns, saying that while the provision doesn't currently apply to schools with smaller endowments, access to education is an issue that college administrators everywhere are invested in.

"Endowments are a key way colleges have of lowering costs," Hess said. "We are able to make tuition costs more affordable because we can subsidize tuition payments by drawing on the endowment. If that money is taxed, obviously there is less available for financial aid and the cost of college goes up."

Proposed changes to charitable giving might hurt donations

The endowment proposal doesn't currently apply to public colleges and universities, but Rickey McCurry, president and CEO of the University of Tennessee Foundation, said it opens the door for such an expansion to eventually happen. …

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