As Republicans in Congress look for ways to slash spending, some legislators are floating new taxes on college scholarships, an end to student loan repayment plans and a big hike in taxes on university endowments.
On the chopping block potentially are several plans students can opt into to repay their students loans, including the SAVE plan introduced by the Biden administration. That plan doesn’t require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a single person — and prevents interest from adding to balances as long as borrowers make their monthly payments. The SAVE plan was already put on hold after Republicans challenged it. Some plans do not appear to be targeted, including one that caps loan payments based on borrowers’ income level.
Another possible change would give borrowers additional opportunities to recover from defaults. While they currently can rehabilitate their loans just once, allowing them to make a certain number of consecutive payments to get out of default, the proposal would allow them to go through that process twice. The committee projected the new process could save the government millions of dollars but did not spell out how.
Scholarships and fellowships have been exempt from taxes as long as they are used for tuition and related expenses. That would change under another proposal that’s up for consideration.
The Tax Cuts and Jobs Act currently requires some private nonprofit colleges and universities to pay a 1.4% tax on income from their endowments, which raised about $244 million from 58 institutions in 2022. The committee suggests increasing that to a 14% tax and expanding which colleges would have to pay it.
Also being considered among hundreds of other ideas in circulation are fines for colleges and universities that violate students’ rights under Title VI of the Civil Rights Act, which protects against discrimination toward students of shared ancestry. Such investigations often have been resolved through settlements calling for training and policy updates. Title VI is currently what is being used to investigate complaints of antisemitism on college campuses across the U.S.
Posted by John3262005
3 Comments
So a kid that couldn’t afford college and got a full ride scholarship would have to pay taxes on it? Some of those scholarships are worth 100s of thousands of dollars. That would be a wild tax bill at the end of the year. You’d have to work or take out a loan to pay it off. If you work your tax bill is just higher.
Taxing endowments like that hinder the school’s income. If they do that then I wouldn’t be surprised to see tuition go up at the schools effected.
The SAVE plan isn’t a bad idea. Helps the student pay down the loan, which is the goal. Otherwise, letting interest incur like that digs a deep hole 5 or 10 years later.
Super excited for the GOP to dicker around on the margins of the federal budget, slash taxes on the rich, and then blame Democrats when we have a debt crisis in 2033.
Oh shit are they gonna try and tax tuition waivers again? There was a bill to do that early in the first Trump administration when I was a grad student. It’s a terrible idea and a financial mugging.