As the school year approaches and education costs become a focal point in the upcoming presidential election, Rep. David Joyce, R-Ohio, is spearheading a bill that offers an alternative approach to reducing education expenses by focusing on inflated university endowments.
The bill, co-introduced by Rep. Nicole Malliotakis, R-N.Y., seeks to significantly increase the tax on private universities' endowment profits from 1.4% to 10%. Additionally, it proposes to lower the threshold for the tax from endowments with $500,000 per student to $250,000 per student. Joyce argues that universities have been taking advantage of federal loan guarantees while continuously raising tuition costs.
If a private university raises tuition above the inflation rate, it would face even steeper penalties. Schools that increase net tuition faster than inflation over a three-year period would be subject to a 20% tax on their endowment profits the following year.
The legislation aims to hold universities accountable for their contribution to the student debt crisis and encourage them to curb rapid tuition hikes. According to the Department of Education, the average cost of tuition, fees, room, and board has more than doubled from $12,992 in 2000-01 to $30,884 in 2022-23.
While the Biden administration and Vice President Harris advocate for student loan forgiveness, the proposed bill focuses on addressing the root cause of rising education costs by shifting universities' priorities towards providing better value for students.
Education Secretary Miguel Cardona expressed the administration's commitment to providing debt relief to millions of borrowers this fall, emphasizing the need to rectify the flaws in the current system. The bill's proponents believe that redirecting endowment funds towards scholarships could alleviate the burden of student loans backed by the federal government, ultimately benefiting deserving students.
