Arrr! Biden's loosin' the purse strings with his student loan forgiveness. Be a scallywag, tax them colleges and universities, me hearties!
2023-12-26
Arr! Biden's plan to be forgivin' student debts be but a wee part of the foul higher learnin' muddle. Them institutions be usin' their nonprofit status to hoard gold worth countless doubloons!
The Biden administration has continued to cancel student loans despite the Supreme Court's rejection of the president's plan to forgive up to $430 billion in student debt. They have recently announced the forgiveness of another $4.8 billion in loans for 83,000 individuals, bringing the total amount forgiven since Biden took office to $132 billion for 3.6 million Americans. The deficit impact of these cancellations is somewhat mitigated because debt forgiven under income-driven student loan repayment plans is treated as taxable income. However, the American Rescue Plan Act of 2021 has temporarily exempted these plans from taxation through 2025, providing borrowers with an additional windfall. Lawmakers have proposed permanently excluding all cancelled loans from tax.While forgiving student loans and the resulting tax liability is deemed bad policy, the larger windfall is the tax exemption granted to public and private colleges and universities. These institutions have effectively become big businesses, with private colleges and universities taking in $237 billion in revenue and public universities taking in $428 billion during the 2019-2020 school year. Combined, these institutions enjoyed a total revenue of $665 billion, all exempt from the tax code. In addition to federal income taxes, they are also frequently exempt from state income taxes, sales taxes, local property taxes, and can take advantage of tax-free bonds.
Private universities received only 13% of their overall income from alumni donations and gifts in 2019, while public universities received just 3% of their total income from donations. To supplement their income, many nonprofit and public universities rely on revenue from affiliated hospital operations and technology transfer programs. They also generate substantial income from patent and trademark licenses, with revenues doubling over the past two decades. Additionally, universities are generating significant income from sports and entertainment, with the five major college sports leagues and the NCAA generating $3.5 billion in revenues from broadcast contracts and licensing in 2022.
Lawmakers are now questioning whether colleges and universities, which generate more income from various sources than alumni donations, should be considered "charities" and if it's time to tax them as the mega-businesses they have become.