November 14, 2017
Members of the Oberlin Community:
I write to you today about the proposed tax legislation currently under consideration by Congress. I ask that you familiarize yourselves with this legislation because it could have a significant negative effect on Oberlin College, as well as on colleges and universities across the country.
On November 6, I sent a letter to Oberlin’s Congressional delegation asking them to oppose certain aspects of the proposed legislation, such as a new excise tax on private college and university endowments. That tax would be an unfair penalty levied on a specific sector of higher education that cares deeply about maintaining the highest quality of education, while managing costs amid increased regulation and outside pressure.
Private, non-profit colleges and university are tremendous educational and cultural assets, and powerful economic drivers in their communities. Their alumni make positive contributions in all aspects of life in our country. Many of the proposed changes to the tax code will increase the cost of a college education and student debt.
As you know, this tax legislation is controversial and is still subject to change. So once you have familiarized yourself with its latest iteration, I ask you to consider texting, emailing and/or calling your representatives in the House and Senate to voice your opinion of the bill. I believe the proposed legislation diverts resources from our students, and adds to the complexity of the tax code when the goal is simplification.
Here’s are some of the provisions which would hurt Oberlin and other colleges and universities:
- Imposing excise taxes on approximately 70 private college endowments—Oberlin’s included—will have a devastating effect not just on Oberlin but on private colleges and universities across the country by taking millions of dollars away from needy students and key college operations. Endowment income is an important source of financial aid funding and helps cover educational costs. Taxing private college endowments is, in effect, taking money that private citizens donated for charitable purposes, and that were identified by the IRS as worthy public causes, and sending the money to Washington instead.This penalty will put private colleges at a competitive disadvantage with public colleges that we compete with directly in the marketplace. Private college endowments serve the same function for our institutions as the full faith and credit of the states serve public colleges—namely to stabilize our institutions during challenging times, and to ensure we can fulfill our educational mission.
- Eliminating the Student Loan Interest Deduction: Our students find the student loan interest deduction incredibly important as they are starting their careers and student loan 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.
- Repealing the Hope Scholarships Tax Credit and the Lifelong Learning Credit. This will make it harder for Americans to afford college tuition and will increase student debt.
- Eliminating 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 us to use those savings for our educational purposes. We 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. This type of bond financing for not‐for‐profits is a proven tool with a decades‐long record of success for providing vital public services and creating jobs. Low‐cost access to capital helps keep private colleges and universities strong, enabling us to keep expenditures low so we can focus on the work we do for the public good and the students and families that we serve.
- Eliminating itemized deductions for 95 percent of taxpayers. This will significantly suppress charitable giving, as will elimination of the estate tax. Oberlin relies on the generous philanthropic giving of our alumni to support financial aid for deserving students and academic, artistic and musical programming that prepares them to lead meaningful, prosperous and productive lives.
- House and Senate bills both propose taxing benefits colleges and universities typically provide their employees. Many of our employees work at Oberlin because of the benefits and because they believe in our educational mission. Among the most important benefits we provide is assistance to help pay their own, and their children’s college tuitions. Taxing this benefit makes college more expensive for them and makes it harder for us to attract faculty and staff. Eliminating this benefit would particularly harm employees who are poised to send their children to college, and have premised their career choices and college savings decisions on the existing tuition benefits for their children. It would most hurt our lowest-paid employees.
- Congress should not be making it harder for students to afford college and more difficult for Oberlin and other colleges and universities to be able to afford to provide students with an education that can transform their lives and the lives of their families. The proposed changes to the tax code do just that. Again, I urge you to inform yourselves about this legislation and to share your views with your Congressional representatives.
President, Oberlin College