Legislation Impacting Higher Ed

13 March 2024

In February, I mentioned traveling to DC to meet with our Minnesota state legislators and discuss proposed legislation impacting higher education. This month provided a good example of why that kind of advocacy is important, as we escaped the threat—at least for now—of a provision attached to a bill proposed in the House, the Bipartisan Workforce Pell Act, that would have had a dramatic negative impact on Carleton.

You may not be aware that, even though we are a nonprofit, Carleton’s endowment is subject to taxation as a result of a 2018 tax law that requires colleges and universities with endowments of over $500,000 per student to pay an annual excise tax on endowment income. At Carleton, that amounted to $770,000 last year. The small group of 33+ colleges that pay that tax are often described as the nation’s wealthiest colleges, putting us in the same category as Harvard, with its $49 billion endowment.

The proposed Bipartisan Workforce Pell Act calls for an expansion of the federal Pell grant program to include support for students participating in certificate and training programs in addition to, as is currently the case, degree granting education programs. We of course strongly support the Pell grant program, and have often lobbied for increasing Pell amounts. Extending Pell aid to students in non-degree programs would be a beneficial enhancement.

The bill authors proposed paying for this expansion, however, with an unprecedented change in the federal loan program: colleges subject to the endowment tax would be required to repay any unpaid student loans of our alumni, including loans forgiven by the Dept. of Education itself—for example, under Biden’s debt cancellation program, or under the public service loan forgiveness program. 

The decision to raise funds by targeting a small group of high-performing schools seems counterintuitive, given that for-profit schools with high loan default rates are not in any way penalized. The proposed funding provision reflects the degree to which elite higher education institutions have become popular targets. Legislators clearly expected that few would object to making “wealthy” schools pay more – even though our resources are what allow us to offer high levels of need-based financial aid, and support educational programs with the nation’s highest retention and graduation rates.

The week this resolution was slated to come to the floor, I personally called Rep. Angie Craig, who I had seen just two weeks before, to convey the significant impact the funding provision would have on Carleton. She pledged to oppose the bill in its current form, and in fact the planned vote was postponed due to similar objections about the planned budget offset.

The fact that some legislators would attempt to penalize prestigious colleges in this way is a disturbing instance of the impact of the negative press higher education has received lately. The recent partisan politicization of higher education, along with broader public concerns about cost and equity, have made us vulnerable. This is one reason why our strategic direction includes as a goal increasing understanding and appreciation for liberal arts education. I believe it is important for Carleton to play a leadership role in this effort.

Featured in Carleton Today, March 14, 2024