Tax elite colleges, help the rest
As an English instructor at Rutgers University-Camden, I often had to confront my students’ dire financial straits. I wasn’t prying; it’s just when they failed to pay tuition, they’d automatically be removed from my class rosters online. I could log on any given day and see who was failing to make ends meet.
Oftentimes, the students would email me explanations: The check is in the mail, they’d say. Please, manually reenter me into the computer system, so that I can keep receiving my assignments. Please, let me learn.
I knew a lot of them would eventually conclude that their degree wasn’t worth the price tag. According to a 2016 study conducted by the Federal Reserve, more than 40% of those who drop out of college — and nearly 40% of those who elect not to go to college in the first place — do so because of the prohibitive cost.
Even at Rutgers-Camden, a public university where costs are relatively low at $11,400 tuition, nearly three-quarters of the 2015 class graduated with debt. As the middle class continues to shrink nationwide, these graduates entered the workforce in an average hole of more than $28,000 per student.
Across the country, 70% of bachelor’s degree recipients graduate with debt.
But while the problem of student debt is widespread, it’s not universal. Forty-six miles north of Rutgers-Camden, Princeton students have a considerably smoother ride. There, more than three-quarters of graduates commence debt-free.
It’s not just because they might start out wealthier; it’s because their school, one of the richest of the rich, has a massive endowment to fall back on, much of which it uses to defray the cost of tuition.
This year, Princeton, with 8,100 students, claimed a $23.8 billion endowment. By way of comparison, the Rutgers system endowment — which serves over 65,000 students — is $1.2 billion.
It’s an old story: That of the haves and the have-nots. And with the economic chasm between the classes widening and America’s citizenry appropriately incensed, bold solutions are needed to close that gap.
Washington is catching on — sort of. The Republican-led House released a tax plan that, though skewed toward the wealthiest Americans in other respects, would institute a 1.4% endowment tax on flush private universities, defined as those with assets of $100,000 or more per full-time student.
It would be a serious step forward on the GOP’s part, if only the plan weren’t being used to offset tax breaks for the wealthy. For bipartisan support, Congress should instead earmark the funds to defray the costs of public universities, which largely fall on their students.
It would make for good politics — and better policy. Last summer, following Bernie Sanders’ progressive presidential campaign, 62% of voters said they supported the idea of free college.
But when asked if they’d be willing to pay higher taxes to implement that policy, many balked. This solution sates both sides: bringing aid, but without the rise in taxes.
Take Rutgers. Last year, the university’s operating budget was $3.9 billion. Students paid more than $1.1 billion in tuition and fees. State taxpayers shelled out hundreds of millions more.
If the 1.4% of Princeton’s endowment that the GOP wants to tax went toward defraying Rutgers student costs, the state could provide full tuition remission to approximately half of the 50,000 undergraduates in their system.
Or the tax could go toward more modest decreases in tuition costs while simultaneously defraying the burden the state’s taxpayers face.
Princeton could certainly afford the hit; its endowment has averaged 12% annual growth over the last 25 years.
Twenty-four countries across four continents offer free public college to their citizens. We can get there easily enough, too, if we collect revenue from Ivy League endowments that — because of their “nonprofit” status — are tax-exempt, despite being bigger than the economies of small nations.
For all the hand-wringing about the symbolism of attacking academia, simpler truths ought to prevail: Namely, that such wealth hoarding isn’t fair. These universities serve far too few, who are disproportionately privileged, and have far too much, for their money to remain tax-free while public university students and state taxpayers continue to suffer.
It’s time for the ivory towers to pay their fair share. With populism ascendant on both the right and the left, surely there are enough Americans who agree.