The financial lives of college students and universities took center stage this year in ways few could imagine. Higher education captured the attention of Congress with the sweeping Republican tax plan, resulting in an unprecedented move on college endowments. State authorities tangled with the new administration over the rollback of rules governing federal financial aid. And the nascent tuition-free movement gained momentum as New York joined the cause.
These are among the influential events that shaped the economics of higher education in 2017. This is not an exhaustive list, but a recap of a few pivotal moments that appear poised to have a lasting impact.
GOP tax plan: Republicans in the House rattled students, parents and universities with the release of a sweeping tax overhaul proposal that threatened to repeal or reduce federal tax credits, deductions and exemptions that play key roles in higher education. Graduate students beat back a plan to tax the tuition waivers colleges provide them in exchange for working as teaching and research assistants. Advocacy organizations and a bipartisan group of lawmakers were successful in ensuring that other controversial provisions from the House bill, including the repeal of the deduction for student loan interest, did not make it into the final legislation.
Colleges were not as lucky in fighting off plans that could change the way they do business. Roughly 30 private colleges and universities will soon have to pay a 1.4 percent excise tax on investment income from their endowments. These schools have at least $500,000 in endowment funds per full-time student. University leaders, even those who are not subject to the tax, say it sets a worrisome precedent. The tax could also result in fewer scholarship dollars for students at some affected schools.
Dismantling of consumer protection regs: The Trump administration has withdrawn, delayed or announced plans to revamp more than a half-dozen Obama-era measures involving federal student aid. Take the gainful employment rule, which threatens to withhold student aid from vocational programs with graduates who consistently end up having more debt than they can repay. Education Secretary Betsy DeVos initially gave colleges more time to appeal poor reviews, but within a matter of months decided to rewrite the rule entirely.
She took a similar step with borrower defense to repayment, a statute that erases federal loans for students whose colleges used illegal or deceptive tactics to get them to borrow. The rule, which dates to the 1990s, was revised last year to speed up and simplify the claims process and to shift more of the cost of discharging loans onto schools. DeVos suspended the changes before they could take effect in the summer and announced plans to rewrite the regulation. Delaying both the gainful employment and borrower defense rules has resulted in a spate of lawsuits from state attorneys general and consumer advocates that will continue to play out in the coming year.
Free-college movement grows: New York became the largest state to offer tuition-free public higher education, with the introduction of the Excelsior Scholarship this year. The grant covers tuition for New Yorkers accepted to one of the state’s community colleges or four-year universities, provided their family earns less than $125,000 a year. Private universities in the state said the move would undermine their schools, many of which reported falling in-state enrollment this fall.
The scholarship also rekindled debates about free-tuition programs, which some experts say are of little benefit to low-income students. Most programs cover only the balance of tuition after factoring in federal and state grants earmarked for needy students, who as a result do not receive the full benefit of free tuition. Critics have said states would be better off directing more money to need-based grants and scholarships.
States across the country and political spectrum are nevertheless exploring the option as more local employers demand some form of post-secondary education. There are at least 85 initiatives at the municipal and state level aiming to cover the cost of tuition at community colleges, according to the nonprofit Upjohn Institute. Rhode Island in August became the fourth state to cover tuition at all of its community colleges, while California agreed in October to make one year at its community colleges free for full-time students.
Purdue acquires Kaplan: Purdue University, a renowned public institution in Indiana, acquired the 15 campuses and learning centers of for-profit Kaplan University to form a new online college, dubbed NewU. When the deal was announced in April, some Purdue faculty, consumer groups and liberal lawmakers railed against the for-profit company’s continued involvement in the new public university. Others praised the unusual union as a model for the expansion of online and adult education at traditional colleges.
Purdue will pay $1 for Kaplan’s academic operations. Kaplan will provide a range of services in exchange for 12.5 percent of NewU’s total revenue. But the for-profit company will get paid only after the new school generates enough revenue to cover its operating costs and other expenses.
FAFSA breach: The Internal Revenue Service and Education Department were forced in March to disable an online tool used to apply for federal financial aid, after identity thieves tried to use personal information harvested from it to file fraudulent tax returns. The IRS identified suspicious activity in the files of people using its “data retrieval tool” to upload tax-return information into the Free Application for Federal Student Aid. Hackers may have stolen the data of up to 100,000 taxpayers in the security breach.
The episode put the data retrieval tool out of commission for several months, leaving advocacy groups worried that the outage would discourage completion among low-income student who might not have proper guidance from parents or counselors. But because the window for submitting the financial aid application opened two months earlier than usual, many students had already completed the form by the time the tool was taken offline. Still, the breach led the Education Department to strengthen its online defenses, a critical move as the agency looks to revamp the financial aid application.