Joyce Introduces Bill to Hold Elite Universities Accountable for Ballooning Student Debt

WASHINGTON, DC – Recently, Congressman Dave Joyce (OH-14) introduced the Higher Education Accountability Tax (HEAT) Act. The legislation aims to hold wealthy, elite universities accountable for the role they have played in the student debt crisis and seeks to stop tuition increases incentivized by the President’s misguided student loan cancellation plan. Congresswoman Nicole Malliotakis is an original co-sponsor of the bill. 

“President Biden’s student debt bailout is designed to benefit America’s wealthiest elite universities,” said Congressman Joyce. “Instead of rewarding institutions for forcing increasing debt on students, we must address the root issue. The HEAT Act does just that by holding these universities accountable for the national student debt crisis. I am proud to advocate for American taxpayers who are left footing President Biden’s bill for unpaid student loans.”

“Our legislation will finally hold universities accountable for their role in fueling the student debt crisis and encourage them to limit rapid tuition increases,” said Congresswoman Malliotakis, Member of the House Committee on Ways and Means. “Out of control tuition and the debt that amasses because of it delays millions of young Americans’ ability to buy homes, start a family, save for retirement, and invest in their futures.”

Specifically, the HEAT Act would: 

1. Increases the tax levied on annual private university endowment profits, first established during the Trump Administration as a part of the Tax Cuts and Jobs Act of 2017, from the current rate of 1.4% to 10%. 
2. Increases the number of universities who must pay the tax, expanding the threshold to all private colleges and universities with an endowment valued at $250,000 per student (currently $500,000). 
3. Further increases annual tax on endowments once again, to 20%, for universities and colleges that raise the net price of attendance above the rate of inflation over the preceding three years. 

BACKGROUND:

In the next academic year alone, the median increase in published tuition prices at America’s top 20 colleges will be 3.7%, resulting in a median sticker price for undergraduate tuition of $58,396. However, this is not a new trend. Data from the past 20 years shows that the average cost of tuition and fees for both private and public national universities has risen significantly for both in-state and out-of-state students. 

In the United States alone, student loan debt totaled $1.7 trillion in 2023. The outstanding federal loan balance is $1.6 trillion and accounts for 92.8% of all student loan debt. Additionally, over 40 million borrowers have federal student loan debt, and the average university student borrows around $30,000 just to attain a bachelor’s degree. In general, tuition increases have significantly outpaced inflation. These increases come amidst new data from the National Bureau of Economic Research that finds that colleges and universities with larger endowments are not more likely to reduce the list price of tuition, nor do they increase the fraction of students receiving institutional aid.

Furthermore, estimates reveal that growing endowments generate large and persistent increases in spending overall and for instruction, student services, and administration in particular. However, wealthier colleges and universities do not increase the number of students they serve or the fraction of students receiving aid, and only modestly increase the generosity of aid packages. Instead, these institutions offset higher freshman yield rates by becoming more selective and enrolling fewer low-income students and students of color. Specifically, colleges and universities whose endowments grew due to high investment returns over the last twenty years enrolled fewer students who were eligible for federal Pell Grants and smaller percentage of Black and Hispanic students.

Overall, colleges and universities appear to use greater endowment wealth to increase spending and to become more selective, resulting in higher institutional rankings, but do not increase the size or diversity of their student bodies. The results are important in light of the preferential tax treatment of endowments and interest in increasing access to elite postsecondary education for underserved populations.