Higher ed fares better than first expected in new tax bill

Congress has reached a final compromise on the tax bill, which has passed both the House and Senate. The bill excludes several provisions that were considered along the way that would have hurt college students, their families and higher education institutions.

Back in November when concerns started to surface about what was being considered for the tax overhaul, many students, families, parents and employees who are part of Advocates for Minnesota Student Aid (AMSA) responded. You quickly reached out to elected officials in Washington to urge them to eliminate provisions in the tax bill that would have harmed students. Thanks to that swift response, college students and institutions are in a much better place now as the bill becomes law. Your voice made a difference, and lawmakers in Washington are listening to you.

What we narrowly avoided
College students — and private college students in particular — stood to lose under the separate tax bills passed by both the U.S. House and the U.S. Senate. When those bills were sent to a conference committee last week, several improvements were made as far as higher ed is concerned.

The House version of the tax bill contained many provisions damaging to students and higher education institutions, including the elimination of tax benefits for students, families and college employees.

  • The House bill proposed ending the deduction of student loan interest, which would have added to the burden students already face in paying their students loans. This provision was eliminated in the conference committee report. Graduates paying student loans can continue to deduct their interest.

  • The House tax bill also proposed to end the tax benefit for when employers help pay for working students' education costs. This benefit was maintained in the conference committee report. Employer-paid tuition will continue to be tax-exempt. Also, employees of nonprofit private colleges who receive tuition remission for themselves, their spouses or their children will continue to receive this tuition benefit tax-free.

  • The House bill had proposed to eliminate the tax exemption for bonds for campus building projects. This would have made it more expensive for private colleges to invest in new or improved facilities to better meet students’ needs. This provision was eliminated, and colleges can continue to issue tax-exempt bonds for new projects.

While the Senate bill was significantly better, it too included provisions harmful to private higher education institutions that were also part of the House bill — a new tax on endowments and the elimination of tax-exempt bond financing mechanisms for academic buildings, residences and other facilities at private colleges.

Unfortunately, the conference report does end the tax exemption that helps private colleges refinance campus building projects. And, the final tax bill does create a new tax on college endowments. However, this provision was improved so that no colleges in Minnesota will be subject to the endowment tax.