"Bailout" Bill: Surprise Help for Colleges and Parents

Important college tax provisions that expired at the end of 2007 were finally extended this last week, after Congress had failed repeatedly to reenact them. The provisions caught a ride as “sweeteners” on the multi-billion dollar rescue bill for at-risk financial services institutions.

The bill also gives authority to the Treasury Secretary to secure both private and federal student loans in the case of an emergency. Passed by the Senate on October 1 and the House on October 3, the bill was immediately signed into law by the president.

Just a week earlier, the House and Senate had reached their third impasse on extending the tax provisions, with both sides announcing they wouldn’t try again this year. Only through the financial services rescue bill were these important provisions – which include the IRA rollover, the tuition deduction, and important tax breaks for research and development – given one last chance at passage this year.

All of the expired provisions in the bill will be extended for two years. The tax benefits will be retroactively extended to cover all of 2008, and be in effect until December 31, 2009.

While most members of Congress support extending these provisions, disagreements over offsetting the cost of the bill kept the package from moving separately. In the end, the extenders will be partially offset, reflecting the language reached in a compromise in the Senate. Inclusion of the extenders in the larger economic recovery package – sweetened with additional safety precautions for small businesses, plus an increase in FDIC deposit protections – was enough to make the tax provisions acceptable to some of the House members who had opposed any offset.

Passage of the extenders is a welcome relief to college parents who are eligible for the deduction, and who have come to depend on it. It also guarantees that families can claim the deduction for 2008 and 2009, providing more certainty when planning tuition payments.

The extension of the IRA charitable rollover provision is important to colleges. Their development offices now can definitively assure waiting donors that any gifts made through the end of 2009 will be subject to the benefits of the new law. NAICU survey results show that during the 2007 calendar year, 581 NAICU members raised more than $185 million through use of the IRA charitable rollover.

The provision allowing the Secretary of the Treasury to secure student loan assets – including private student loans – could also prove important to private colleges and their families, should a crisis hit the student loan programs. A different authority given to the Department of Education last summer to act as a type of secondary market for federal student loans is widely credited with having helped keep student loans flowing this fall. The new authority allows the Treasury Secretary to get into the act as well, if broader student loan problems arise. It’s an important addition, since the Treasury Secretary has fewer hoops to run through in the event of an emergency, and because he has authority to cover all types of student loans, including private loans, for more lenders.

Endowments

Yesterday’s roundtable on endowments organized by Senator Charles Grassley of Iowa led the news this morning. A roundup of some top stories:

• College Presidents Defend Rising Tuition, but Lawmakers Sound Skeptical (New York Times)
• Watching Endowments, Not Legislating Over Them (Inside Higher Ed)
• Lawmakers Ease Pressure for Mandatory Payouts as Colleges Increase Aid (Chronicle of Higher Education)
• Colleges spending wisely? Discuss. (Yale Daily News)
• Endowment Spending Idea Is Attacked by Academics (New York Sun)
  
• Senator Grassley Wants New 990 Tax Form Tailored to Colleges (Chronicle of Higher Education)
• Remarks by President Shirley M. Tilghman on endowments and college costs (Princeton Press Release)

Drinking age debate fills the August doldrums

An initiative to reopen the debate on the drinking age, led by a consortium of college presidents (called the Amethyst Initiative), has hit the jackpot in media coverage during the mid-August higher ed reporting doldrums.

Within the past few days, the story has been reported in more than 600 articles (see the Google news roundup here, and a listing of blog hits here. The last 24 hours alone have seen stories in the Chicago Trib, the LA Times, the Washington Post, the Wall Street Journal, CNN, MSNBC, Christian Science Monitor, and AFP, among others.

John McCardell, the initiative's leader, made a presentation on his efforts at the NAICU annual meeting in February - click here for audio excerpts and powerpoint.

The initiative's statement of purpose is to "call upon elected officials to weigh all the consequences of current alcohol policies and to invite new ideas on how best to prepare young adults to make responsible decisions about alcohol use."

If they're looking to open the debate, then the explosion of coverage indicates success. The initiative has raised criticism from several sources, including MADD and the Governors Highway Safety Association.

Democrats release platform, McCain posts higher education agenda

A forum last Friday at the New America Foundation gave Democrats an opportunity to roll-out elements of their recently completed platform. The foundation has extended an invitation to the Republicans to do the same with the GOP platform in September (we'll provide the link when available).

See McCain’s higher ed agenda here. and Obama's here.

The higher education section of the Democratic platform is what we expected, having heard these ideas in Obama speeches (see Inside Higher Ed article for more) – simplifying the financial aid system, support the Pell Grant program, and create a new American Opportunity Tax Credit, which students can receive in exchange for community service. The McCain campaign this weekend released their higher education program – which also has no big surprises. McCain calls for supporting modernized universities without increased regulation; improving information for parents; simplifying higher ed tax benefits; simplifying financial aid; and fixing the student loan programs.

The release of the Democratic platform piqued the interest of the DC set, with a packed room, a spill-over room, and 500+ people who (according to the foundation) logged in for the webcast, notable given that the foundation put the event together in just one day.

An overview of the Democratic platform drafting process was given by Karen Kornbluh (formerly of the foundation and now on leave from Obama’s senate staff and working on his campaign). As she put it, the Democrats had five weeks to write the platform instead of the usual five months (as a result of the prolonged primary season). They had a drafting committee and a platform committee with two high level meetings – one of about 50 people in Ohio, one of 180 in Pittsburgh. The groups were made up of half Clinton people and half Obama people. Apparently, there was no dissension.

Preceding those two meetings, grassroots participation in the platform process took place as "meet-ups” (a throwback to the Dean campaign). Kornbluh reported that there were 1,645 listening hearings and more than 30,000 people participated.

Other items of note include some new language (which we'll all be tired of by November), such as "no restoration to the status quo ante," "transnational challenges," "common security,” and "green-collar jobs."

Quandry

We applaud Forbes magazine for its possibly inadvertent efforts yesterday to heighten awareness of the complexities of higher education policy. In an op-ed in its “America’s Best Colleges” issue and on its Web site, Senator Charles Grassley makes the case that colleges are too rich and that they need to spend more of their endowments on student aid rather than on attracting new students. In a companion article, Forbes announced the launch of their new college ranking system that, when you look closely at the fine print, rewards colleges with large endowments for allowing their professors to pursue specialized scholarship and thus win awards, honors and other recognition.

When reading these two articles, it's seems as if Forbes is telling us that colleges are too rich, but that they have to be rich to be good. See the irony? This media clutter is a major reason NAICU developed U-CAN, a free online consumer information resource that lets students and parents decide for themselves which institution ranks as their best option.

So our thanks goes to Forbes.com for their insightful treatment of a quandry facing higher education - how to compete in a complex market without competing in a complex market.