Section: Uncategorized

College wary of tax reform

Republicans in Congress released their proposal to overhaul the tax code on Nov. 2. The two bills — one in the House and one in the Senate — include policy changes that could be financially harmful for Kenyon and other colleges and universities.

A repeal of advanced refunding bonds, which are bonds used to pay off older bonds, is present in both versions of the tax reform. This proposal “would decrease the College’s ability to refinance its debt,” according to Vice President for Finance Todd Burson. Since the financial crisis in 2008, and the resulting drop in interest rates, “the College has advanced refunded a number of bond issues to save on interest costs,” Burson wrote in an email to the Collegian.

If The Tax Cuts and Jobs Act (the bill proposed in the House) passes, it could hurt former students making loan payments, by not allowing them to deduct the interest on their loans. The bill also taxes a tuition exchange which any College employee is eligible to receive through the Great Lakes College Association (GCLA).

Another effect of the proposed changes to tax policy regards how the College’s structures its debt. “By taxing interest on Private Activity Bonds (PAB), the bill essentially eliminates the tax-exempt bond market and would probably result in higher borrowing costs for the College,” Burson wrote. Private Activity Bonds are generally untaxed bonds given to private institutions for pre-approved projects. Under the new tax regime, any PABs taken out on behalf of the College would now be charged interest.

The Senate’s version of the bill does not include changes to student loans or the Qualified Tuition Reduction — a tuition break the GCLA offers to children of employees of member institutions.

The precedents written into the new tax reform could affect the ability of families to pursue higher education in the future. “[It] represents a major step backwards from a set of policies dating back to the mid-twentieth century aimed at incentivizing college attendance and completion,” President Sean Decatur said in an email to the Collegian. “Inevitably, this will make college education more expensive for families.” Last year, the Board of Trustees predicted that Kenyon tuition would continue to increase by 3.5 percent each year.

President Decatur encourages the Kenyon community to learn more about the proposed tax reforms. “For anyone who would like to speak out on any provisions, I encourage you to write and call the Ohio congressional delegation,” he said.

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