WASHINGTON – Congressman Tom Reed (R-Ithaca) has introduced legislation that he says will help provide financial relief for college students.
The bill, known as the Reducing Excessive Debt and Unfair Costs of Education (REDUCE) Act, is designed to incentivize colleges and universities across the country to use proceeds from their endowments to help provide financial assistance to working families struggling with high tuition costs.
“We should care about the working-class students who are being taken advantage of by the unfair costs of college,” said Reed. “In most cases, the richer the school, the smaller the percentage of working class students being served by the college.”
Reed said his bill would waive the new tax on college endowments if they spend 25 percent of their annual investment earnings on reducing the cost for middle-income students.
If educational institutions meet the requirement, they won’t be taxed 1.4 percent on investment earnings, which was just implemented in the new tax reform passed late last year.
Key provisions of the REDUCE Act include:
- Requires colleges to have a plan to keep tuition increases below the rate of inflation.
- Mandates reporting of easily digestible information about how colleges are being managed and where their money is spent.
- Requires the wealthiest universities to distribute 25 percent of the profits from their massive endowments to assist students from working-class families.
- Encourages university donors to give money that will assist low and middle-income students and eliminates tax deductions for large restricted college donations.
Reed has been critical of college endowments, saying they allow colleges to horde money at the expense of students who pay tuition.
During a conference call with media on Tuesday, said the interest made on the endowments can run into the millions of dollars, with that money often being used for frivolous spending that has no direct impact on education. Reed said some examples of that spending include installing lazy rivers on campus, flat screen TVs in in player locker rooms, and steep salary increases for college administrators.