How Professors Can Help Fund Student Loans
by Maria Minsker | Cornell University
Image courtesy of Flickr, a.mina
To maintain the loyalty of the youth vote that arguably got him elected in 2008, President Obama has dedicated a lot of time to trying to convince Congress to extend the 3.4 percent student loan rate and not allow it to grow to a whopping 6.8 percent in July. But even if Congress approves the extension of the low rate, the question of how to pay remains.
The legislation currently in the works proposes that certain S Corporation partner earnings are taxed, meaning service businesses with three or fewer professionals — including lawyers, doctors, accountants, engineers and professionals in the performing arts, sports, consulting and financial management — earning over $200,000 would be taxed.
In a recent installment of NPR’s Diane Rehm show, one of President Obama’s leading domestic policy advisers, Mark Zuckerman, admitted that the president has yet to figure out a way to afford the $6 billion price tag on a one-year Stafford Loan interest rate freeze, but said that finding the money isn’t the issue.
“What [Obama] wants to do is negotiate with Congress to pay for that. But this president has been very fiscally responsible when it comes for paying for higher education,” Zuckerman said. “We have billions of dollars in the budget that we’ve set aside to pay for the initiatives that we’re planning to initiate. So, we’re happy to negotiate with Congress over the offsets to fully pay for this. That really isn’t the issue.”
College students and tax-payers likely disagree with that statement.
Though the details of how to pay for the freeze are yet to be finalized or approved, one thing is clear. As in the past, colleges are not being held accountable for the extremely high tuition costs or the efforts that are required (on the part of the government and of individuals) to meet them.
In a Forbes article, contributor Dean Zerbe explains that though some colleges, like the University of the South, have cut or frozen tuition, few have followed suit.
“There is nothing in the proposed legislation that requires colleges and universities to do anything — nothing to control tuition costs; nothing to increase endowment spending; nothing to forgive loans,” Zerbe writes, “and when it comes to colleges taking any responsibility for the massive student loans – plenty o’ nuthin.”
To hold universities and university officials accountable, the Joint Committee on Taxation has proposed eliminating a loophole that allows college professors, administrators and presidents to send their children to school for free or at reduced costs. Why do these people get such a generous discount for their children on top of the hefty salaries they already receive from universities? Zerbe believes there’s absolutely no reason.
Perhaps even more troubling is that not only do they get this tuition cut for their children, but they also receive this benefit tax-free.
“By contrast, if Wal-Mart or Exxon decided to give the children of its employees $1000 to help pay for college tuition – that $1000 would be subject to federal income tax,” Zerbe explains.
If this loophole were to be eliminated, the government could raise approximately $1 billion —money that could certainly be put towards covering the cost of keeping loan rates low.
Maria Minsker is a junior English and communication double major at Cornell University. She is an aspiring journalist who loves to travel, try foreign cuisines and watch reruns of old sitcoms.
