Less than a month ago, the Supreme Court declared President Joe Biden’s 2022 student loan forgiveness plan unconstitutional, but Inez Stepman of the Independent Women’s Forum believes that Biden still achieved what he wanted for that year. Stepman argues that young Americans seeking relief from their debt burden turned out to vote for a party that promised student loan forgiveness. According to Stepman, this political reality is one of the reasons behind her recent proposal to fund student loan forgiveness by taxing universities.
Stepman acknowledges that it is not surprising that the Left wants to provide free college education at the expense of taxpayers, as universities are one of their strongholds. She believes that the Left is good at rewarding their friends and punishing their enemies, including wealthy conservatives who donate to institutions that are hostile to their values. However, Stepman also argues that the Right is wrong to view the issue of student debt as though it is still 1983. Tuition costs have risen at almost five times the rate of inflation since the early 1970s, making it nearly impossible for an 18-year-old to work their way through college unless their parents can afford to pay the full tuition or they receive substantial financial aid from the university.
Stepman attributes the distorted market for higher education to federal student loan programs that began in the 1960s. Universities have been able to raise tuition prices in step with rising student loan guarantees, as there is no market mechanism to check them due to the existence of government-backed loans. Additionally, more and more jobs now require a bachelor’s degree, further reinforcing the notion that college is necessary for success in life.
Stepman proposes taxing universities as a means to fund student loan forgiveness. She argues that the vast wealth and income enjoyed by universities, much of which is tax-free, is partly a result of decades of government-guaranteed student loans. One of her key proposals is to raise the tax on university endowments, which currently stands at 1.4 percent. She believes that taxing the wealthiest universities will generate a significant amount of money to fund loan forgiveness benefits. Stepman also suggests taxing non-tuition revenue and requiring universities to pay property taxes on the land they own. She believes that states could independently address the property tax issue and use the revenue for state-level loan forgiveness pools.
In addition to taxing universities, Stepman recommends targeting wasteful university research spending and linking future taxation on universities to trends in student loan debt. This approach aligns with proposed GOP solutions to the student debt crisis, such as the Federal Assistance to Initiate Repayment (FAIR) Act, which offers scaled-back relief for some borrowers based on their income. Stepman hopes that lawmakers will build on the 1.4 percent tax on private university investment income in the Tax Cuts and Jobs Act.
Stepman strongly believes that universities should be held accountable for their role in the student debt problem and should be part of the solution, whether they like it or not. She argues that they have greatly benefited from the problem and should not be tax-exempt entities. By taxing universities, Stepman hopes to provide relief to young people burdened by student loan debt and make higher education more affordable for future generations.
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