Unlocking $500 Billion: How Higher Education Reforms Could Transform Reconciliation Bills – Insights from Minding The Campus

With November elections behind us, Republicans now hold narrow majorities in the House and Senate. This shift sparks interest in reconciliation bills, which have their own benefits and drawbacks compared to regular legislation.

The big plus of reconciliation bills is that they can’t be filibustered. This means only 51 votes are needed to pass them in the Senate. So, with 53 Republican Senators, they can push through bills with just their support. However, these bills can only deal with budget-related issues like spending and taxes. This limitation likely excludes many Republican goals, such as reforms in higher education and other areas. Moreover, they can’t increase the deficit beyond ten years, which complicates efforts to make permanent tax cuts from the Trump era.

Interestingly, the world of higher education holds potential for saving money and generating revenue for these reconciliation bills. By targeting federal spending and reducing government involvement, Congress could uncover substantial savings—up to half a trillion dollars—while simultaneously improving the higher education system.

Cutting Higher Education Spending

One of the biggest areas for potential savings is student loans, which could save around $212 billion over ten years. Currently, the government loses about 19 cents for every dollar it lends. Phasing out federal student loans and shifting to private lending could not only save money but also enhance competition in the education market.

There are also specific programs that could be eliminated to save further:

• Eliminate Subsidized Loans: Eliminating this program could save about $14 billion over the next decade. These loans currently waive interest while students are in school, yet it’s argued they don’t significantly influence borrowing decisions.
• Scrap Grad PLUS Loans: This program allows graduate students to borrow more money than what they need, leading to excessive debt for some. Ending this program could save around $47 billion over ten years.
• Eliminate Parent PLUS Loans: This program is primarily profitable for the government but allows parents to rack up significant debt. Ending both Grad and Parent PLUS loans could lead to substantial savings.

In addition to cutting, there are a few other strategies for reducing federal spending in higher education:

• Ending overly generous repayment plans, like SAVE, could save hundreds of billions.
• Modifying or capping Public Service Loan Forgiveness could cut unnecessary spending.
• Adjusting income-driven repayment requirements could boost revenue without harming borrowers.

Raising More Revenue

Revenues can also be increased through reforms in tax credits and deductions related to higher education. Most of these programs don’t effectively improve affordability but rather benefit wealthier individuals.

• Eliminating tax credits like the American Opportunity Tax Credit could raise up to $148 billion over a decade.
• Ending the student loan interest deduction could generate another $29 billion.
• Taxing employer-provided educational assistance could add another $19 billion.
• Limiting deductions for donations to colleges may yield additional funds.
• Taxing university endowments more effectively could also raise revenue.

The new Congress has a chance to explore reforms in higher education that could drive down costs and create revenue, opening the door for significant budget reforms and financial relief.