Dive Brief:
- Berea College, a liberal arts institution in Kentucky, is the wealthiest American college exclusively serving low-income students. But under the new tax law, it must now pay a 1.4 % tax on its billion-dollar endowment that funds tuition-free education for its 1,600 students, according to The New York Times.
- In a sprint to enact tax reform before year’s end, Senate majority leader Mitch McConnell (R-KY) was unable to secure a last-minute exemption for Berea College. Democrats blocked the exemption on grounds it showed favoritism to one school in the Senate leader’s home state.
- The new tax requirement was intended to pressure wealthy colleges into using their vast endowments on more student financial aid. President of Berea College, Lyle Roelofs, lamented the partisan infighting, and said that his institution would have to accept fewer students as a result of the new law.
Dive Insight:
The growing divide between rich and poor on college campuses is igniting an important conversation about education and social mobility. For colleges, educating lower-income students is costly and there’s little incentive to do so. Instead of finding ways to cut costs, some colleges are opting to enroll fewer poor students.
A study by the Equal of Opportunity Project found that 38 elite colleges enrolled more students from the top 1% of household incomes than the bottom 60%. Many other studies have found similar results. Across the board, even at flagship public universities, the number of low-income college students is shrinking.
This troubling trend can have serious consequences for American economy. Institutions like Berea College should be uplifted for their commitment to social mobility and contribution to American dream. The new tax proves that colleges are not safe from partisan Congressional feuding, and that schools must do a better job promoting their contribution to the common good.