In early 2025, we have much in the news about Federal education policy. While people focus on issues that might not matter much, they might be ignoring things that could significantly impact education in the United States, particularly in higher education, which is the focus of this blog post.
Abolishing the US Department of Education
The U.S. Department of Education, my employer for 30 years, was created in 1980. Many of the large programs in it, however, were created in 1965. I view the U.S. Department of Education as being a shell for education programs. People can move shells around; what matters most is what is inside the shell. The U.S. Department of Education has value mainly as a symbol. Education advocates focusing primarily on maintaining the U.S. Department of Education rather than its contents risk winning a battle only to lose a war.
Conclusion: The fear here is mostly fake.
Cap On Indirect Costs for Research
While universities are rarely for profit, they often turn their largest “profit” on research. The Federal government funds a large portion of research at universities. The National Institutes of Health (NIH) recently announced that they would place a cap on indirect costs of 15 percent.
Indirect costs are not directly related to the contract's goods or services but are necessary for the contractor to operate. Indirect costs include overhead costs, such as equipment, depreciation, and utilities. Indirect costs also include administrative costs, such as accounting and human resources. Indirect costs can also include providing vacation time, sick leave, and insurance.
The Chronicle of Higher Education reports that the average indirect cost rate for NIH’s grantees is 27 to 29 percent. The Chronicle indicates that the loss from NIH’s policy will be billions of dollars. The Association of American Medical Colleges, whose members would take a big financial hit, recently spoke out against this change in NIH’s policy.
Universities might be able to do some “accounting voodoo” to categorize some indirect costs as direct costs, but there will be limits.
Conclusion: The fear here is real, particularly if the entire Federal government enforces the cap.
Elimination of Grad PLUS and Parent PLUS Loans
The Federal government has multiple student loan programs. A family would typically start borrowing through the Federal direct loan program, but that program caps the amount of loans a family can take.
Parent PLUS loans are important to private colleges that tend to serve disadvantaged students. Parents of undergraduate students can borrow money through the Parent PLUS loan program after their child reaches the loan limit under the Federal direct loan program. The Parent PLUS loan program is likely essential at Historically Black Colleges and Universities, as many are private, and the families they serve are less likely to have the cash to pay the full price.
While research is often the most profitable activity for a university, graduate/professional education is likely the next most profitable. Grad PLUS loans are available to graduate students who exhaust the loans available in the Federal direct loan program. Absent Grad PLUS loans, many students would not enroll in graduate school. Private loans exist, but savvy students pursuing MBAs typically opt for these Federal loans rather than private loans. While the interest rates charged on Grad PLUS loans are high, the loans come with benefits, such as loan forgiveness upon death or total disability.
Conclusion: The fear here is real.
Alienating International Students
For decades, foreigners have viewed the U.S. as the crown jewel in higher education. Some U.S. universities use international students as a profit center. International students often pay the sticker price at U.S. colleges; some universities even charge them an additional fee.
While insulting foreign countries is not a policy per se, it affects enrollment levels. During Trump’s first term, the number of students from China attending schools in the U.S. dropped. Just three weeks into Trump’s second term, stores in Canada are promoting that they do not carry products made in the U.S.
At this rate, I predict that foreigners will change their views about attending a U.S. university and that the enrollment of international students will decline. There is also a risk that the Trump administration will limit visas from certain countries, e.g., the “Muslim ban.” International students might be unable to come to the U.S. even if they want to.
Conclusion: The fear here is real.
Increasing Tax On Endowments
Universities rely on endowments to help cover operating and capital expenses. Trump imposed a tax on some university endowments during his first term. The revenue from these taxes helped cover the loss of revenue from tax cuts.
Now there is a proposal to increase the tax on endowments.
Conclusion: The fear here is real.
Taxing Scholarships
Only about 12-14 percent of families pay the sticker price to attend college in the U.S. Most students receive some form of financial aid. Now we have a proposal to tax scholarships. This tax would increase the cost to a family of attending a college. Families will recognize this cost and make decisions accordingly, including the decision to not go to college.
Conclusion: The fear here is real.
Cumulative Effect of Trump Federal Education Policy Is the Biggest Problem
The biggest danger is that all of these changes take place. Higher education survived the tax on endowments during Trump’s first term.
To survive the cumulative effect of these changes, universities will likely need to reconfigure how they operate. Universities, and highly selective universities in particular, have become increasingly generous with providing need-based scholarships using their own funds over the past decade. This generosity may stop, and the U.S. risks becoming a class-based society with little opportunity for upward mobility. Universities typically lose money on their undergraduate college and rely on funds from other aspects, such as research, graduate/professional schools, and endowments to help fill this gap.
Educ8Fit Consulting
The author of this article, Jim Houser, worked at the U.S. Department of Education for thirty years. He began his career as an education policy analyst in the Reagan White House budget office. He ended his Federal career as a higher education policy analyst in the Office of the Secretary at the Department in 2020, towards the end of the first Trump administration.
Jim Houser is currently an independent educational consultant who guides students and families through the college and graduate/professional school application process. Please get in touch with him at Educ8Fit Consulting at either Jim@Educ8Fit.com or College Admission Counseling | Educ8fit Consulting | United States, contact for a free 30-minute consultation.
コメント