The arrival of the coronavirus pandemic resulted in college and university campuses having to begin shutting down in March 2020. Many were able to do so without suffering painful losses of valuable forms of income derived from fees associated with tuition, dormitory living, provision of food services, and a variety of activities, such as rental of campus property in the summer and sales of tickets and concessions for football and basketball games. Not every institution was so fortunate, however, and have had to offset reductions in revenue by laying off personnel involved in teaching and administration. Worst of all, some smaller schools without endowments are confronted with the danger of having to close their doors permanently.
One means of offsetting a decline in revenue was to substitute in-class learning with instruction that is provided online. Schools that already offered courses in that manner were able to continue doing so without having to make any major adjustments. Institutions that were not in a similar position had to convert a great many courses that formerly were furnished exclusively in classrooms. Not all students and their families believed that these new products were valuable substitutes and they consequently have been unwilling to pay for them.
Another consideration is more of a downstream nature. Since March 2020, many students throughout the U.S. at elementary and high school levels have not been in classrooms for the latter part of the 2019-2020 academic year and almost all of the 2020-2021 school year. Prior to the pandemic, some students admitted to college typically are academically underprepared and must be provided with remediation services. Students who already were in their third year of high school in spring 2020 are graduating in virtual ceremonies either this month or will do so in June. Many of them may be even less prepared to enroll in college than previous cohorts of students that did so before the pandemic struck the nation.
Student Loan Tax Elimination Act
A chronic problem for many students and their families is mounting educational debt. Individuals at the postgraduate level who attend MBA programs, law chools, and medical schools may assume mountains of such debt, but they are in a favorable and enviable position to move into high paying jobs upon graduation. Less fortunate are those students who complete their formal education at the baccalaureate level with majors that lead to few, low remunerative forms of employment. Even worse off are students who drop out of school without ever completing a degree program, but who still managed to borrow substantial amounts of money for education purposes.
A common aspiration expressed by many Democrat candidates who competed to be nominated by their party for the 2020 presidential election was to address the problem either by forgiving all or a portion of this educational debt. A step in that direction is a bipartisan bill introduced on March 18, 2021 in Congress, the Student Loan Tax Elimination Act (S. 847), a measure designed to eliminate origination fees on all federal direct student loans disbursed on or after March 27, 2020. Presently, by taking as much as 4% of the proceeds of a federal student loan, a strong influence is placed on students regarding their decision whether to pursue and complete a degree program.
Similar legislation was introduced on June 3, 2019. Supporters of the bill view origination fees as reducing the amount of loan dollars disbursed to borrowers by 1% percent for Direct Stafford Loans and 4% for Direct PLUS Loans. This levy is considered to create confusion among students and increase costs for borrowers, who are responsible not only for repaying the withheld amount, but also the interest accruing on that amount. The result can be hundreds or thousands of additional dollars owed, depending on loan type, loan amount, and program length.
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