The false argument against higher education funding

The false argument against higher education funding
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Chances are you’ve heard this accusation: For-profit schools live exclusively on federal funding.

Here’s the truth.

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Such statements ignore the demographics of these schools’ students — large numbers of single parents, first-generation students and minorities. The facts are that in most for-profit colleges, over 90 percent of students enrolled are eligible for federal financial aid based on need.

 

The higher education community is now engaged in a heated debate about whether the current tax benefits for college students should be eliminated as part of tax reform. The House Republican plan says they should. Many in higher education disagree.

But one thing becomes very clear in this debate. Middle and upper income students enrolled — and graduating — from traditional colleges and universities have long benefited from significant financial support through tax laws, outside of federal student financial aid. Many of the tax benefits help students who otherwise would not qualify for federal assistance because of their family’s income.

The current tax debate prompts a deeper look at the entire annual federal support for higher education. And the results are surprising. In 2015-16, total federal aid in grants, loans and veterans/military benefits amounted to $139.5 billion. Proprietary colleges and universities receive approximately 16 percent of these funds, or $23 billion. If one were to subtract the very popular GI Bill and other military benefits so popular with our veterans pursuing career education after active duty, the total appropriations going to proprietary colleges and universities would be $18.9 billion.

In 2016, the Pew Research Center reported that the federal government also provided $21 billion in federal tax credits for higher education. Most of this money goes to middle- and high-income students and families who itemize their deductions (Low-income families would not benefit from such itemized tax returns). But to be credible — and cautious — we should assume that 10 percent ($2.1 billion) of this tax benefit is used by students enrolled in our nation’s proprietary schools.

In total, then, the total direct and indirect support for higher education is $160 billion annually. Of this amount, proprietary school students receive $26.1 billion (approximately 16 percent). Studies show that a significantly larger number of students at proprietary schools use federal financial aid than those attending public schools: 25 percent more in less than 2-year programs; 31 percent more in 2-year programs; and 23 percent more in 4-year programs.

Assuming an average of 25 percent higher dependence on financial aid, it becomes clear that the total federal support for higher education to the proprietary sector is just about right.

We currently have 10 percent of all students enrolled in postsecondary institutions. Considering the economic demographics of our students we should use about 12.5 percent of all federal support.

The most recent data shows that with no operating subsidies of any kind our students use 16 percent of all federal funds. That seems just about right. If anything it is low when one considers they attend schools where tuition reflects the total cost of the education because there are no public sector operating subsidies.

As we begin consideration to reauthorize the Higher Education Act, it is time to end this false argument that the proprietary sector gets too much public sector aid. The numbers suggest otherwise.

Steve Gunderson is a former eight-term Republican U.S. representative from Wisconsin and currently serves as president and CEO of the Career Education Colleges and Universities.