When HNW Philanthropy Meets Student Debt Woes - Congress Mulls Legislation

Tom Burroughes, Group Editor, June 5, 2019


Heavy student debt is a big political and economnic issue in the US. And philanthropists have made big gifts to education establishments - should some of this money ease students' debt pain? Legislators are looking at the issue.

Lawmakers in Washington DC are reportedly mulling a bill that might exclude post-graduation scholarship grants from gross income in the same way that scholarships are excluded. The measure is designed to ease some of the cost pain. This highlights how philanthropy and education can and should intersect.

Legislation being considered would, if enacted, mean that donors could make gifts to be used for scholarships to pay off acquired student debt. It lifts the fear that qualified recipients face tax consequences. 

With tuition costs and student debt running into the hundreds of billions of dollars - and becoming major political as well as economic and education issues - the idea of harnessing philanthropy is interesting. Billionaires have in recent years - as chronicled by Family Wealth Report - made big gifts to higher education institutions. (See a case here and here.) Donors include former New York mayor and media tycoon Michael Bloomberg, for example. But as the legislative initiatives suggest, an urgent channel for philanthropy could be students’ loans. 

On March 6, 2019, Senator Gary Peters (D-MI) introduced a bill that would exclude post-graduation scholarship grants from gross income. That bill is called Workforce Development Through Post-Graduation Scholarships Act of 2019. The bill is co-sponsored by Senator Shelley Moore Capito (R-WV). According to the website: "This bill modifies the requirements for calculating taxable income to exclude post-graduation scholarship grants from gross income in the same manner as scholarships are currently excluded."

In 2018, a bill along the same lines was introduced by Representative Darin LaHood (R-IL) - H.R. 6486, Workforce Development Through Post-Graduation Scholarships Act of 2018. It is in front of the House Ways and Means Committee, according to a report by Forbes.

(Editor's note: We have written about some of the big gifts made to higher education institutions; some of these involve donors having their names emblazoned on the side of buildings and can, sometimes, appear to be rather egotistic, even if that's not intended. Perhaps using some of these vast sums to ease the debt woes of students might be a more effective way of doing good. Of course, a retort may be that students taking courses in subjects that might not have much appeal to employers, and which are expensive, should not be rescued from the fianncial consequences of their own choices. It is also worth arguing whether the whole higher education establishments of the US and certain other countries have become dangerously bloated, with student debt resembling the status of a bubble.)

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