Weekly Market Update

WHAT THE GOP'S PROPOSAL TO OVERHAUL THE TAX CODE MEANS FOR HIGHER EDUCATION

Thursday, December 21, 2017

Republicans backed away from some of the most controversial education proposals in their finalized bill Friday, leaving in place a school supply deduction for teachers and breaks for student borrowers. The final bill allows individuals to deduct up to $2,500 per year in student loan interest and retains the current selection of higher education tax credits. Teachers can continue to deduct up to $250 per year in supplies, and employees can still receive tuition without claiming it as income. For colleges and universities, the final legislation also axed a House provision that would have ended interest-free bonds that many private colleges use to fund campus construction. However, the bill restricts the ability of taxpayers to deduct state and local taxes from their federal taxes, limiting the deduction to $10,000. Since this increases the federal tax burden on individuals, higher education advocates worry that states, counties, and school boards will have a tougher time raising money for schools that depend on state and local tax revenues. The final legislation also curtails advance refunding bonds, which universities rely on to refinance debt at lower interest rates, and it includes a 1.4% excise tax on endowment-derived net investment income for schools with endowments exceeding $500,000 per full-time student, expected to affect around 30 institutions.

In Other News

  • Some students turned their backs on a speech by Education Secretary Betsy DeVos at University of Baltimore's fall commencement on Monday, while others applauded the controversial Cabinet member.
  • The Missouri Department of Higher Education introduced a new plan for student aid distribution, based on enrollment and graduation goals for various academic programs. The goal of the new model is to address concerns that the current system is too lenient with colleges and universities.
  • Dallas Federal Reserve Bank President Robert Kaplan said on Friday that the narrowing gap between long-term and short-term U.S. interest rates reflects expectations of slow growth and could impact the pace of rate hikes.
  • Students beginning their first semester at the University of Toledo next year will have locked-in tuition, guaranteeing no tuition increases for four years.
  • California public colleges and universities are facing building construction and renovation expenses approaching $50 billion over the next five years, driven by the urgent need to maintain and expand their campuses to make room for more students and upgrade their aging buildings.
  • Carnegie Mellon University's endowment returned 13.2%, or $227.04 million, for the fiscal year ended June 30th, the university stated in a financial update last Wednesday.

Rating Agency Update

  • Moody's affirmed University of Louisville Foundation's A3 rating. The outlook is negative.
  • Moody's downgraded University of Louisville's rating from A1 to A3. The outlook is negative.
  • Moody's affirmed Florida Agricultural & Mechanical University's Baa1 rating. The outlook is revised from negative to stable.
  • Moody's affirmed St. Joseph College's Ba1 rating. The outlook is revised from negative to stable.
  • Moody's assigned Aa3 to Montana State University's Series 2018E Facilities Improvement Revenue Bonds. The outlook is stable.
  • Moody's assigned Baa2 to Illinois State University's Series 2018A Auxiliary Facilities System Revenue Bonds. The outlook is negative.
  • Moody's affirmed Concordia College's Baa1 rating. The outlook is revised from negative to stable.
  • Moody's affirmed Lincoln University's Baa3 rating. The outlook is stable.
  • Moody's assigned Aa3 to Colorado State University System's Series 2017E&F. The outlook is stable.
  • Moody's affirmed St. John's University's A3 rating. The outlook is stable.
  • S&P affirmed Moravian College's BBB+ rating. The outlook is stable.
  • S&P assigned AA- to University of Oregon's Series 2018A General Revenue Bonds. The outlook is stable.
  • S&P assigned BBB+ to Idaho College of Osteopathic Medicine LLC's Series 2017A&B Revenue Bonds. The outlook is stable.
  • S&P affirmed Association of American Medical College's A+ rating. The outlook is stable.
  • S&P lowered Ursinus College's rating from BBB+ to BBB. The outlook is stable.
  • S&P raised Fisher College's rating from BBB to BBB+. The outlook is stable.
  • S&P assigned AAA to Yale University's Series 2017C Revenue Bonds. The outlook is stable.
  • S&P affirmed Wilkes University's BBB rating. The outlook is stable.
  • S&P affirmed Crowder College's A- rating. The outlook is stable.