Tax-Exempt Borrowing at Postsecondary Institutions: How Reforming Tax-Exempt Bonds Can Improve Student Outcomes and Save the Government Money

Click here to read the full report: Tax-Exempt Borrowing at Postsecondary Institutions: How Reforming Tax-Exempt Bonds Can Improve Student Outcomes
and Save the Government Money

Click here to download the Report Summary

NEW REPORT: Young Invincibles Finds that Tax-Exempt Bonds Issued by Postsecondary Institutions Result in Excess Government Spending, Calls on Congress to Support Cost-efficient Alternative and Reinvest Savings in Pell Grants

For far too long, the federal government has done the right thing in the wrong way. The federal government spends billions of dollars in forgone revenue each year to support the construction and renovation of dormitories, athletic facilities, and other capital projects that many colleges and universities fund using tax-exempt bonds. Unfortunately, this practice is inefficient, costing the government more than the amount postsecondary institutions save by using tax-exempt bonds. The design of tax-exempt bonds also makes it difficult to ensure that one hundred percent of the federal subsidy goes to support students and schools meeting basic quality standards. We propose the policy solutions below as a way to make bonds work better for schools, students, and the federal government. Please contact Jennifer Wang, our Policy and Advocacy Manger, at as we would love to discuss our findings with you in more detail.

Our findings …

  • Tax-exempt bonds issued by postsecondary institutions could cost the federal government nearly $18.2 billion between 2013 and 2017.
  • Tax-exempt borrowing is poorly targeted. Only about 80% of the federal government’s expenditure on tax-exempt bonds benefits state and local governments. High marginal-tax rate investors capture the remaining 20%.
  • Under current policy, postsecondary institutions can issue tax-exempt bonds regardless of how well they are preparing their students for academic and professional success.
  • Redesigned tax credit bonds could deliver the same benefit to schools at a lower cost to the federal government than using tax-exempt bonds.

Our Recommendations…

Redesign and improve the way the government helps schools borrow. The federal government should replace tax-exempt bonds for postsecondary institutions with redesigned direct pay tax credit bonds. These redesigned bonds will allow the government greater control over who benefits from federally subsidized borrowing. Tax-credit bonds will make the government’s cost equal to, but not greater than, the savings enjoyed by schools. This change will save the government and taxpayers money.

Eliminate subsidies entirely to extremely low performing institutions.

Schools that do not meet basic quality assurance standards in the areas of Pell freshmen enrollment, graduation rates, and student loan default rates should not have access to federally subsidized borrowing until they do the work to get better.

Invest Savings into the Federal Pell Grant Program.

Studies show that grants increase a student’s likelihood of completing college more than loans. A student’s level of unmet financial need also impacts college completion rates. As a program that addresses both of these issues, the Pell Grant Program is an ideal destination for government savings and a strong driver of educational advancement.

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Comments on the Proposed Rule on Program Integrity: Gainful Employment

U.S. Department of Education
Attention: Ashley Higgins
1990 K Street NW
Room 8037
Washington, DC 20006-8502
Filed via on May 27, 2014

Re: Comments on the Proposed Rule on Program Integrity: Gainful Employment
[Docket ID ED–2014–OPE–0039]

To whom it may concern:

Young Invincibles is a non-profit, non-partisan organization that works to expand
economic opportunity for young people ages 18 to 34. We thank you for the opportunity to comment on the Notice of Proposed Rulemaking regarding the gainful employment (GE) regulation (NPRM).

Young Invincibles represented students throughout the gainful employment negotiated rulemaking process. Though we appreciate the years of effort that the Department of Education (the Department) has put into crafting a GE rule to protect students from predatory schools, the draft rule is too weak to achieve this goal. Many programs that leave students with enormous amounts of debt and few job prospects will continue to receive federal financial aid under the proposed language.

We were further disappointed when the Department issued a weakened draft regulation that made several adjustments proposed by the for-profit college industry at the expense of students and taxpayers. Worse, the draft rule appears to lack any of the recommendations called for by a coalition of more than 50 organizations that work on behalf of students and college access, veterans, consumers, and civil rights. The
Department now has a rare opportunity to learn from the experiences of actual students who have been through these programs and ensure that taxpayer dollars do not continue to benefit failing schools. For these reasons, Young Invincibles urges the Department of Education to protect students who attend gainful employment programs and taxpayers who pay for them by promulgating a strong rule. The rule should:

1. Provide relief for students in programs that lose eligibility
2. Strengthen core accountability standards and close loopholes
3. Fix the glaring problem with the certification requirement
4. Limit enrollment in poorly performing programs until they improve
5. Strengthen consumer information and disclosures

Click here to download the full comment!

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Turning 26? Here are your options to get covered!


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Report: Young Adults More Likely to Qualify for Special Enrollment

Young adults are more likely to experience life events that trigger special enrollment periods than any other age group in the United States.

Read our full report here:

Young Adults More Likely to Qualify for Special Enrollment

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Issue Brief: Young LGBTQ Adults and the ACA

How does the Affordable Care Act impact young LGBTQ adults? You’d be surprised!

Click here to download the full brief.

When you’re finished getting all the details, check out our infographic!

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Investing In Young America: What’s In The President’s Budget

On March 4, 2014, the White House released the President’s budget for 2015. We have detailed the parts of the budget that most affect young adults and our economic future, analyzing funding for youth jobs, higher education and health care.

Click here to read Investing In Young America: What’s In The President’s Budget.

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Automatic for the Borrower: Repayment Based on Income Can Reduce Student Loan Defaults

Click here to read: Automatic for the Borrower:

Repayment Based on Income Can Reduce Student Loan Defaults.

Click here to read a Report Summary

This paper is the culmination of work by a consortium of five student-aid advocacy and research organizations – HCM Strategists, the Institute for Higher Education Policy, the National Association of Student Financial Aid Administrators (NASFAA), New America, and Young Invincibles – with assistance from the Association of Public and Land-grant Universities, Committee for Economic Development, the National Campus Leadership Council, and the National College Access Network. The proposals contained in this paper reflect research conducted by and discussions between members of the consortium. However, not all proposals included in this paper are supported by all groups in the consortium. Financial support for this research was provided by a grant from the Bill & Melinda Gates Foundation through the Reimagining Aid Design and Delivery (RADD) project.

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Comments Regarding CFPB’s Advanced Notice of Proposed Rule Making – Debt Collection (Reg F)

February 28, 2014

Consumer Financial Protection Bureau
Attention: Monica Jackson
Office of the Executive Secretary
1700 G Street NW
Washington, DC 20552

Re: CFPB-2013-0033-0001, Advanced Notice of Proposed Rule Making – Debt Collection (Regulation F)

Dear Ms. Jackson:

Young Invincibles (YI) appreciates the opportunity to comment on the Consumer Financial Protection Bureau’s (CFPB) Advanced Notice of Proposed Rulemaking (ANPR) on debt collection (Regulation F). We are a non-profit advocacy organization working to advance economic opportunities for young adults 18 to 34 in the areas of higher education, jobs, and health care.

Recently, a young woman named Cara from Florida wrote to us about her challenges with debt collection. She graduated from the University of Miami with a degree in electrical engineering. Several unforeseen events led her to default on her student loans. For eighteen months, Cara tried everything she could to rehabilitate them. She wrote to debt collection agency after agency to no avail. Agencies sold her loans back and forth several times, and when she tried to contact them to sort things out, she told us that the debt collectors refused to respond to her requests or give her any information. When Cara was six months pregnant with her first child, a collection agency started garnishing her paychecks. When Cara contacted YI, she barely had any money to support her family or feed her baby. The collection agency still refused to return her calls or letters. She tried to buy a home for her new family but the mortgage company denied her mortgage because of her credit. She feels powerless because she cannot take care of her aging parents or even open a simple checking account. Cara feels like a prisoner to her loans.

This is one borrower’s story, but it illustrates how debt collection practices can make a trying situation for a young borrower much worse. And Cara is not alone. Currently, thirty-seven million student loan borrowers have outstanding balances that total over $1 trillion.[1] Over five million borrowers have at least one past due student loan account, with a whopping $85 billion past due.[2] Student loan collection is a hefty portion of the debt collection industry: in 2011, a national trade association of collectors reported that student loan debts were among the most frequent debts on which collectors seek to recover from.[3]

[1] Young Invincibles, “College Affordability Facts,” (last visited February 28, 2014).

[2] Ibid.

[3] ACA International, 2011 Top Collection Markets Survey: For Period: Jan.1, 2010-Dec. 31, 2010 at 9 (2011), available at

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Request for Information To Gather Technical Expertise Pertaining to Data Elements, Metrics, Data Collection, Weighting, Scoring, and Presentation of a Postsecondary Institution Ratings System

January 31, 2014

U.S. Department of Education
Attention: National Center for Education Statistics
1990 K Street NW, 8th Floor
Washington, DC 20006

Re: Request for Information To Gather Technical Expertise Pertaining to Data Elements, Metrics, Data Collection, Weighting, Scoring, and Presentation of a Postsecondary Institution Ratings System

Dear Sir or Madam:

Last fall, Young Invincibles convened a group of Portland Community College students to discuss the need for better information about college choices. Ebony, a nineteen year-old, first generation student told us that she wished she had known more about how her schools’ graduates performed in nursing school as well as the workforce. Currently, no one can tell Ebony what proportion of Portland Community College Students successfully transferred and graduated from any institution, not to mention success rates in nursing school or workforce outcomes in the industry. With so much at stake, we must do more to help students like Ebony make informed decisions about their future.

For this reason, we appreciate the Department’s effort to equip students with better information through a Postsecondary Institutional Ratings System (PIRS). Done well, we believe that such a system can help students make informed choices and receive more value from their post-secondary investments.

However, the Department faces a daunting task on several fronts. First, the Department expects PIRS to assist consumers and hold institutions accountable. These two goals are very different and likely require different systems. Second, basing aid on ratings could unintentionally harm low-income students who face barriers to successful outcomes.

Third, the Department currently lacks the necessary data to make PIRS successful. Using the wrong data could render the system useless, or worse, counter productive. Fourth, the Department has set a very fast timeline for PIRS, giving it few opportunities to address the above challenges.

Finally, we feel it is important to note that information and incentives alone will not solve the problem of college affordability. States cut per-student higher education expenditures by an average of 28 percent between fiscal years 2007 and 2012, and in response, institutions hiked tuition an average of 27 percent. Any comprehensive solution for college affordability must address state disinvestment.

We hope the following comments from the student perspective will constructively contribute to your efforts. Specifically, we ask the Department for the following:

1. Incorporate data that students care most about: affordability, job placement rates, and the ability to pay back their loans.

2. Present information to students in a clear and understandable format.

3. Engage the public through an outreach campaign about the ratings system.

4. Distinguish between using PIRS for consumer information and institutional accountability.

5. Use the ratings to set a minimum performance bar for institutions to receive aid and reward institutions who successfully serve low-income students.

6. Establish privacy protections for student level data.

To read the full Comment, click here.

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Fact Sheet: Young African Americans and the Affordable Care Act

How does the Affordable Care Act impact young African Americans? You’d be surprised!

Click here to download the full fact sheet!

When you’re finished getting all the details, check out our infographic!

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