As Republican lawmakers hustle this month to advance a “big, beautiful bill” to enact President Trump’s agenda, they are reportedly forging ahead with a hike in the endowment tax that a sliver of wealthy private colleges pay.
On Friday, details of potential endowment-tax changes emerged via Punchbowl News, Politico, and Bloomberg. The exact tax rates described in those news reports varied, but the proposed new system would be tiered, and only colleges with endowments valued at more than $750,000 per student would pay a higher tax rate. (Currently, colleges that have endowments valued at $500,000 or more per student — and meet certain other conditions — pay a 1.4-percent tax on endowment earnings. Fifty-six institutions paid the tax in 2023, according to the Internal Revenue Service.)
In one version of the newly proposed structure, reported by Punchbowl News, colleges with endowment values over $2 million per student — fewer than half a dozen — would pay a 21-percent tax rate on endowment earnings. Princeton and Yale Universities and the Massachusetts Institute for Technology could qualify for this bracket, according to an analysis by James Murphy, who leads Education Reform Now. Depending on how you calculate value, Stanford and Harvard Universities could fall into either this group or the one just below it.
The next group in the breakdown reported by Punchbowl News — subject to a 14-percent tax rate on earnings — covers endowment values between $1.25 million and $2 million per student, which could include a group of roughly 10 institutions like Amherst, Swarthmore, and Grinnell Colleges, and the California Institute of Technology.
Then there’s a third group in that proposal, covering endowment values between $750,000 and $1.25 million per student that would pay a 7-percent rate. That could include roughly a dozen institutions, such as Wellesley and Claremont McKenna Colleges and Washington and Lee University, and potentially the University of Pennsylvania — again, depending on how you calculate value.
In the tiered structure reported by Politico, the tax rates would be 10 percent for colleges with endowment values between $750,000 and $1 million per student, and 20 percent for colleges with values over $1 million.
Republican lawmakers see expanding the college-endowment tax as a way to raise revenue and cover tax cuts elsewhere. College leaders argue that increasing the tax rate would harm students by hampering institutions’ ability to offer generous financial aid, which often comes out of endowment earnings.
According to the National Association of College and University Business Officers, nearly half of colleges’ endowment spending in 2024 went to financial aid, with another 18 percent supporting academic programs and 11 percent paying for endowed faculty positions.
The American Council on Education wrote in a letter to lawmakers last fall that the endowment tax in general “undermines the teaching and research missions of the affected institutions without doing anything to lower the cost of college, enhance access, or address student indebtedness.”
Notably absent from these potential lists of taxed institutions is Columbia University, which has a $15-billion endowment but enrolls more than 30,000 students, putting it outside of the eligibility criteria. Columbia has been a prime target for the Trump administration in recent months as federal officials seek to leverage federal funding to force colleges to change policies and practices.
The proposed tax tiers reported on Friday would also leave out small colleges like Furman University, in South Carolina, which told The Chronicle this year that a double-digit tax rate on its $850-million endowment would severely curtail access for low- and middle-income students.
News outlets reported Friday that Republicans have not yet finalized their tax package and that specifics related to the college-endowment tax could change.
