Donald Trump is still weeks away from taking the oath of office as president of the United States, but college leaders are already bracing for the potential financial impacts of his second term on their institutions. For example, one of Trump’s first acts just days into his first term in 2017 was to sign an executive order banning visitors to the United States from seven predominantly Muslim countries, a move that precipitated turmoil in international-student enrollment. Some colleges have already begun asking students from other countries to return to campus before Trump is inaugurated on January 20.
What can colleges expect this time around? Experts are cautious about speculating too far ahead, and leaders at several universities declined to comment for this story. But based on Trump’s campaign rhetoric and past legislative proposals popular with Republican lawmakers, who will control both houses of the U.S. Congress in the new term, they see some areas where the president’s agenda could affect higher education’s bottom line. The most obvious possibilities include fallout from looming tax reform, adjustments to the Pell Grant, and changes big or small to the Education Department, including its possible demolition. But many other policy decisions could have unexpected or unpredictable effects on college finances.
Many colleges are already facing a financial pinch due to demographic shifts and other pressures, and here are new financial complications experts said the second Trump administration could bring.
Lawmakers could pay for tax cuts by raising taxes on colleges.
One thing is certain about the new year: Tax reform is coming. Many of the tax cuts enacted by President Trump in 2018 during his first term will expire in 2025, and he will no doubt want them extended.
“That’s going to come with a cost,” said Liz Clark, vice president for policy and research at the National Association of College and University Business Officers. “We fully expect that lawmakers are going to be looking for offsets to help pay for those tax cuts. So it is possible that they may look to some of the existing tax provisions that impact college students and colleges and universities as well.”
Expanding the tax on college endowments is one possible way to help pay for extending the Trump tax cuts. The current tax targets endowment-investment income and was introduced in 2017, during the first Trump administration. It applies only to private institutions with endowments of $500,000 per student or more, so only about 50 institutions are subject to it. “There are a lot of ways they could expand it,” said Brian Flahaven, vice president for strategic partnerships at the Council for Advancement and Support of Education, known as CASE. Congress could lower the threshold to bring in less-wealthy colleges, for example, or include public colleges, which are currently exempt.
Flahaven and his CASE colleagues think the endowment tax is a terrible idea and would like to see it repealed rather than expanded. According to CASE’s annual Insights on Voluntary Support of Education survey, about 40 percent of gifts to college endowments in fiscal year 2023 were earmarked for financial aid, the plurality among all such specific purposes. Making more colleges subject to the endowment tax, Flahaven said, “certainly wouldn’t be helpful if you’re trying to keep down college costs and provide more access to institutions.”
Other areas that could be in lawmakers’ sights include colleges’ ability to offer their employees tax-free tuition benefits and their ability to access tax-exempt bonds to raise money for construction projects, Clark said.
“Legislation expires, but ideas don’t,” she added, and both have been proposed in the past.
Pell Grants could be in danger — or they may be expanded.
The Pell Grant is a linchpin of college access for millions of Americans and an important source of revenue for colleges, but its fate may be unpredictable under a second Trump administration.
On the one hand, the president-elect has asked billionaire businessmen Elon Musk and Vivek Ramaswamy to head a new federal Department of Government Efficiency to slash government spending, and Pell Grants may be on the chopping block. In an editorial in The Wall Street Journal last month, Musk and Ramaswamy wrote that they planned to cut costs in part by targeting the more than $500 billion in federal expenditures that are not currently “authorized” by legislation but are funded year to year by congressional budget resolutions.
Among those unauthorized programs: the more than $22 billion spent on Pell Grants in fiscal year 2023.
On the other hand, Pell Grants help millions of Americans — all of them congressional constituents, many of them voters — afford college and are the little-noted foundation of the free-college programs that have mushroomed across the country. Some experts believe that the Pell Grant program may even be on the verge of expanding through so-called Workforce Pell.
Conservatives may not be avowed fans of higher education in its more intellectual guise, but work-force training enjoys strong support across the political spectrum. Last year, a bipartisan bill to expand the Pell Grants to cover students who want to enroll in shorter, noncredit programs for jobs such as welding, failed to pass, in part due to concerns over how to pay for it. Currently, Pell Grants only apply to for-credit courses or noncredit courses that last as long as 600 hours. “We think that’s not fair and doesn’t align with current expectations of reality from employers or students,” said Nate MacKinnon, executive director of the Massachusetts Association of Community Colleges. “Maybe having single-party control will allow us to finally see some action on that really important topic.”
The passage of Workforce Pell soon is a good bet, said Charles L. Welch, president of the American Association of State Colleges and Universities, known as AASCU, a membership organization for regional public universities. Workforce Pell could bring a flood of new students to community colleges and, ultimately, into the pipeline for the four-year access institutions that AASCU represents.
Welch is also more sanguine about the future of Pell Grants, generally, despite talk of massive cuts to government spending. “Among many policymakers of both parties, higher education is unpopular,” he said, “but their local campus is typically popular with them.” While huge cuts to Pell funding may be unlikely, he added, so are big increases.
Trump doesn’t have to eliminate the Education Department to cause significant financial disruption.
Trump has spoken repeatedly about eliminating the Education Department. If he were to follow through, it could cause disruption across the entire sector, and significant financial impacts. Even if the department remains intact, major policy changes, such as cutting programs in the name of government efficiency, could have serious financial repercussions.
Before anyone panics, eliminating the Education Department “is not a magic-wand activity,” said Andrew Koricich, a professor of higher education at Appalachian State University in Boone, N.C., and executive director of the Alliance for Research on Regional Colleges. “You still need congressional approval to eliminate a cabinet agency, and I don’t think we can just assume that, on the very narrow majorities in both chambers, there are just people who are going to sign up to eliminate that department.”
Lawmakers may hesitate to fold the Education Department because it administers important functions, among them helping students pay for colleges and overseeing student-loan payments. If the department were to go away, Koricich said, those functions would have to be moved to other federal agencies, or, in the case of student loans, possibly back to the private sector. That process couldn’t happen without disruption for students, families, and institutions. Those disruptions would likely most harm those least able to withstand them, he added, such as low-income learners with few safety nets.
If the department remains intact, the administration still can trigger significant financial effects through policy. Trump has nominated Linda McMahon to be education secretary, and her priorities are still unclear. The department administers a host of grant programs that subsidize learners and institutions and could run afoul of cost-cutting measures. But, again, the dollars that flow from these government-spending programs could have sharp economic consequences in lawmakers’ home districts.
Take the Gaining Early Awareness and Readiness for Undergraduate Programs, or GEAR UP, for one example. The federal program is designed to increase college-going rates in low-income school districts and has served more than 500,000 elementary and secondary students in 36 states at a cost of more than $380 million in fiscal year 2023. The GEAR UP program based at Appalachian State is funded by a $35-million grant over seven years from the Education Department, but it’s not just dollars. “That is hiring folks in counties throughout western North Carolina,” Koricich said. “So if those grants get cut, there are a lot of jobs that are connected to that, but then there’s also a lot of work that programs like GEAR UP do that there’s not a quick and easy replacement in a lot of states or in local municipalities. So it’s either states have to step up or those programs disappear.”
Trump could create unbidden financial effects on colleges … or opportunities.
Changes to the tax code, Pell Grants, or the Education Department could all affect colleges’ finances, but the most unpredictable changes could come from policies that have nothing to do with education per se. If the Trump administration enacts tariffs against foreign goods, as vowed, unanticipated price increases could spike costs in construction or technology. The planned appointment of Robert F. Kennedy Jr., who has spread anti-vaccine conspiracy theories and criticized the medical industry, to head the U.S. Health and Human Services Department could signal changes in research funding. If the president-elect follows through on campaign rhetoric about cracking down on immigration or deporting entire families with mixed immigration status, the human costs could be accompanied by enrollment drops for colleges.
About a third of the undergraduates at Dominican University of California, a small private college in San Rafael, just north of San Francisco, are Latino. College leaders don’t know how many of their students are undocumented or may have family members who are undocumented, because the university doesn’t collect that data, says Nicola Pitchford, the president. “But certainly we’re hearing anxiety,” she said. “We’re trying to focus on the things we can do something about and making sure that the immigrant and immigrant-adjacent population here feels supported and knows what resources are available in the community as well as on campus.”
There are, of course, scenarios in which a second Trump administration makes relatively little difference to a college’s budget. Fewer than 2 percent of the students at Wofford College, a private institution in Spartanburg, S.C., come from overseas, said Christopher L. Gardner, the chief financial officer (and no relation to this writer). Only 20 percent of this year’s incoming class receive Pell Grants. Since the college’s endowment is a modest $485 million, Gardner thinks an expanded endowment tax would be unlikely to affect it.
A second Trump administration may even be good for some colleges, Gardner adds, if they can make a case for what they offer. “The conversation around the value of higher education, obviously, is not going away,” he said. The bias against higher education among many conservatives is based on the perception of colleges as high-cost hotbeds of protest, “but a community college is different from a small public is different from a flagship is different from small private is different from an Ivy League institution,” he adds. “There’s not a ton of similarity between the issues and the experience we have on our campus versus the issues and experience that are going on at, say, an Ivy League school. How do we communicate that?”
The opportunities to thrive during a second Trump term may be even greater for community colleges and regional public universities — access institutions largely focused on work-force development. These are not the colleges with campus unrest and high tuition that leave students with high levels of debt, said Welch of AASCU. “If we can appropriately educate policymakers about the things that we are doing, and conversely, the things that we aren’t doing, I think that we can begin to change that conversation.”
