Latest news with #wealthycolleges
Fast Company
08-08-2025
- Business
- Fast Company
How Trump's new tax rate on college endowments is threatening university jobs and financial aid
A big increase in the tax on university endowments is adding to financial uncertainty for the wealthiest colleges in the U.S., leading several already to lay off staff or implement hiring freezes. Spending more endowment money on taxes could also lead colleges to reduce financial aid, cutting off access to elite institutions for lower-income students, colleges and industry experts have warned. President Donald Trump signed the tax increase into law last month as part of his signature spending bill. The new tax rates take effect in 2026, but colleges such as Harvard, Yale and Stanford already are citing the tax as one of many reasons for making cuts across their universities. Each will be on the hook to pay hundreds of millions more in taxes, while also navigating reductions in research grants and other threats to funding by the Trump administration. A tax on college endowments was introduced during Trump's first administration, collecting 1.4% of wealthy universities' investment earnings. The law signed by Trump last month creates a new tiered system that taxes the richest schools at the highest rates. The new tax will charge an 8% rate at schools with $2 million or more in assets for each enrolled student. Schools with $750,000 to $2 million will be charged 4%, and schools with $500,000 to $750,000 will continue to be charged the 1.4% rate. The tax applies only to private colleges and universities with at least 3,000 students, up from the previous cutoff of 500 students. 'The tax now will really solely apply to private research universities,' said Steven Bloom, assistant vice president of government relations for the American Council on Education. 'It's going to mean that these schools are going to have to spend more money under the tax, taking it away from what they primarily use their endowment assets for — financial aid.' This small group of wealthy colleges faces a tax increase The law will increase the endowment tax for about a dozen universities, according to an Associated Press analysis of data from the National Association of College and University Business Officers. Harvard, Yale, Stanford, Princeton and the Massachusetts Institute of Technology are expected to pay the 8% rate next year. The schools facing the 4% rate include Notre Dame, Dartmouth College, Rice University, University of Pennsylvania, Washington University in St. Louis and Vanderbilt University. Some universities are on the edge of the law's parameters. Both Duke and Emory, for instance, were shy of the $750,000-per-student endowment threshold based on last fiscal year. Endowments are made up of donations to the college, which are invested to maintain the money over time. Colleges often spend about 5% of their investment earnings every year to put toward their budgets. Much of it goes toward scholarships for students, along with costs such as research or endowed faculty positions. Despite the colleges' wealth, the tax will drastically impact their budgets, said Phillip Levine, an economist and professor at Wellesley College. 'They're looking for savings wherever possible,' Levine said, which could impact financial aid. 'One of the most important things they do with their endowment is lower the cost of education for lower- and middle-income students. The institutions paying the highest tax are also the ones charging these students the least amount of money to attend.' For example, at Rice University in Houston, officials anticipate the college will need to pay $6.4 million more in taxes. That equates to more than 100 student financial aid packages, the university said, but Rice officials will explore all other options to avoid cutting that support. How colleges are adjusting to financial pressures In the meantime, some universities are going forward with staff cuts. Yale University says it will have to pay an estimated $280 million in total endowment taxes, citing the tax in a campus message implementing a hiring freeze. Stanford University announced plans to reduce its operating budget by $140 million this upcoming school year, which included 363 layoffs and an ongoing hiring freeze. The university spent months trying to determine where to reduce its budget, but said it would continue to support undergraduate financial aid and funding for Ph.D. students. Research universities are under increasing financial pressure from reductions in funding from the National Institutes of Health, the National Science Foundation and other federal agencies. No university knows this pressure better than Harvard, the country's wealthiest college. Its $53 billion endowment puts it at the top of the list for the new tax, but it's also seeing massive portions of research funding under threat in its ongoing battle with the White House. The federal government has frozen $2.6 billion in Harvard's research grants in connection with civil rights investigations focused on antisemitism and Harvard's efforts to promote diversity on campus. But the impact of other administration policies on the university could approach $1 billion annually, Harvard said in a statement. 'It's not like Harvard is going to go from one of the best institutions in the world to just a mediocre institution. That's probably not going to happen,' Levine said. 'But that doesn't mean it's not going to be a bad thing — that there won't be pain and that students won't suffer.' The Associated Press' education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP's standards for working with philanthropies, a list of supporters and funded coverage areas at
Yahoo
08-08-2025
- Business
- Yahoo
College endowment tax is leading to hiring freezes and could mean cuts in financial aid
A big increase in the tax on university endowments is adding to financial uncertainty for the wealthiest colleges in the U.S., leading several already to lay off staff or implement hiring freezes. Spending more endowment money on taxes could also lead colleges to reduce financial aid, cutting off access to elite institutions for lower-income students, colleges and industry experts have warned. President Donald Trump signed the tax increase into law last month as part of his signature spending bill. The new tax rates take effect in 2026, but colleges such as Harvard, Yale and Stanford already are citing the tax as one of many reasons for making cuts across their universities. Each will be on the hook to pay hundreds of millions more in taxes, while also navigating reductions in research grants and other threats to funding by the Trump administration. A tax on college endowments was introduced during Trump's first administration, collecting 1.4% of wealthy universities' investment earnings. The law signed by Trump last month creates a new tiered system that taxes the richest schools at the highest rates. The new tax will charge an 8% rate at schools with $2 million or more in assets for each enrolled student. Schools with $750,000 to $2 million will be charged 4%, and schools with $500,000 to $750,000 will continue to be charged the 1.4% rate. The tax applies only to private colleges and universities with at least 3,000 students, up from the previous cutoff of 500 students. 'The tax now will really solely apply to private research universities,' said Steven Bloom, assistant vice president of government relations for the American Council on Education. 'It's going to mean that these schools are going to have to spend more money under the tax, taking it away from what they primarily use their endowment assets for — financial aid.' This small group of wealthy colleges faces a tax increase The law will increase the endowment tax for about a dozen universities, according to an Associated Press analysis of data from the National Association of College and University Business Officers. Harvard, Yale, Stanford, Princeton and the Massachusetts Institute of Technology are expected to pay the 8% rate next year. The schools facing the 4% rate include Notre Dame, Dartmouth College, Rice University, University of Pennsylvania, Washington University in St. Louis and Vanderbilt University. Some universities are on the edge of the law's parameters. Both Duke and Emory, for instance, were shy of the $750,000-per-student endowment threshold based on last fiscal year. Endowments are made up of donations to the college, which are invested to maintain the money over time. Colleges often spend about 5% of their investment earnings every year to put toward their budgets. Much of it goes toward scholarships for students, along with costs such as research or endowed faculty positions. Despite the colleges' wealth, the tax will drastically impact their budgets, said Phillip Levine, an economist and professor at Wellesley College. 'They're looking for savings wherever possible,' Levine said, which could impact financial aid. 'One of the most important things they do with their endowment is lower the cost of education for lower- and middle-income students. The institutions paying the highest tax are also the ones charging these students the least amount of money to attend.' For example, at Rice University in Houston, officials anticipate the college will need to pay $6.4 million more in taxes. That equates to more than 100 student financial aid packages, the university said, but Rice officials will explore all other options to avoid cutting that support. How colleges are adjusting to financial pressures In the meantime, some universities are going forward with staff cuts. Yale University says it will have to pay an estimated $280 million in total endowment taxes, citing the tax in a campus message implementing a hiring freeze. Stanford University announced plans to reduce its operating budget by $140 million this upcoming school year, which included 363 layoffs and an ongoing hiring freeze. The university spent months trying to determine where to reduce its budget, but said it would continue to support undergraduate financial aid and funding for Ph.D. students. Research universities are under increasing financial pressure from reductions in funding from the National Institutes of Health, the National Science Foundation and other federal agencies. No university knows this pressure better than Harvard, the country's wealthiest college. Its $53 billion endowment puts it at the top of the list for the new tax, but it's also seeing massive portions of research funding under threat in its ongoing battle with the White House. The federal government has frozen $2.6 billion in Harvard's research grants in connection with civil rights investigations focused on antisemitism and Harvard's efforts to promote diversity on campus. But the impact of other administration policies on the university could approach $1 billion annually, Harvard said in a statement. 'It's not like Harvard is going to go from one of the best institutions in the world to just a mediocre institution. That's probably not going to happen," Levine said. 'But that doesn't mean it's not going to be a bad thing — that there won't be pain and that students won't suffer.' ___ Mumphrey reported from Phoenix. Associated Press writer Sharon Lurye in Philadelphia contributed to this report. ___ The Associated Press' education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP's standards for working with philanthropies, a list of supporters and funded coverage areas at Cheyanne Mumphrey, The Associated Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Independent
08-08-2025
- Business
- The Independent
College endowment tax is leading to hiring freezes and could mean cuts in financial aid
A big increase in the tax on university endowments is adding to financial uncertainty for the wealthiest colleges in the U.S., leading several already to lay off staff or implement hiring freezes. Spending more endowment money on taxes could also lead colleges to reduce financial aid, cutting off access to elite institutions for lower-income students, colleges and industry experts have warned. President Donald Trump signed the tax increase into law last month as part of his signature spending bill. The new tax rates take effect in 2026, but colleges such as Harvard, Yale and Stanford already are citing the tax as one of many reasons for making cuts across their universities. Each will be on the hook to pay hundreds of millions more in taxes, while also navigating reductions in research grants and other threats to funding by the Trump administration. A tax on college endowments was introduced during Trump's first administration, collecting 1.4% of wealthy universities' investment earnings. The law signed by Trump last month creates a new tiered system that taxes the richest schools at the highest rates. The new tax will charge an 8% rate at schools with $2 million or more in assets for each enrolled student. Schools with $750,000 to $2 million will be charged 4%, and schools with $500,000 to $750,000 will continue to be charged the 1.4% rate. The tax applies only to private colleges and universities with at least 3,000 students, up from the previous cutoff of 500 students. 'The tax now will really solely apply to private research universities,' said Steven Bloom, assistant vice president of government relations for the American Council on Education. 'It's going to mean that these schools are going to have to spend more money under the tax, taking it away from what they primarily use their endowment assets for — financial aid.' This small group of wealthy colleges faces a tax increase The law will increase the endowment tax for about a dozen universities, according to an Associated Press analysis of data from the National Association of College and University Business Officers. Harvard, Yale, Stanford, Princeton and the Massachusetts Institute of Technology are expected to pay the 8% rate next year. The schools facing the 4% rate include Notre Dame, Dartmouth College, Rice University, University of Pennsylvania, Washington University in St. Louis and Vanderbilt University. Some universities are on the edge of the law's parameters. Both Duke and Emory, for instance, were shy of the $750,000-per-student endowment threshold based on last fiscal year. Endowments are made up of donations to the college, which are invested to maintain the money over time. Colleges often spend about 5% of their investment earnings every year to put toward their budgets. Much of it goes toward scholarships for students, along with costs such as research or endowed faculty positions. Despite the colleges' wealth, the tax will drastically impact their budgets, said Phillip Levine, an economist and professor at Wellesley College. 'They're looking for savings wherever possible,' Levine said, which could impact financial aid. ' One of the most important things they do with their endowment is lower the cost of education for lower- and middle-income students. The institutions paying the highest tax are also the ones charging these students the least amount of money to attend.' For example, at Rice University in Houston, officials anticipate the college will need to pay $6.4 million more in taxes. That equates to more than 100 student financial aid packages, the university said, but Rice officials will explore all other options to avoid cutting that support. How colleges are adjusting to financial pressures In the meantime, some universities are going forward with staff cuts. Yale University says it will have to pay an estimated $280 million in total endowment taxes, citing the tax in a campus message implementing a hiring freeze. Stanford University announced plans to reduce its operating budget by $140 million this upcoming school year, which included 363 layoffs and an ongoing hiring freeze. The university spent months trying to determine where to reduce its budget, but said it would continue to support undergraduate financial aid and funding for Ph.D. students. Research universities are under increasing financial pressure from reductions in funding from the National Institutes of Health, the National Science Foundation and other federal agencies. No university knows this pressure better than Harvard, the country's wealthiest college. Its $53 billion endowment puts it at the top of the list for the new tax, but it's also seeing massive portions of research funding under threat in its ongoing battle with the White House. The federal government has frozen $2.6 billion in Harvard's research grants in connection with civil rights investigations focused on antisemitism and Harvard's efforts to promote diversity on campus. But the impact of other administration policies on the university could approach $1 billion annually, Harvard said in a statement. 'It's not like Harvard is going to go from one of the best institutions in the world to just a mediocre institution. That's probably not going to happen," Levine said. 'But that doesn't mean it's not going to be a bad thing — that there won't be pain and that students won't suffer.' ___ Mumphrey reported from Phoenix. Associated Press writer Sharon Lurye in Philadelphia contributed to this report. ___ The Associated Press' education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP's standards for working with philanthropies, a list of supporters and funded coverage areas at
Associated Press
08-08-2025
- Business
- Associated Press
College endowment tax is leading to hiring freezes and could mean cuts in financial aid
A big increase in the tax on university endowments is adding to financial uncertainty for the wealthiest colleges in the U.S., leading several already to lay off staff or implement hiring freezes. Spending more endowment money on taxes could also lead colleges to reduce financial aid, cutting off access to elite institutions for lower-income students, colleges and industry experts have warned. President Donald Trump signed the tax increase into law last month as part of his signature spending bill. The new tax rates take effect in 2026, but colleges such as Harvard, Yale and Stanford already are citing the tax as one of many reasons for making cuts across their universities. Each will be on the hook to pay hundreds of millions more in taxes, while also navigating reductions in research grants and other threats to funding by the Trump administration. A tax on college endowments was introduced during Trump's first administration, collecting 1.4% of wealthy universities' investment earnings. The law signed by Trump last month creates a new tiered system that taxes the richest schools at the highest rates. The new tax will charge an 8% rate at schools with $2 million or more in assets for each enrolled student. Schools with $750,000 to $2 million will be charged 4%, and schools with $500,000 to $750,000 will continue to be charged the 1.4% rate. The tax applies only to private colleges and universities with at least 3,000 students, up from the previous cutoff of 500 students. 'The tax now will really solely apply to private research universities,' said Steven Bloom, assistant vice president of government relations for the American Council on Education. 'It's going to mean that these schools are going to have to spend more money under the tax, taking it away from what they primarily use their endowment assets for — financial aid.' This small group of wealthy colleges faces a tax increase The law will increase the endowment tax for about a dozen universities, according to an Associated Press analysis of data from the National Association of College and University Business Officers. Harvard, Yale, Stanford, Princeton and the Massachusetts Institute of Technology are expected to pay the 8% rate next year. The schools facing the 4% rate include Notre Dame, Dartmouth College, Rice University, University of Pennsylvania, Washington University in St. Louis and Vanderbilt University. Some universities are on the edge of the law's parameters. Both Duke and Emory, for instance, were shy of the $750,000-per-student endowment threshold based on last fiscal year. Endowments are made up of donations to the college, which are invested to maintain the money over time. Colleges often spend about 5% of their investment earnings every year to put toward their budgets. Much of it goes toward scholarships for students, along with costs such as research or endowed faculty positions. Despite the colleges' wealth, the tax will drastically impact their budgets, said Phillip Levine, an economist and professor at Wellesley College. 'They're looking for savings wherever possible,' Levine said, which could impact financial aid. 'One of the most important things they do with their endowment is lower the cost of education for lower- and middle-income students. The institutions paying the highest tax are also the ones charging these students the least amount of money to attend.' For example, at Rice University in Houston, officials anticipate the college will need to pay $6.4 million more in taxes. That equates to more than 100 student financial aid packages, the university said, but Rice officials will explore all other options to avoid cutting that support. How colleges are adjusting to financial pressures In the meantime, some universities are going forward with staff cuts. Yale University says it will have to pay an estimated $280 million in total endowment taxes, citing the tax in a campus message implementing a hiring freeze. Stanford University announced plans to reduce its operating budget by $140 million this upcoming school year, which included 363 layoffs and an ongoing hiring freeze. The university spent months trying to determine where to reduce its budget, but said it would continue to support undergraduate financial aid and funding for Ph.D. students. Research universities are under increasing financial pressure from reductions in funding from the National Institutes of Health, the National Science Foundation and other federal agencies. No university knows this pressure better than Harvard, the country's wealthiest college. Its $53 billion endowment puts it at the top of the list for the new tax, but it's also seeing massive portions of research funding under threat in its ongoing battle with the White House. The federal government has frozen $2.6 billion in Harvard's research grants in connection with civil rights investigations focused on antisemitism and Harvard's efforts to promote diversity on campus. But the impact of other administration policies on the university could approach $1 billion annually, Harvard said in a statement. 'It's not like Harvard is going to go from one of the best institutions in the world to just a mediocre institution. That's probably not going to happen,' Levine said. 'But that doesn't mean it's not going to be a bad thing — that there won't be pain and that students won't suffer.' ___ Mumphrey reported from Phoenix. Associated Press writer Sharon Lurye in Philadelphia contributed to this report. ___ The Associated Press' education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP's standards for working with philanthropies, a list of supporters and funded coverage areas at
Forbes
05-07-2025
- Business
- Forbes
These 26 Rich Private Colleges Just Got A Tax Cut From Republicans
S trange things happen when details of a massive tax and budget bill, like the one President Donald Trump signed yesterday, are tweaked behind closed doors. Among them: A couple dozen of the nation's wealthiest small private colleges will be getting a tax cut next year, even as bigger rich universities, including Princeton, MIT, Yale and Harvard, will be slammed with higher taxes. It all began as an effort by House Republicans to dramatically raise the excise tax imposed on the earnings of college endowments, and particularly the endowments of wealthy 'woke' schools like Harvard University that they (and President Donald Trump) have targeted. But as it turns out, while Harvard's tax bill will likely more than double, some smaller schools with famously left-leaning student bodies (e.g. Swarthmore College and Amherst College) are getting tax relief. That's because schools with fewer than 3,000 full-time equivalent tuition-paying students will be exempt from the revamped endowment tax beginning next year. It currently applies to private schools with more than 500 full-time equivalent tuition-paying students and endowments worth more than $500,000 per student. Using the latest available federal data from fiscal year 2023, Forbes identified at least 26 wealthy colleges that are likely subject to the endowment tax now, but will be exempt next year based on their size. Along with top liberal arts schools like Williams College, Wellesley College, Amherst and Swarthmore, the list includes the California Institute of Technology, a STEM powerhouse, and the Julliard School, the New York city institution known for its music, dance and drama training. Grinnell College in Iowa, which enrolled 1,790 students in 2023, will save around $2.4 million in tax each year as a result of the change, President Anne Harris said in an email to Forbes . Here's what happened. As passed by the House in late May, the One Big Beautiful Bill (its Trumpian name) increased the current 1.4% excise tax on college endowments' investment earnings to as high as 21% for the richest institutions—those with endowments worth more than $2 million a student. (While these schools are all non-profits and traditionally tax exempt, the 1.4% tax on investment earnings was introduced by Trump's big 2017 tax bill. According to Internal Revenue Service data, 56 schools paid a total of $381 million in endowment tax in calendar 2023.) Along with raising the rate, the House voted to exempt from the tax both religiously-affiliated schools (think the University of Notre Dame) and those that don't take federal student financial aid. (The religious exemption was structured in a way that Harvard, founded by the Puritans to train ministers, wouldn't qualify.) The House also sought to penalize schools like Columbia University, with heavy international student enrollments, by excluding students who aren't U.S. citizens or lawful permanent residents from the per capita calculations. Then the bill went to the Senate, where the Finance Committee settled on more modest–albeit still stiff–rate hikes. Schools with endowments of $500,000 to $750,000 per capita would still pay at a 1.4% rate, while those with endowments above $750,000 and up to $2 million would pay 4%. Those with endowments worth more than $2 million per student would pay an 8% tax on their earnings, not the 21% passed by the House. Enter Senate Parliamentarian Elizabeth MacDonough, who makes decisions on the Senate's Byrd rule, which requires parts of a budget reconciliation bill like this one to have a primary purpose related to the budget—not other types of policy. The Byrd rule was put in place because reconciliation isn't subject to filibuster. 'You can't get into a lot of prescriptive activity' in a budget reconciliation bill, explains Dean Zerbe, a national managing director for Alliantgroup, who worked on college endowment issues back when he was tax counsel for Sen. Chuck Grassley (R-Iowa). 'Like, 'you've got to hop on one foot,' or 'you've got to make tuition affordable,' or 'you've got to do better in terms of admission.'' The Parliamentarian ruled that those three House provisions—exempting religious-affiliated schools, exempting schools that don't take federal aid, and excluding foreign students from the per capita calculation—didn't pass the Byrd test. At that point, Republican senators settled on the 3,000-student threshold in large part to specifically exempt one school from the tax: Hillsdale College, an ultra-conservative, Christian liberal arts college in Hillsdale, Michigan and a GOP darling. It enrolled 1,794 students in 2023, had an endowment worth $584,000 per-student, and notably accepts no federal money, including student aid. (So both the religious exemption and the one for schools taking no federal student aid would have presumably shielded Hillsdale from the endowment tax—before the Parliamentarian gave them the thumbs down.) There was also a broader group of small schools pushing for the exemption, notes Jonathan Fansmith, senior vice president for government relations and national engagement at the American Council on Education. 'They made an argument that I think got some positive reception among Republican senators of saying that essentially, while their endowments may be big relative to the fact that they have small student bodies … their endowments weren't big.' A school like Amherst, he adds, 'might have a big endowment for a small school, but they don't have a big endowment relative to the Ivies and the more heavily resourced [universities].' House Republicans, under intense pressure to meet Trump's July 4th deadline, ended up accepting the final Senate product in full. That meant exempting the smaller schools, including the 'woke' ones, while levying a rate of up to 8% on the endowments of bigger schools. Congress' Joint Committee on Taxation estimates colleges will now pay an extra $761 million in tax over 10 years, compared to the extra $6.7 billion they would have paid under the House version with its higher 21% rate and broader reach. Based on data from 2023, Forbes estimates that at least 11 universities will have their endowment earnings taxed at an 8% or 4% rate in 2026, while five will continue to pay the 1.4% rate. Three schools—Princeton University, Yale University, and the Massachusetts Institute of Technology—will likely be required to pay an 8% excise tax on their endowment earnings. Another eight, including Harvard, Stanford University, Dartmouth College and Vanderbilt University, will likely pay a 4% tax. The remaining five schools—Emory University, Duke University, Washington University in St Louis, the University of Pennsylvania, and Brown University—would pay the same 1.4% endowment tax rate they're paying now, based on fiscal 2023 numbers. One school that will likely pay 4% is the University of Notre Dame, a Catholic-affiliated school which would have been exempt from the tax were it not for the Byrd rule. 'We are deeply disappointed by the removal of language protecting religious institutions of higher education from the endowment tax before passage of the final bill,' Notre Dame wrote in a statement to Forbes . 'Any expansion of the endowment tax threatens to undermine the ability of a broad range of faith-based institutions to serve their religious purpose. We are proud to have stood with a coalition of these institutions against that threat, and we are encouraged by the strong support for a religious exemption received from both chambers.' Fansmith, for his part, won't call the exemption of the small schools a win. 'We think the tax is a bad idea and it's bad policy, and no schools should be paying it. But, by the standard that fewer schools are paying, it's better, but it's still not good,' he says. 'It's not really about revenue,' adds Fansmith. 'It's really about punishing these schools that right now a segment of the Republican party doesn't like.' The schools make the argument that it's students who are being punished, since around half of endowment spending pays for student scholarships. Meanwhile, Zerbe warns the now exempt schools shouldn't take that status for granted. 'Once revenue raisers are in play and out there, they come back again and again,' he says. 'It would be a disaster for [colleges] to think somehow this was a win for them. This was a billion dollar hit on them and there's more to come later.' More from Forbes Forbes Here's What The Senate Budget And Tax Bill Means For Colleges By Emma Whitford Forbes Trump's Foreign Student Crackdown Puts These 16 Struggling Colleges At Risk By Emma Whitford Forbes Trump's Visa Ban Is Barring New Foreign Doctors From Entering U.S. By Emma Whitford Forbes What The One Big Beautiful Bill Act Will Mean For You And Your Business By Kelly Phillips Erb
