The latest Republican assault on higher education

Earlier, it was a dramatic cut in indirect costs on all federal grants and outright cancellation of some grants. Now, congressional Republicans are mulling a steep tax on university endowments.

“Republicans are considering increases to the university endowment tax to help reduce the national deficit and as a potential lever to force universities to comply with the Trump administration’s priorities. The nation’s wealthiest private colleges and universities currently pay an excise tax of 1.4 percent on endowment investment returns, a levy established during President Trump’s first term despite heavy pushback from universities.”

*snip*

“College endowment proceeds are usually restricted at the request of donors and intended to last in perpetuity to support the institution for years to come. Schools are not allowed to spend the principal, only investment gains.

 

“There is a mistaken perception that an endowment is essentially like a massive savings account,” Kluttz said. “In reality, the endowment is a collection of gifts given to the college over the decades.”

 

“Many schools across the region have relied on endowment proceeds to increase student financial aid in recent years, especially for families earning under $200,000, to address public concern about sky-high sticker prices. Harvard, for example, last week became the latest university to say it will be free for undergraduates from families with household incomes under $100,000, and no tuition will be charged to families with income under $200,000. Harvard’s endowment is valued at $53.2 billion, and the university spent $250 million on financial aid for undergraduates in 2024, up 6 percent from a year earlier.”

So how much of a tax are we talking about here?

“At least two endowment tax proposals are gaining traction in Washington, D.C., including a bill Representative Troy Nehls, a Texas Republican, proposed in January that would raise the excise tax levied on private university endowments with assets of at least $500,000 per student to the corporate rate of 21 percent.

 

“Nehls said in a January statement that it is “unacceptable” that universities with “massive” endowments have “significantly increased tuition” while paying a tax rate that is “far lower than what most hardworking Americans pay.”

 

“My bill would put elite universities with massive endowments on notice by holding them to the same tax standard as corporations,” Nehls said.

“A separate proposal would increase the tax on endowment returns tenfold, to 14 percent.”

And how much money would that generate?

“Critics of the proposals say higher taxes on university endowments would not make a dent in the federal government’s $1.8 trillion deficit. In 2023, 56 colleges and universities were subject to the federal endowment tax and paid a total of $380 million, including schools across New England, such as Harvard, MIT, Brown University, Yale University, Williams College, Colby College, and Amherst College.

“It really is about punishment more than it is about revenue generation, and we should just recognize that that’s going to have downstream harm to the students who would benefit from those dollars,” said David Greene, president of Colby in Maine.

“Schools with large endowments tend to offer the highest amounts of financial aid to low- and middle-income students, often making them the most affordable option for top-performing students who gain admission.

“The National Association of College and University Business Officers’ most recent report on university endowments found that more than 48 percent of endowment spending went to student financial aid. About 18 percent went to academic programs and 11 percent was spent on endowed faculty positions.”

Look, the indirect cost reduction on federal grants aren’t going to be used to fund the direct costs of addition research. And the tax money extracted from universities isn’t going to be used for a federal grant program to help middle and working class Americans attend college. But they’re just going to use this money to help offset the huge hole in the budget that their tax cuts for the 1% and corporations will create. 

Don’t listen to what they say, watch what they do.

https://www.bostonglobe.com/2025/03/25/metro/university-endowment-tax-trump-higher-education/