BUZZ
Incentivizes universities to spend more on students instead of stockpiling investments
President Donald Trump’s endowment tax is spurring universities to offer more financial aid to students, according to two policy experts.
James Murphy and Ryan Cieslikowski with the Class Action Network argue the endowment tax, first created in the 2017 tax cuts package and increased last year, was just supposed to be an attack on elite colleges.
Yet it is incentivizing some colleges, such as Princeton University, to make college more affordable for low and middle income students.
“Congress increased the endowment tax rates, but it also raised the enrollment ceiling for the exemption to 3,000 tuition-paying students, which means that several dozen institutions with multimillion- and even multibillion-dollar endowments will actually stop paying the tax this year,” the pair wrote in the New York Times.
In other words, universities can avoid a hefty endowment tax by having more students who do not pay tuition.
As the opinion piece explains:
The additional $44 million Princeton was expected to spend on financial aid last school year is a fraction of the over $200 million it was projected to owe under the tax every year. Even if this move is entirely self-serving, the effect will not be. Princeton will surely need to enroll classes that are majority working- and middle-class every year in order to avoid the endowment tax.
The essay calls for revising the endowment tax and accuses the Trump administration of having “fomented and exploited popular resentment of elite colleges for its own ideological ends.”
Still, they find an opportunity: “If anything, shared mistrust of elite colleges provides a rare opportunity to work across the aisle,” the pair wrote.
“Americans don’t have to choose between an assault on higher education and a status quo built to serve a privileged few,” the pair concluded. “A better, bipartisan endowment tax that rewards access and affordability and sends revenue to the colleges that do the most good is a way out of that false choice and a step toward repairing higher education’s broken social contract with the nation.”
Meanwhile Princeton University’s move to offer more tuition assistance follows other potential benefits from Trump’s higher education agenda.
As reported by The College Fix, the University of California Irvine cut its MBA tuition to come under new federal caps that stem from last year’s “One Big Beautiful Bill” budget deal.
This follows a similar decision by Santa Clara University’s law school to make tuition more affordable to avoid caps on subsidized student loans.
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