The significant increase in taxes on university contributions has increased the financial uncertainty of the richest universities in the United States, already laying off several staff members and implementing employment freezes.
It warns that spending more donations on taxes will reduce financial aid and reduce access to elite institutions for low-income students, universities and industry experts. President Donald Trump signed a tax increase on the law last month as part of his signature Expense bill.
New tax rates will come into effect in 2026, but universities such as Harvard, Yale and Stanford have already cited taxes as one of many reasons for reducing across universities. Each one is on a hook, paying hundreds of millions of people taxes at the same time Reduction of research grants and Other threats to fundraising By the Trump administration.
a University donations tax It was introduced during Trump’s first administration and collected 1.4% of the investment revenues of wealthy universities. The law signed by Trump last month creates a new tiered system that taxes the richest schools at the highest fees.
The new tax will charge an 8% tax rate for schools with assets of $2 million or more per registered student. Schools that cost between $750,000 and $2 million will be charged 4%, while schools that cost between $500,000 and $750,000 will continue to be charged 1.4%.
This tax applies only to private universities with at least 3,000 students from the previous cutoff of 500 students.
“Currently, this tax applies only to private research universities,” said Stephen Bloom, vice president of government relations at the U.S. Council of Education. “These schools mean they have to spend more money under taxes and they have to take it away from those that are primarily using their fund assets – financial aid.”
This small group of wealthy universities faces tax hikes
According to the Associated Press, the law raises fund taxes for around 12 universities Data analysis From the National Association of Colleges and College Business Officers.
Harvard, Yale, Stanford, Princeton and the Massachusetts Institute of Technology are expected to pay 8% next year. Schools facing a 4% rate include Notre Dame, Dartmouth College, Rice University, University of Pennsylvania, University of Washington St. Louis University and Vanderbilt University.
Some universities are at the edge of legal parameters. For example, both Duke and Emory were shy about the basic threshold of $750,000 per student, based on last year.
Donations consist of donations to universities that are invested in maintaining money over time. Universities often spend around 5% of their investment returns on their budgets each year. Much of this is directed towards student scholarships, along with costs such as research and awarded faculty status.
Philip Levine, an economist and professor at Wellesley College, says despite the wealth of the university, taxes have a major impact on the budget.
“They are looking for savings as much as possible,” Levine said. “One of the most important things about making donations is to reduce education costs for low- and middle-income students. The best tax paying institutions also charge these students the minimum amount to attend.”
For example, at Rice University in Houston, authorities expect the university to have an additional $6.4 million in taxes. This amounts to a financial aid package for over 100 students, the university said, but US officials will explore all other options to cut back on that support.
How universities adapt to economic pressures
In the meantime, some universities are working to cut staff.
Yale University says it will need to pay an estimated $280 million in donation tax, citing taxes in its campus message, which will implement a job freeze. Stanford University announces its plans Reduce operational budget This academic year was $140 million, including 363 layoffs and ongoing layoffs. Hire Freeze. The university said it would continue to support undergraduate financial aid and funding for its PhD, although it has spent months trying to determine where to cut its budget. Student.
Research universities are National Institutes of Healththe National Science Foundation and other federal agencies.
No university knows this pressure better than Harvard, the wealthiest university in the country. The $53 billion fund places it at the top of the new tax list, but the majority of research funding is being seen based on that threat. Continuing battle with the White House.
The federal government has Harvard University Research Grant Freezes $2.6 billion In relation to the civil rights investigation, we focused on Harvard’s efforts to promote anti-Semitism and campus diversity. However, the impact of other management policies on universities could approach $1 billion a year, Harvard said in a statement.
“Harvard University isn’t going from one of the best institutions in the world to a mediocre institution. Perhaps that won’t happen,” Levine said. “But that doesn’t mean it won’t go bad. There’s no pain and students will not suffer.”
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Mumphrey reported from Phoenix. Associated Press Writer Sharon Lurye from Philadelphia contributed to this report.
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