How Princeton is Getting Around the Endowment Tax
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Anonymous
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Princeton makes financial aid changes presumably to get it to fewer than 3,000 “tuition-paying” students.
https://www.princeton.edu/news/2025/08/07/princeton-enhances-financial-aid-again-it-welcomes-class-2029-which-includes |
Anonymous
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Seems like a win for everyone!
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Anonymous
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Brilliant. It's cheaper for Princeton to give free tuition to all those studnets then pay the massive endowment tax.
I knew they'd find a way around it. With that much money on the line, there is a huge motivation to do so. |
Anonymous
| Yep. Makes sense. Won’t be the last school to do it either. |
Anonymous
And that’s ok. |
Anonymous
Seems like it makes the endowment tax arbitrary stupid nonsense. Don't tax Princeton but tax MIT. Don't text Amherst or NYU but tax Notre Dame. This whole thing just seems pointless. |
Anonymous
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I've never attended one of these private schools with the massive need-based aid programs. Is it a weird dichotomy with basically only poor kids and rich kids and no real middle class?
I attended a state school so there were basically all types of kids, but lots of middle class. |
Anonymous
There is a lot of aid that goes to middle class families at a place like Princeton. At Princeton middle class is poor. |
Anonymous
If the administrations top "targets" start adjusting to avoid being taxed I expect the IRS regs to get reinterpreted to cut off the easy paths out of taxation. A few schools could just eliminate tuition but that isn't feasible for most. I suspect longer term "tuition paying" will be replaced with a strict size limit which protects Hillsdale but cuts off the avoidance opportunities for the Ivy schools. Top SLACs are going to win big as this shakes out as they are resource rich, not dependent on federal money, and are effectively shielded because of the republican desire to protect Hillsdale at all costs. |
Anonymous
| While this is done by algorithm on the back end, it's still kind of amazing that need-blind schools can enroll a fairly precise number of full pay students. |
Anonymous
Or they accept who they accept and only make a certain number full pay. |
Anonymous
It is a Pigovian tax. It wasn’t intended to raise revenue. This is an optimal outcome, perhaps even an intended one. |
Anonymous
They only give need-based aid, so they can't give would-be full pay students who are borderline for needing aid if they didn't apply for it. They would want students close to the borderline who do need some aid. |
Anonymous
Yup. It is the barbell. Low income (which includes a number of middle income people in this case) go for free so don't care about sticker price. Super rich people don't care about sticker price. Those who are just above the threshold get squeezed - $100k a year is still meaningful to them when there is a much cheaper option. No one cries for the families in high cost of living areas making $400k a year, but going to Princeton will not be easy. Ironically, many legacies fit in this bucket - contrary to popular opinion, most Ivy alums are UMC, not rich. I was an UMC full pay at an Ivy+ 30 years ago. I was far from ostentatious, but I had a car (a hand-me-down Toyota Camry from my grandparents) and would occasionally go out for dinner, to concerts, etc. on weekends (nowhere fancy). But I had friends who had to think twice about coming to dinner and doing other things that many took for granted. There were plenty of people who advertised their wealth much more, and it was a challenge. And this has likely just gotten worse. |
Anonymous
Second bolded sentence is why the first probably won’t happen. Only a few schools can do this. That, and the IRS already was challenged on this previously during the public consultation process in 2020 and would likely lose the ensuing lawsuit since they are on record defending the current approach, without a good legal rationale for changing course now. Congress could have taken “tuition-paying” out of the legislation, but didn’t. |