Amount of Endowment Tax Liability Expected for 25 Elite US Universities

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I dont know why they don't stop charging tuition. Or move the FA limits up to 500k HHI and 3mm assets. so only 20% pay tuition.

Princeton probably will, at least to get the number of tuition-paying students below 3,000. They aren’t that far off already.

To make this work many schools on this list will have to abandon need-blind in making admissions decisions. Even the top schools need tuition revenue. Each school will need to figure out if its bottom line or net revenue is better if: 1) decrease the number of students, 2) increase the number of students on full aid for tuition and fees, or 3) pay the endowment tax.

This is a win for the enrollment management companies and their algorithms.

This is why it makes sense in Princeton’s case though. About 3200 grad students, most of whom are PhDs or Wilson school students that go for free, and of 5700 undergrads, 62% of them are getting aid that on average is more than tuition. They can easily push below 3000 tuition payers if they aren’t already there.

There may be some others like Dartmouth. Probably will be much harder for schools that are bigger or reliant on MBA, JD, and other grad programs for revenue.

[Anonymous]

Tuition will decrease while new mandatory fees will increase.

[Anonymous]

Anonymous wrote:Tuition will decrease while new mandatory fees will increase.

Mandatory fees count, per the regs and definitions.

[Anonymous]

Anonymous wrote:Great time to be an LAC. Amherst and Williams are getting tax cuts!

Yes it is! The richest SLACs got a big tax cut and they aren't really affected by the Fed research budget cuts so they win.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I dont know why they don't stop charging tuition. Or move the FA limits up to 500k HHI and 3mm assets. so only 20% pay tuition.

Princeton probably will, at least to get the number of tuition-paying students below 3,000. They aren’t that far off already.

To make this work many schools on this list will have to abandon need-blind in making admissions decisions. Even the top schools need tuition revenue. Each school will need to figure out if its bottom line or net revenue is better if: 1) decrease the number of students, 2) increase the number of students on full aid for tuition and fees, or 3) pay the endowment tax.

This is a win for the enrollment management companies and their algorithms.

This is why it makes sense in Princeton’s case though. About 3200 grad students, most of whom are PhDs or Wilson school students that go for free, and of 5700 undergrads, 62% of them are getting aid that on average is more than tuition. They can easily push below 3000 tuition payers if they aren’t already there.

There may be some others like Dartmouth. Probably will be much harder for schools that are bigger or reliant on MBA, JD, and other grad programs for revenue.

You are neglecting a crucial concern: What is the definition of "tuition paying students" ? Are students with grants--either/or based on merit or financial need--tuition paying students ?

[Anonymous]

Does the financial aid budget pay their tuition ?

And does the payment of a student's tuition by another or by a fund (scholarship or financial aid fund) make the beneficiary a tuition paying student ?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I dont know why they don't stop charging tuition. Or move the FA limits up to 500k HHI and 3mm assets. so only 20% pay tuition.

Princeton probably will, at least to get the number of tuition-paying students below 3,000. They aren’t that far off already.

To make this work many schools on this list will have to abandon need-blind in making admissions decisions. Even the top schools need tuition revenue. Each school will need to figure out if its bottom line or net revenue is better if: 1) decrease the number of students, 2) increase the number of students on full aid for tuition and fees, or 3) pay the endowment tax.

This is a win for the enrollment management companies and their algorithms.

This is why it makes sense in Princeton’s case though. About 3200 grad students, most of whom are PhDs or Wilson school students that go for free, and of 5700 undergrads, 62% of them are getting aid that on average is more than tuition. They can easily push below 3000 tuition payers if they aren’t already there.

There may be some others like Dartmouth. Probably will be much harder for schools that are bigger or reliant on MBA, JD, and other grad programs for revenue.

You are neglecting a crucial concern: What is the definition of "tuition paying students" ? Are students with grants--either/or based on merit or financial need--tuition paying students ?

I posted the definition already at 18:05. Tuition paying is determined by whether a student pays any tuition or fees after taking into account the assistance provided by the university. You can also see this in the final regs and responses to comments (below). Students that go for free due to federal or state assistance are also not counted as tuition payers. Third party scholarships, however, would be counted as tuition paying.

“One commenter expressed a concern that smaller educational institutions might modify their financial aid programs to offer fewer partial scholarships and more full scholarships to fall under the threshold of having 500 tuition-paying students. The Treasury Department and the IRS have determined that a modification to the regulations for this purpose is not necessary because any definition of tuition-paying may lead to this result and because the same definition of tuition-paying should apply regardless of the size of the institution.

Another commenter recommended that a student should be considered "tuition-paying" regardless of the source of tuition funds, except that an eligible educational institution that does not charge tuition to any student would not be considered to have any tuition-paying students. These final regulations do not adopt this suggestion because the statute does not refer to tuition "charged," rather it refers to tuition "paid."

The third commenter asked whether the term "scholarships" in the proposed regulations was intended to include Pell Grants and other forms of Federal and state student financial aid as well as non-governmental grants made on behalf of students, recommending that these grants from government and non-government sources not be treated as the payment of tuition on behalf of students. The Treasury Department and the IRS agree…and therefore it would be fundamentally unfair to include these government grants as payment of tuition by or on behalf of a student in determining whether an educational institution is liable for the excise tax imposed by section 4968.

Thus, these final regulations adopt the definition of "tuition-paying" found in the proposed regulations, which concluded that scholarships awarded by the institution are not tuition "paid" on behalf of the student, whereas scholarships from third parties essentially are payments of the student's tuition, but add that whether a student is tuition-paying is also determined after taking into account grants made by the Federal government or any state or local government.”

[Anonymous]

There are also these final definitions which clarify:

Tuition-paying — (i) In general. The term tuition-paying means the payment of any tuition or fees required for the enrollment or attendance of a student for a course of instruction at an educational institution. Tuition and fees do not include payment for supplies or equipment required during a specific course once a student is enrolled in and attending the course, or payment for room and board or other personal living expenses.

Scholarships, grants, and work study programs. Whether a student is tuition-paying is determined after taking into account any scholarships and grants provided directly by the educational institution or by the Federal government or any state or local government, and after application of any work study programs operated directly by the institution. Scholarships and grants provided by non-governmental third parties, even if administered by the institution, are considered payments of tuition on behalf of the student. Accordingly, a student will be considered a tuition-paying student if payment of tuition or a fee is required for the enrollment or attendance of the student for courses of instruction after the application of any scholarships offered directly by the institution, any work study program operated directly by the institution, and any grants and scholarships provided by the Federal government or any state or local government.

[Anonymous]

I don't understand how any of this is constitutional. We have one man making all these capricious decisions regarding various individual universities. There's no method or system. Just whims and enemies.

Very banana republic.

[Anonymous]

Anonymous wrote:I don't understand how any of this is constitutional. We have one man making all these capricious decisions regarding various individual universities. There's no method or system. Just whims and enemies.

Very banana republic.

Well this one is a tax on investment income passed by Congress so unfortunately it is very constitutional.

Ultimately I think Princeton and Dartmouth will escape through the tuition-paying threshold, and MIT and Rice might too. For the dozen or so others that this applies to, they will manage their investment income to reduce the tax burden. But even then it isn’t large. For example, even before taking steps to optimize tax efficiency, these tax estimates are generally less than one percent of these schools’ total endowments (~0.5 percent in many cases).

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't understand how any of this is constitutional. We have one man making all these capricious decisions regarding various individual universities. There's no method or system. Just whims and enemies.

Very banana republic.

Well this one is a tax on investment income passed by Congress so unfortunately it is very constitutional.

Ultimately I think Princeton and Dartmouth will escape through the tuition-paying threshold, and MIT and Rice might too. For the dozen or so others that this applies to, they will manage their investment income to reduce the tax burden. But even then it isn’t large. For example, even before taking steps to optimize tax efficiency, these tax estimates are generally less than one percent of these schools’ total endowments (~0.5 percent in many cases).

Sorry to repeat my question, but what is the definition of a tuition paying student for purposes of the excise tax on educational institutions endowment income ?

Are students who receive financial aid of any type which covers at least 100% of tuition "tuition paying students" ? I would argue that they are since tuition is still paid on their behalf even though through a financial aid fund. Accordingly, schools cannot escape the 3,000 tuition paying students threshold as easily as several posters have asserted.

[Anonymous]

If one's tuition is paid by a scholarship fund or by a grandparent, that student still receives a tuition bill and statement showing that the student's tuition has been paid.

[Anonymous]

Anonymous wrote:If one's tuition is paid by a scholarship fund or by a grandparent, that student still receives a tuition bill and statement showing that the student's tuition has been paid.

The regulations provide that if one’s tuition is paid by an outside scholarship fund, that student would be “tuition-paying,” but not if institutional funding pays for the tuition.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't understand how any of this is constitutional. We have one man making all these capricious decisions regarding various individual universities. There's no method or system. Just whims and enemies.

Very banana republic.

Well this one is a tax on investment income passed by Congress so unfortunately it is very constitutional.

Ultimately I think Princeton and Dartmouth will escape through the tuition-paying threshold, and MIT and Rice might too. For the dozen or so others that this applies to, they will manage their investment income to reduce the tax burden. But even then it isn’t large. For example, even before taking steps to optimize tax efficiency, these tax estimates are generally less than one percent of these schools’ total endowments (~0.5 percent in many cases).

Sorry to repeat my question, but what is the definition of a tuition paying student for purposes of the excise tax on educational institutions endowment income ?

Are students who receive financial aid of any type which covers at least 100% of tuition "tuition paying students" ? I would argue that they are since tuition is still paid on their behalf even though through a financial aid fund. Accordingly, schools cannot escape the 3,000 tuition paying students threshold as easily as several posters have asserted.

All of this is in the comments above. A student whose entire tuition and fees are covered by scholarships or grants provided by the university or a federal, state, or local government is not tuition paying. Therefore they don’t count toward the 3,000 threshold.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If one's tuition is paid by a scholarship fund or by a grandparent, that student still receives a tuition bill and statement showing that the student's tuition has been paid.

The regulations provide that if one’s tuition is paid by an outside scholarship fund, that student would be “tuition-paying,” but not if institutional funding pays for the tuition.

Thank you for this response. Can you cite a source for this definition ? I understand that you referenced "the regulations", but I did not see such a definition in The Big Beautiful Bill, although, admittedly, my read was fairly quick & focused on the one section.