How Princeton is Getting Around the Endowment Tax

[Anonymous]

Anonymous wrote:any reason to think Yale will do this too?

Yale is too large and has way too many professional school students to get out of the endowment tax in this manner.

[Anonymous]

Anonymous wrote:

Anonymous wrote:any reason to think Yale will do this too?

Yale is too large and has way too many professional school students to get out of the endowment tax in this manner.

Yes, Yale is too big to do this.

But MIT (4576 students) and Dartmouth (4447 students) could pull it off.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:any reason to think Yale will do this too?

Yale is too large and has way too many professional school students to get out of the endowment tax in this manner.

Yes, Yale is too big to do this.

But MIT (4576 students) and Dartmouth (4447 students) could pull it off.

It’s not just undergrads, though. Grad students count toward the 3,000 too. Even if we assume that no academic grad students pay tuition, MIT has a large business school and Dartmouth has a med school and a business school. Those students are all tuition-paying. Princeton is uniquely situated in that it has very few professional students and has a long-standing focus on FGLI that means a huge portion of its students already receive significant aid.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

Aid goes to families making $250,000 so it's not like these families are poor.

Not actually poor, but a kid from a $250k family with a mortgage, multiple kids, and a need to save for retirement is going to feel "poor" next to a kid whose family can pay $400k for one kid to attend college and think nothing of it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

Aid goes to families making $250,000 so it's not like these families are poor.

Not actually poor, but a kid from a $250k family with a mortgage, multiple kids, and a need to save for retirement is going to feel "poor" next to a kid whose family can pay $400k for one kid to attend college and think nothing of it.

And? There are really wealthy people in the world sending kids to college with ease if your kid doesn't have any coping skills around this yet, they will have the opportunity to develop some in college.

[Anonymous]

It might take a bit, but eventually the colleges will find a workaround. Maybe it's a giant tuition hike so that virtually all get financial aid, I don't know. But their accountants and tax attorneys will find a way.

[Anonymous]

Princeton is smart

[Anonymous]

Anonymous wrote:It might take a bit, but eventually the colleges will find a workaround. Maybe it's a giant tuition hike so that virtually all get financial aid, I don't know. But their accountants and tax attorneys will find a way.

There are definitely other ways to reduce the impact of the tax, but this is one that actually serves the alleged purpose of the tax (which was to penalize colleges for hoarding wealth).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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

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.

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.

The current approach isn't the previous approach which was solely based on endowment size. It may be similar but it isn't the same and is open to revisiting from a regulatory standpoint. More important is the simple fact that this administration doesn't care, they want to punish. Harvard can do anything that Princeton does to get around the tax and I'm not buy the idea that the buffoons in the Whitehouse will meekly allow workarounds. They will aggressively work to ensure punishment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:any reason to think Yale will do this too?

Yale is too large and has way too many professional school students to get out of the endowment tax in this manner.

Yes, Yale is too big to do this.

But MIT (4576 students) and Dartmouth (4447 students) could pull it off.

It’s not just undergrads, though. Grad students count toward the 3,000 too. Even if we assume that no academic grad students pay tuition, MIT has a large business school and Dartmouth has a med school and a business school. Those students are all tuition-paying. Princeton is uniquely situated in that it has very few professional students and has a long-standing focus on FGLI that means a huge portion of its students already receive significant aid.

DP. Yes, it is easier for Princeton. But MIT is only about 7600 undergrads and master’s students, many of which are not paying tuition (Sloan is about 1500). Dartmouth is under 6000 of the same (business and med are only around 1100). It’s just a question of how close to going below 3000 they already are.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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

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.

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.

The current approach isn't the previous approach which was solely based on endowment size. It may be similar but it isn't the same and is open to revisiting from a regulatory standpoint. More important is the simple fact that this administration doesn't care, they want to punish. Harvard can do anything that Princeton does to get around the tax and I'm not buy the idea that the buffoons in the Whitehouse will meekly allow workarounds. They will aggressively work to ensure punishment.

You can’t regulate in a way that is inconsistent with the plain language of a statute. The Trump Supreme Court has made that clear. The IRS can’t write “tuition-paying” out of the statute.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Seems like a win for everyone!

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.

It is a Pigovian tax. It wasn’t intended to raise revenue. This is an optimal outcome, perhaps even an intended one.

It’s kind of crappy to be a family who makes just a tad over the line (or who have more than typical assets) who will pay full price while others just a tiny bit under the line pay none. I get the rationale but it’s not optimal from that perspective.

That’s us at a different Ivy. $90k/year hurts. Hopefully we get some $$ with second kid. From NPC it looks like we might

[Anonymous]

At my kids Princeton interview for 2024 the interviewer said Princeton was working for free tuition for all undergrads in 10 years

[Anonymous]

Anonymous wrote:

Anonymous wrote:It might take a bit, but eventually the colleges will find a workaround. Maybe it's a giant tuition hike so that virtually all get financial aid, I don't know. But their accountants and tax attorneys will find a way.

There are definitely other ways to reduce the impact of the tax, but this is one that actually serves the alleged purpose of the tax (which was to penalize colleges for hoarding wealth).

Okay sure. They decided to penalize some universities colleges that already had some of the most generous financial aid in the entire landscape. Don't be stupid. Maga doesn't like Princeton for being "woke" and
"Lib" or something like that. This helps no one and hurts science research. Thanks so much for that Maga.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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

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.

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.

The current approach isn't the previous approach which was solely based on endowment size. It may be similar but it isn't the same and is open to revisiting from a regulatory standpoint. More important is the simple fact that this administration doesn't care, they want to punish. Harvard can do anything that Princeton does to get around the tax and I'm not buy the idea that the buffoons in the Whitehouse will meekly allow workarounds. They will aggressively work to ensure punishment.

The approach is exactly the same. They just increased the thresholds and the tax rates. It was previously 500 “tuition-paying” students and they increased it to 3000 “tuition-paying” students. Tuition-paying was in the previous legislation and the relevant IRS interpretation and regulations (since the legislation didn’t define what that meant) have been in place since 2020.

Note that endowment per student for calculating the tax bracket is based on total students, not just tuition-paying ones. So the legislation could have also just set the size thresholds in terms of “students.” But it didn’t. Congress set it in terms of “tuition-paying” students. And the IRS defined it differently in the legally-binding regulations, noting specifically that it relates to tuition “payment,” not just a student who gets charged tuition. They even acknowledged that schools could get below the threshold by increasing full scholarships and decreasing partial ones. If they try to change it now after Congress reaffirmed “tuition-paying” in another bill, they will almost certainly lose.

Harvard can’t do the same thing. It is way too big with way too many paying students, especially in the grad programs.