Reply to Amount of Endowment Tax Liability Expected for 25 Elite US Universities

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

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

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.[/quote]

This is why it makes sense in Princeton’s case though. [b]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.[/b]

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.[/quote]

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 ? [/quote]

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.”[/quote]

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