A major increase in the tax on university donations is the addition of financial uncertainty for the richest colleges in the US, as a result of which several all the staff have resigned or the adoption of freezing is implemented.
The issue of more donation fees to taxes can also lead to colleges to reduce financial aid, warning access to elite institutions for students, colleges and industry experts. President Donald Trump signed the tax increase last month as part of his signature expenditure account.
The new tax rates will take effect in 2026, but colleges such as Harvard, Yale and Stanford mention the tax as one of the many reasons for making cuts at their universities. Each will be on the hook to pay hundreds of millions more taxes, while they also navigate Reductions of research subsidies And Other threats for financing By the Trump government.
A Tax on college -donations was introduced during Trump’s first administration and collected 1.4% of the investment profit of rich universities. The law signed by Trump Last month creates a new layered system that charges the richest schools at the highest rates.
The new tax charges an 8% rate in schools with $ 2 million or more in assets for each registered student. Schools with $ 750,000 to $ 2 million are charged 4%, and schools with $ 500,000 to $ 750,000 will charge the rate of 1.4%.
The tax only applies to private colleges and universities with at least 3,000 students, against the previous closure of 500 students.
“The tax now really applies to private research universities,” said Steven Bloom, assistant vice -president of government relationships for the American Council on Education. “It will mean that these schools have to spend more money under the tax, which removes it for which they mainly use their gift assets – financial help.”
This small group of rich colleges stands for a tax increase
The law will increase gift tax for about a dozen universities, according to an associated press Analysis of data of the National Association of College and University Business Officers.
Harvard, Yale, Stanford, Princeton and the Massachusetts Institute of Technology are expected to pay the 8% rate next year. The schools with the rate of 4% include Notre Dame, Dartmouth College, Rice University, University of Pennsylvania, Washington University in St. Louis and Vanderbilt University.
Some universities are on the edge of the parameters of the law. Both Duke and Emory, for example, were shy for the $ 750,000 per student gift threshold based on the last tax year.
Donations consist of donations to the college, which are invested to maintain the money over time. Colleges often spend around 5% of their investment income every year to bring their budgets. Much of it goes to stock markets for students, together with costs such as research or beneficial faculty positions.
Despite the richness of the colleges, the tax will drastically influence their budgets, said Phillip Levine, an economist and professor of Wellesley College.
“They are looking for savings where possible,” Levine said, which can influence financial help. “One of the most important things they do with their donation is the costs of education for students with a lower and average income lower. The institutions that pay the highest tax are also those who charge these students the least amount to attend.”
At Rice University in Houston, for example, officials expect the college to pay $ 6.4 million more in taxes. That amounts to more than 100 financial care providers of students, the university said, but rice officials will explore all other options to prevent that support.
How colleges adapt to financial pressure
In the meantime, some universities continue with cuts on staff.
Yale University says that it will have to pay an estimated $ 280 million in total gift tax, with reference to the tax in a campus report to implement an recruitment. Stanford University has announced plans Reduce the operational budget With $ 140 million this coming school year, including 363 fired and a current Hiring freezing. The university has tried to determine for months where the budget could be reduced, but said that the non -graduated financial aid and financing for Ph.D. would continue to support. Students.
Research universities are increasing the financial pressure of financing the financing of the National Institutes of HealthThe National Science Foundation and other federal agencies.
No university knows this pressure better than Harvard, the richest college in the country. The donation of $ 53 billion places the list for the new tax at the top, but it also sees huge parts of research financing that are in its threat constant struggle with the White House.
The federal government has Frozen $ 2.6 billion in Harvard research grants In connection with research into civil rights, it was aimed at anti -Semitism and Harvard’s efforts to promote diversity on campus. But the impact of other administration policy at the university could approach $ 1 billion annually, Harvard said in a statement.
“It is not as if Harvard goes from one of the best institutions in the world to only a mediocre institution. That probably won’t happen,” said Levine. “But that does not mean that it will not be a bad thing – that there will be no pain and that students will not suffer.”
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Mumpphrey reported from Phoenix. Associated Press writer Sharon Lurye in Philadelphia has contributed to this report.
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