The U.S. Ought to Means-Check Schools The Similar Method It Means-Checks People
Harvard College sits on an endowment (PDF File) price roughly $56.9 billion. That’s greater than the GDP of over 100 nations. But within the 2024-25 educational 12 months, Harvard college students nonetheless acquired over $14.4 million in need-based federal grants and one other $5.3 million in non-need-based assist, in line with its personal Widespread Knowledge Set submitting.
Harvard is just not alone. Yale, with a $41.1 billion endowment, Princeton at $36.4 billion, Stanford at $37.6 billion, and MIT at $24.6 billion all take part in Title IV federal scholar assist packages. These faculties obtain Pell Grants, Federal Supplemental Academic Alternative Grants (FSEOG), federal work-study funds, and course of billions in federal scholar loans for his or her college students.
The endowment tax signed into legislation on July 4, 2025, as a part of the One Huge Lovely Invoice Act, is a step in the fitting path. However it doesn’t go far sufficient.
The federal authorities ought to cease giving Title IV monetary assist (together with Pell Grants and federal scholar loans) to schools which can be sitting on large endowments producing funding income. If a school has the assets to fund each scholar’s training from its personal endowment returns, American taxpayers shouldn’t be subsidizing it.
And each greenback in monetary assist funds spent at these wealth faculties is a possible greenback that could possibly be spent at a school that basically wants the funds: suppose state or neighborhood faculties that ship optimistic scholar outcomes however might lack that additional funding.
The Numbers Do not Add Up
The dimensions of accrued wealth in American greater training is staggering.
Greater than 80 faculties and universities have endowments exceeding $1 billion. This contains not simply personal elite establishments but additionally large public college programs. The College of Texas System holds $47.5 billion. Texas A&M holds $20.4 billion. The College of Michigan holds $19.2 billion. The College of California system holds $19.1 billion.
Amongst personal establishments, the numbers are much more placing when seen per scholar. Harvard, Yale, Princeton, Stanford, and MIT every have endowments above $2 million per scholar. One other 18 establishments exceed $1 million per scholar. These faculties collected billions in funding returns in 2024 alone, rising their wealth whereas concurrently accepting federal taxpayer {dollars}.
Critics of endowment reform usually level out that a lot of this wealth is “restricted” by donor needs – going in direction of a constructing or a sure college’s dean’s wage. However the knowledge tells a special story.
About 40% of upper training endowment belongings are topic to everlasting restrictions, 30% are quickly restricted, and roughly 29% are quasi-endowment—that means the establishment itself selected to set the cash apart and may select to spend it otherwise.
At Harvard, unrestricted funds account for about 20% of its endowment. That’s nonetheless roughly $10 billion in unrestricted funds alone – greater than the entire endowment of most universities in America.
The New Endowment Tax Is A Begin, However Not Sufficient
The One Huge Lovely Invoice Act launched a tiered endowment tax that changed the flat 1.4% excise tax that had been in impact since 2017.
The brand new charges are primarily based on endowment {dollars} per scholar: 1.4% for establishments with $500,000 to $750,000 per scholar, 4% for $750,000 to $2 million per scholar, and eight% for these exceeding $2 million per scholar.
The tax applies to non-public establishments with at the least 3,000 tuition-paying college students, greater than 50% of whom are within the U.S., and at the least $500,000 in endowment per scholar.
Yale’s president estimated the college pays roughly $280 million within the first 12 months underneath the brand new charges. Harvard, with the biggest endowment, will doubtless pay much more.
Taxing endowment revenue is an affordable coverage. However taxation alone doesn’t deal with the core absurdity: that these similar establishments proceed to obtain federal scholar assist. Yale college students nonetheless acquired almost $19 million in Federal assist, while you mix each the scholar and mum or dad grants and scholar loans.
The tax says, “You’ve an excessive amount of cash, so we’ll take a reduce.”
The smarter coverage says, “You’ve an excessive amount of cash, so use your personal assets to assist your college students.”
And when you see the numbers, it is laborious to disregard. Yale is aware of that their households acquired $19 million in assist (together with $6 million in scholar loans) – figuring out full effectively they’ve a lot in extra funds they’re going to pay $280 million in taxes. If they will not make the fitting choices for his or her households, the federal government ought to.
We “Means Check” People For Many Social Applications — Why Not Schools?
The USA operates roughly 80 means-tested federal packages, spending over $1 trillion yearly on advantages for low-income People.
These packages span each space of life: Medicaid for healthcare, SNAP for meals help, Part 8 vouchers for housing, Non permanent Help for Needy Households (TANF), the Earned Revenue Tax Credit score, and Supplemental Safety Revenue, amongst dozens of others.
Each one in all these packages requires candidates to show they lack enough assets earlier than receiving assist. A household incomes an excessive amount of can’t get Medicaid. A family with too many belongings could also be denied SNAP advantages.
The precept is easy: authorities assets ought to go to those that want them, to not those that can afford to assist themselves.
But we apply no equal customary to the establishments that obtain federal scholar assist. Harvard, with $56.9 billion in endowment belongings, receives the identical sort of Title IV funding as a neighborhood school with no endowment and a scholar physique that’s overwhelmingly low-income.
A regional state college serving first-generation college students will get the identical class of federal Pell Grant funding as Princeton, which is sitting on $3.75 million per scholar.
If a household incomes $200,000 a 12 months can’t get meals stamps, why can a college sitting on $53 billion get Pell Grant cash?
Federal Assist Ought to Go To Each College students AND Schools Who Truly Want It
The Pell Grant program disbursed $36.6 billion to 7.2 million recipients within the 2024-25 award 12 months. The most particular person Pell Grant was $7,395.
That is the first federal grant program for low-income college students and it faces a projected $11.5 billion shortfall. On the similar time, Pell {dollars} are flowing to college students at faculties that might simply change each greenback of federal assist with institutional cash.
Think about what redirecting these funds may accomplish. The federal grants going to college students on the 23 faculties with over $1 million in endowment per scholar may as a substitute be routed to neighborhood faculties, regional public universities, and traditionally Black faculties and universities (HBCUs)—establishments that serve the scholars who need assistance probably the most and have the fewest institutional assets to supply it.
Simply trying on the knowledge for these few faculties – implementing these proposals would shift over $100 million in monetary assist to schools that want it.
The federal assist being despatched to those establishments is a rounding error on their steadiness sheets. However for a neighborhood school struggling to maintain its doorways open, those self same federal {dollars} are the distinction between providing lessons and chopping packages.
The Proposal: Ban Title IV for Endowment-Wealthy Faculties
Congress ought to move laws prohibiting establishments from taking part in Title IV federal scholar assist packages (together with Pell Grants, Federal Supplemental Academic Alternative Grants, federal work-study, and federal scholar loans) if the establishment’s endowment generates a web funding revenue in any given fiscal 12 months AND the establishment meets sure endowment-per-student thresholds.
An inexpensive threshold may mirror the present endowment tax brackets. Any personal establishment with greater than $500,000 in endowment per scholar that generates a revenue on its investments must be required to exchange federal scholar assist dollar-for-dollar with institutional assist.
You don’t want taxpayer cash to coach your college students—use your personal.
This isn’t about punishing these faculties. It’s about allocating scarce federal assets the place they’re really wanted.
Faculties like Harvard, Yale, Princeton, and Stanford already present beneficiant institutional monetary assist. They’ve the infrastructure and the belongings to cowl each greenback of federal assist their college students at present obtain. In lots of circumstances, they already complement federal assist with their very own funds anyway.
For college students at these establishments, the transition can be seamless. The college merely replaces the federal Pell Grant with an institutional grant of the identical quantity. The coed’s value doesn’t change.
What adjustments is that federal {dollars} (your tax {dollars}) go to college students at faculties that genuinely want the assistance.
What Are The Objections?
This proposal will little doubt draw sharp criticism from college directors.
In speaking with some business insiders, the three strongest counter-arguments deserve a dialog.
“Title IV Assist Is a Pupil’s Cash—You’re Punishing College students, Not Faculties”
The most typical objection I heard is that Pell Grants and federal loans observe the scholar, not the establishment. Underneath this view, a low-income scholar admitted to Harvard has the identical authorized proper to a Pell Grant as one attending a neighborhood school.
Proscribing Title IV at rich faculties, the argument goes, strips a federal profit from the scholars this system was designed to serve.
This sounds persuasive till you take a look at the maths. Harvard’s 2024–25 Widespread Knowledge Set reveals it already offers $249.5 million in institutional grants to undergraduates. Changing $14.5 million in federal grants (about 5.8% of what Harvard already spends on assist) is trivial.
My proposal requires dollar-for-dollar substitute, so no scholar loses a single greenback. A scholar receiving a $7,395 Pell Grant at Harvard would as a substitute obtain a $7,395 institutional grant from Harvard. The coed’s web value doesn’t change. What adjustments is that federal {dollars} cease flowing to a faculty with $53.2 billion in belongings.
The “scholar cash” framing additionally ignores the truth that it is really the federal government’s cash, and it isn’t flowing to the place the cash may do extra good. Solely about 16% of scholars at highly-endowed personal universities obtain Pell Grants. At neighborhood faculties, that determine generally exceeds 50%.
Redirecting those self same federal {dollars} means reaching 3 to 4 occasions extra low-income college students per greenback spent. The Pell Grant program faces a projected $11.5 billion shortfall – this isn’t about taking advantages away from college students, it’s about stretching restricted federal assets additional.
“Elite Schools Are Engines of Social Mobility—Don’t Discourage Low-Revenue College students from Attending”
A extra nuanced objection attracts Mark Kantrowitz’s insights into undermatching – the place low revenue college students are already under-applying to selective faculties. Eradicating federal assist may create a psychological barrier: even when the college replaces the {dollars}, the sign is that the federal authorities doesn’t help low-income college students attending elite faculties.
However the knowledge really undermines this argument greater than it helps it. At Ivy Plus faculties, extra college students come from the highest 1% of the revenue distribution than from the complete backside 50%. Kids from the highest 1% are 77 occasions extra prone to attend an Ivy Plus college than youngsters from the underside 20%.
The “mobility charge” (which measures what fraction of a college’s total scholar physique are bottom-to-top success tales) is definitely highest at mid-tier public establishments like CUNY campuses, California state faculties, and College of Texas faculties. These are the faculties this proposal would redirect federal funds towards.
Sure, elite faculties are efficient for the few low-income college students who get in. However the federal authorities will get much more mobility per greenback on the public establishments that serve the overwhelming majority of low-income college students.
If Harvard can seamlessly change a $7,395 Pell Grant with a $7,395 institutional grant (which it demonstrably can primarily based on it is steadiness sheet) there isn’t any sensible barrier to a low-income scholar attending. The FAFSA course of doesn’t change for the scholar. The college merely funds the award itself.
“This Units a Harmful Precedent—Authorities Will Weaponize Pupil Assist Towards Universities”
The third objection I heard is political: that giving the federal government a brand new lever to limit Title IV primarily based on institutional traits opens the door to politically motivated restrictions. And the federal government is already attacking admissions insurance policies and extra.
This argument conflates goal monetary standards with political focusing on. Means-testing primarily based on endowment-per-student ratios is not any completely different in precept from means-testing people primarily based on revenue—one thing the federal authorities already does throughout 80-plus packages spending over $1 trillion yearly. The edge is monetary and quantifiable, not ideological.
The slippery slope concern additionally ignores that the federal government already units a number of monetary benchmarks that decide Title IV eligibility.
Faculties should preserve acceptable cohort default charges, meet monetary duty requirements, and adjust to ROI guidelines. Faculties that fail these benchmarks lose entry to federal assist.
Including a monetary capability take a look at for establishments with huge wealth is in line with present observe.
If something, a transparent statutory threshold primarily based on endowment-per-student protects faculties higher than the present surroundings, the place Harvard noticed 350 federal analysis grants frozen or terminated by govt motion in 2025 with none outlined monetary standards in any respect.
A clear, legislated customary is the other of weaponization – it’s rule of legislation.The issue is that faculties do not wish to admit what this rule will do: it would encourage faculties to start supporting college students financially. One thing the present school tuition disaster has failed at.
Let’s Ship Monetary Assist {Dollars} To The place They’re Truly Wanted And Cease Giving Handouts To Rich Faculties
The American social security web is constructed on a easy thought: assist goes to those that want it.
We don’t give unemployment advantages to billionaires. We don’t give meals help to households incomes six figures. We don’t give Medicaid to individuals with complete personal insurance coverage. But we give federal scholar assist to establishments with extra wealth than most nations.
The brand new endowment tax is a begin. It acknowledges that these establishments have accrued wealth that must be contributing extra to the general public good. However taxing the endowment whereas concurrently sending federal monetary assist {dollars} again to the identical faculties is contradictory.
Congress ought to take the following logical step: means-test faculties the identical method we means-test People. In case your endowment is producing income, use that cash in your college students.
Let federal monetary assist cash movement to the faculties and college students who really need it.
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