With the One Big Beautiful Bill the law of the land, there are a host of new policy implications to unpack, especially pertaining to higher education. Among the changes in the law is an increased endowments tax, up to 8% for wealthy, private colleges (compared to 1.4% currently). The new top rate of 8% is lower than what some had proposed — the House version would have topped out at 21%. Still, 8% does represent a significant new tax burden for elite institutions.
Last week, Mark Schneider at AEI released estimates of universities’ tax burden under the new law, and projected these estimates out to 2030. He estimates that 20 colleges and universities will be subject to the endowments tax next year, with a total tax liability of $1.7 billion for all 20 institutions. By 2030, the cumulative projected tax liability is $10.5 billion.
Of these 20 institutions, five would have 2026 tax liabilities of more than $100 million: Harvard ($368.2 million), Yale ($275.6 million), Princeton ($217.4 million), Stanford ($202.5 million), and MIT ($174 million). As a comparison, Harvard’s tax liability in 2024 was more than $40 million, according to the Associated Press. The total tax liability for these five institutions alone in 2026 would be $1.2 billion, about 72% of the total tax liability for all 20 of the institutions that would be subject to the endowments tax ($1.7 billion).
By the end of 2030, each of these institutions would have had a cumulative tax liability of over $1 billion, with Harvard coming in over $2 billion. That is a total tax liability of $1.2 billion in 2026 and a total cumulative tax liability of $7.1 billion by 2030 for just these five institutions. That represents about 67% of the total cumulative tax liability for all 20 institutions ($10.5 billion).
It is important to note that these are estimates and subject to change, especially if universities change their behavior or take steps to reduce their tax burden, as Schneider notes. But certain behavior changes could open them up to other tax liabilities, such as the capital gains tax, if universities need to sell other high-value assets.
The increase in the top rate may have been less than was feared, but colleges and universities should not consider themselves out of the woods yet. Lawmakers will still be looking for pay-fors and ways to trim spending or divert it to other priorities. Institutions could find themselves in the cross-hairs of Congress again. As we have written before, many elite universities have not done enough to establish their value proposition with the electorate. The increase in the endowments tax is one consequences of not having done so.
