Key Takeaways
• The House advanced a bill increasing endowment tax rates for private universities with large international student populations.
• International and undocumented students are excluded from per-student tax calculations, raising tax burdens for affected schools.
• Yale, Harvard, MIT, and Stanford face up to $690 million annually in new endowment taxes under the proposal.
A major change to how the United States 🇺🇸 taxes wealthy private universities is moving quickly through Congress, and it could have serious consequences for international students, financial aid, and the future of American higher education. On May 23–25, 2025, the U.S. House of Representatives advanced the “One Big Beautiful Bill Act,” a sweeping budget proposal that includes a dramatic increase in the federal endowment tax for private universities. The most controversial part of the bill is a new rule that excludes international and undocumented students from the per-student calculation used to determine how much tax a university must pay. This change could hit schools with large international student populations the hardest, raising their tax bills by hundreds of millions of dollars each year.
Let’s break down what’s happening, why it matters, and what it could mean for students, universities, and the future of U.S. higher education.
What Is the Endowment Tax and What’s Changing?
Endowment tax is a federal tax on the investment income earned by the endowments of wealthy private colleges and universities. An endowment is a large pool of money, often donated by alumni and supporters, that universities invest to support scholarships, research, and other programs. Since 2017, the United States 🇺🇸 has taxed the investment returns of private universities with endowments over $500,000 per student at a rate of 1.4%.
The new proposal, passed by the House Ways and Means Committee on May 16, 2025, and now heading for a full House vote, would:
- Raise the tax rates sharply for universities with higher endowment-per-student ratios.
- Exclude international and undocumented students from the per-student count, making the endowment-per-student number look much higher for schools with many international students.
- Apply a tiered tax rate system as follows:
- $500,000–$750,000 per student: 1.4% (unchanged)
- $750,000–$1.25 million per student: 7%
- $1.25 million–$2 million per student: 14%
- $2 million or more per student: 21%
This means that universities with large numbers of international students will be pushed into higher tax brackets, even if their overall endowment size hasn’t changed.
How Is the Endowment Tax Calculated?
Here’s a simple step-by-step explanation of how the new endowment tax would work:
- Calculate the total endowment value for the university.
- Count only eligible students: This now means only U.S. citizens and permanent residents enrolled full-time. International and undocumented students are not counted.
- Divide the endowment by the eligible student count to get the endowment-per-student figure.
- Apply the new tiered tax rate based on the endowment-per-student number.
- Tax only the investment returns, not the original endowment money.
For example, if a university has a $10 billion endowment and 10,000 eligible students, the endowment-per-student is $1 million. If 3,000 of those students are international and now excluded, the calculation becomes $10 billion divided by 7,000, or about $1.43 million per student. This could push the university into a much higher tax bracket.
Who Is Most Affected?
The universities most affected are those with both large endowments and significant international student populations. These include:
- Yale
- Harvard
- Princeton
- MIT
- Stanford
- Northwestern
- Several other elite private universities
According to analysis from VisaVerge.com, at least 41 colleges and universities would be subject to the expanded tax, with several facing much higher rates than before. Only three universities—Princeton, Yale, and MIT—would pay the highest 21% rate, while about 10 more, including Harvard and Stanford, would pay 14%.
Yale’s estimated annual tax bill would jump to $690 million, while Harvard, Stanford, MIT, and Princeton could each face $400–$850 million in new annual taxes. In 2023, 56 private schools paid the current tax, generating about $380 million in total. Under the new plan, the government could collect billions more each year.
Why Exclude International Students?
Supporters of the bill, mostly House Republicans, argue that wealthy universities should pay more in taxes, especially since their endowments are tax-exempt and they believe these schools don’t spend enough on student aid. By excluding international and undocumented students from the calculation, the bill’s authors say they are focusing the tax on support for U.S. citizens and permanent residents.
However, critics say this move unfairly punishes universities that welcome international students, who often pay full tuition and contribute to campus diversity and research. Many experts believe the exclusion is meant to target elite universities that enroll large numbers of international students, which some lawmakers see as politically or culturally out of step with their priorities.
What Do University Leaders and Experts Say?
University leaders have spoken out strongly against the proposal. Yale President Maurie McInnis called it “a greater threat to Yale than any other bill in memory,” warning that it could cost the university hundreds of millions of dollars each year—money that now supports financial aid and research.
MIT spokesperson Kimberly Allen said the proposal is “basically a tax on national research and student aid, and at MIT alone it would cut hundreds of millions of dollars from our budget each year.” Stanford’s Luisa Rapport warned that the tax hike “will directly reduce financial aid for undergraduates, support for faculty and graduate students, and funding for research programs.”
Policy experts agree. Steven Bloom of the American Council on Education said, “It’s always been a scholarship tax… will be incredibly detrimental to student aid efforts at affected colleges.” Phillip Levine of Wellesley College added, “Both [excellence and access] are at risk in the presence of a large endowment tax.”
How Will This Affect International Students?
The exclusion of international students from the tax calculation does not mean they are not welcome, but it does make them a financial liability for universities. Here’s how:
- Universities with many international students will pay much higher taxes.
- Financial aid and scholarships for all students, including international students, could be cut as universities try to cover the new tax bills.
- Research funding may drop, affecting graduate students and postdocs, many of whom are international.
- Universities may be less likely to admit international students in the future, or may limit their numbers to reduce their tax burden.
This could make the United States 🇺🇸 less attractive to international students, who already face high tuition and visa hurdles. It could also hurt the country’s reputation as a global leader in education and research.
What About Financial Aid and Research?
Endowment spending is a key source of funding for student financial aid, scholarships, and research. In 2022, private universities spent about 49.1% of their endowment returns on student financial aid and 17.7% on academic programs and research.
If universities have to pay hundreds of millions more in taxes, they will have less money for these purposes. This could mean:
- Less financial aid for low-income and middle-class students
- Fewer scholarships for international students
- Cuts to research programs, labs, and faculty positions
- Reduced support for graduate students
Some universities may also have to cut other student services or raise tuition to make up for lost funds.
Could This Change Donor Behavior?
Experts warn that the higher endowment tax could discourage charitable giving. Donors may prefer to give to institutions not subject to the tax, or may give less if they believe their gifts will be taxed away. This could further reduce the resources available for scholarships and research.
Are Any Schools Exempt?
Yes. Religious and certain faith-based institutions are exempted from the endowment tax. This means that some private colleges and universities will not be affected, even if they have large endowments.
What’s the Political Situation?
The bill has passed the House Ways and Means Committee and is being merged with other proposals for a full House vote. However, it has not yet become law. The Senate must also approve the bill, and there is opposition there, especially from some Republican senators like Ron Johnson (R-WI), who have raised concerns about the fiscal impact and fairness of the proposal.
The specifics of the tax rates and calculation formula could still change during negotiations. The final outcome is uncertain, but universities are lobbying hard to stop or change the bill.
Historical Background
The original 1.4% endowment excise tax was created in 2017 during the Trump administration. It was aimed at private universities with large endowments, based on the idea that these schools should contribute more to federal revenues. Since then, lawmakers have debated whether the tax is fair and whether it hurts or helps students.
In 2024–2025, Republican lawmakers pushed for a higher tax and for the exclusion of international students from the calculation, citing concerns about elite universities’ wealth and political bias. Universities have responded with strong lobbying efforts, warning of severe financial consequences.
What Happens Next?
The bill must still pass the full House and the Senate before it becomes law. There is strong opposition in the Senate, and the details could change. If the bill passes as written, it could reshape university finances, reduce financial aid and research capacity, and change the makeup of student bodies at elite institutions.
What Should Students and Families Do?
If you are a current or prospective student—especially an international student—here are some steps you can take:
- Stay informed: Follow updates from your university and official sources like the U.S. House Ways and Means Committee for the latest news.
- Ask about financial aid: Contact your school’s financial aid office to see if they expect changes to scholarships or aid packages.
- Consider your options: If you are applying to U.S. universities, ask about how the endowment tax might affect your financial aid or research opportunities.
- Advocate: If you are concerned, consider joining student or alumni groups that are speaking out about the issue.
Key Takeaways
- The House of Representatives is advancing a bill that would raise the endowment tax for private universities and exclude international and undocumented students from the per-student calculation.
- Universities with large international student populations will pay much higher taxes, threatening financial aid, research, and access for both domestic and international students.
- The bill has not yet become law and faces opposition in the Senate.
- Students, families, and universities should stay informed and be prepared for possible changes to financial aid and research funding.
For more detailed analysis and ongoing updates, VisaVerge.com reports that the higher endowment tax could reshape the landscape of U.S. higher education, especially for international students and the universities that serve them.
Additional Resources
- U.S. House Ways and Means Committee – Official updates on the bill and contact information
- American Council on Education – Advocacy and policy analysis
- National Association of Independent Colleges and Universities – News and updates for private colleges
In summary: The proposed endowment tax hike, especially the exclusion of international students from the calculation, would disproportionately harm universities with large international student bodies by pushing them into higher tax brackets. This threatens financial aid, research, and access for both domestic and international students. The policy is moving forward in Congress but faces an uncertain future in the Senate. Stay tuned for further developments as the debate continues.
Learn Today
Endowment Tax → A federal tax on investment income earned by private universities’ endowment funds supporting scholarships and research.
Endowment → A large pool of invested funds donated to universities to support scholarships, research, and academic programs long term.
Undocumented Students → Students who lack official immigration status and are excluded from the new per-student tax calculations.
Tiered Tax Rate → A system where tax rates increase at different thresholds of endowment value per eligible student.
International Students → Students from other countries whose exclusion from tax counts increases universities’ endowment tax liabilities.
This Article in a Nutshell
Congress is advancing a bill to raise federal taxes on wealthy private universities by excluding international students from counts, increasing financial pressure, cutting aid, and possibly limiting international student admissions across top U.S. institutions.
— By VisaVerge.com
