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Factbox-How Trump’s Tax Cuts Affect Federal Student Aid

UNITED STATES, JUL 7 – The new tax raises the endowment investment tax rate to 8%, exempting smaller colleges with fewer than 3,000 students, and is projected to generate an additional $761 million over 10 years.

  • On July 3, 2025, President Donald Trump signed a tax-and-spending package increasing endowment taxes on the nation's top colleges to a multi-tiered rate up to 8%.
  • The law introduces this tax hike due to concerns about fiscal challenges faced by both public and private institutions amid other funding cuts and enrollment restrictions.
  • At least 11 universities will pay taxes at 4% or 8%, while five will pay 1.4%, and Yale is expected to pay about $280 million the first year under the new rates.
  • Experts note college tuition has surged 5.6% annually since 1983, and institutions are raising prices, with Levine stating that 5% or 6% tuition increases "don't seem out of line."
  • The tax increase could reduce financial aid availability and cause tuition hikes, worsening colleges' precarious finances and affecting low-income students who rely on grants like Pell Grants.
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Diane Ravitch's blog broke the news in on Sunday, July 6, 2025.
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