Last year, David Camp, the former chairman of the House Ways and Means Committee, proposed a 1 percent excise tax on the net investment income of universities with endowments that have at least $100,000 per student. Camp has since retired.
Endowment Growth
Before the financial crisis, Charles Grassley, the Republican senator from Iowa, in a Senate finance committee hearing in September 2007, said he was concerned about endowment growth as college tuition continued to rise. Grassley later raised the idea that college endowments should pay out 5 percent of their value each year, using the same rule as foundations.
Several of the wealthiest U.S. colleges in 2007 and 2008 changed their financial aid policies, awarding grants that don’t need to be repaid instead of loans. Among the schools that adopted the so-called “no-loan” polices were all of the Ivy League, Swarthmore College and Pomona College. Princeton University had the policy years before.
Don Heller, dean of the college of education at Michigan State University, said in an interview he isn’t surprised that Congress is again interested in endowments. However, requiring universities to spend a portion on their endowments on a specific area can be tricky, as much of the funds are restricted, he said. In addition, schools would be concerned about fundraising if Congress began to restrict how money could be spent.
“You would see immediate push-back because of the tax implication,” Heller said. “It could reduce future donations.”