Rep. Joyce introduces bill to increase taxes levied on private university endowments

U.S. Rep. Dave Joyce (R-OH) introduced legislation that would increase the tax rate on private university endowment profits.

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The Higher Education Accountability Tax (HEAT) Act (H.R. 9331) would increase the tax levied on annual private university endowment profits from the current rate of 1.4 percent to 10 percent.

Further, it would increase the number of universities who must pay the tax, expanding the threshold to all private colleges and universities with an endowment valued at $250,000 per student. Currently, the threshold is an endowment of $500,000.

In addition, the annual tax on endowments would jump to 20 percent for universities and colleges that raise the net price of attendance above the rate of inflation over the preceding three years.

“Instead of rewarding institutions for forcing increasing debt on students, we must address the root issue. The HEAT Act does just that by holding these universities accountable for the national student debt crisis. I am proud to advocate for American taxpayers who are left footing President Biden’s bill for unpaid student loans,” Joyce said.

The bill is cosponsored by Rep. Nicole Malliotakis (R-NY).

“Our legislation will finally hold universities accountable for their role in fueling the student debt crisis and encourage them to limit rapid tuition increases,” Malliotakis, a member of the House Committee on Ways and Means, said. “Out of control tuition and the debt that amasses because of it delays millions of young Americans’ ability to buy homes, start a family, save for retirement, and invest in their futures.”

In the next academic year alone, the median increase in published tuition prices at America’s top 20 colleges will be 3.7 percent, resulting in a median sticker price for undergraduate tuition of $58,396.

In the United States, student loan debt totaled $1.7 trillion in 2023. The outstanding federal loan balance is $1.6 trillion and accounts for 92.8 percent of all student loan debt. Additionally, over 40 million borrowers have federal student loan debt, and the average university student borrows around $30,000 just to attain a bachelor’s degree. In general, tuition increases have significantly outpaced inflation.

Further, estimates show that wealthier colleges and universities with growing endowments do not increase the number of students they serve or the fraction of students receiving aid, and only modestly increase the generosity of aid packages. Instead, they offset higher freshman yield rates by becoming more selective and enrolling fewer low-income students and students of color.

Overall, colleges and universities appear to use greater endowment wealth to increase spending and to become more selective, resulting in higher institutional rankings, but do not increase the size or diversity of their student bodies.