Congress raises tax on college endowments, but students may pay the bill

What it does

This bill increases the federal excise tax on investment income earned by private colleges and universities from 1.4% to 10%, with an additional penalty rate of 20% for institutions that have raised their net tuition prices faster than inflation over the prior three years. It also lowers the asset threshold that triggers the tax from $500,000 to $250,000, bringing more institutions under the tax. The changes take effect for tax years beginning after December 31, 2024.

Why we flagged it

The bill's operative mechanism is a straightforward increase in an existing excise tax on private college endowments, with a penalty tier for institutions raising net prices faster than inflation. It is a tax policy amendment, not a regulatory or appropriations measure.

What the text implies

• Colleges may respond by raising tuition on all students (including those not receiving aid) to offset the tax, potentially worsening affordability for middle-income families.
• The 20% penalty rate for net-price-increase institutions creates a strong incentive to freeze or cut net prices, but does not prevent absolute price increases—only those exceeding inflation.
• Lowering the asset threshold from $500k to $250k brings smaller endowments into the tax base, potentially affecting regional and less-wealthy private institutions more severely than large research universities.
• The tax applies to investment income, not endowment principal, so institutions may shift asset allocation away from equities toward lower-yielding bonds, reducing long-term growth and future aid capacity.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill targets price increases at private colleges, which could incentivize cost restraint and benefit students facing rising tuition. However, the tax may be passed through to students via higher fees, reduce institutional financial aid, or force cuts to academic programs and services—offsetting the intended accountability benefit. The net effect on ordinary students and families is unclear and depends on institutional responses.

Named in the bill

Private colleges and universities, Internal Revenue Service (IRS), Internal Revenue Code Section 4968, Higher Education Act of 1986, Consumer Price Index (CPI)

Where it stands

1 cosponsor: 1 Republicans.

• Feb 5, 2025 — Introduced · Congress.gov: “Introduced in House”
• Feb 5, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $360,000 in lobbying spend. A filing names 34 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

David Joyce, the sponsor, reported $984,500 in PAC receipts in the 2026 cycle.

• Cornell University — $360,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.