New York Times Op-Ed: A Bold Idea to Open Up Elite Colleges, by James S. Murphy (Fellow, Class Action) & Ryan Cieslikowski (Co-Founder & Director, Class Action):

Princeton recently waived tuition for most students from families making up to $250,000 a year. Reporting in The Daily Princetonian suggests that this move may have removed the university from the One Big Beautiful Bill Act’s endowment tax rolls.

Although Republicans created the tax on endowments in 2017 and increased it for many institutions last year as little more than a way to stick a thumb in the eye of elite colleges, they may have inadvertently created an incentive for Princeton to expand access and diversity on its campus by exploiting a new tax loophole.

This is the kind of tax evasion we should all get behind.

We’re members of a student-driven organization that pushes elite colleges and universities to be more accessible to ordinary Americans, so it feels odd to praise Princeton for possibly avoiding a tax on its over $36 billion endowment. It feels even stranger to praise anything about legislation that is a giant tax giveaway to the wealthy that guts a range of social services.

Yet the Republicans’ endowment tax revealed a useful lesson: It seems possible to push wealthy colleges like Princeton to enroll more working- and middle-class students. They surely need that push, because our most prestigious universities enroll a larger share of rich students now than they did in the 1980s. Congress should devise a smarter endowment tax to reward the country’s most exclusive colleges for better serving the American public. …

The additional $44 million Princeton was expected to spend on financial aid last school year is a fraction of the over $200 million it was projected to owe under the tax every year. Even if this move is entirely self-serving, the effect will not be. Princeton will surely need to enroll classes of students that are majority working- and middle-class every year to avoid the endowment tax.

In January, the managing director of the Princeton University Investment Company reportedly told attendees at a closed-door event that the school expects to stop paying the federal endowment tax. This is most likely thanks to the university’s new policy, which waives tuition for students from the 90 percent of American households that make less than a quarter-million dollars a year. …

A better-designed tax would apply to schools with endowments worth more than $500,000 per student, regardless of enrollment size, but the rate they pay would go down, potentially to zero, as they increase their share of students from the bottom 80 percent of income and provide them enough financial aid to avoid debt. Institutions would be rewarded, as well, for rejecting unfair admissions practices like legacy and donor preferences and for increasing their share of community college transfers. …

Americans don’t have to choose between an assault on higher education and a status quo built to serve a privileged few. A better, bipartisan endowment tax that rewards access and affordability and sends revenue to the colleges that do the most good is a way out of that false choice and a step toward repairing higher education’s broken social contract with the nation.

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