A view of Swarthmore College, located in Delaware County. (Credit: Swarthmore College)
Amid President Donald Trump’s escalating clash with elite private universities, the administration’s “Big Beautiful Bill,” passed on July 4, delivers financial relief to small colleges while raising taxes on larger institutions. Four Philadelphia-area universities will be impacted.
The legislation derives its double-edged sword quality from its policy on endowment funds, which are a collection of financial assets meant to support university operations.
Typically including stocks, real estate, cash donations, and even royalties, academic endowments tend to have staggeringly high numbers. Harvard University has the largest university endowment in the world — it is currently valued at $53.2 billion.
In legislation enacted during Trump's prior term, all private colleges with at least 500 tuition-paying students and an endowment exceeding $500,000 per student were required to pay a 1.4% excise tax on their endowment. As a result of the 2017 law, 56 universities paid about $380 million under the endowment tax rate.
However, Trump’s new policy on the endowment tax introduced a three-tiered system, which Congress’s Joint Committee on Taxation estimates will bring in $761 million in tax revenue over 10 years.
To start, only private colleges with more than 3,000 students qualify. Then, the tax rates vary based on the size of the university's endowment.
The increased federal tax revenue comes at the expense of universities already facing immense fiscal pressure. Notably, Trump’s comprehensive spending package includes cuts to Pell Grants and National Institutes of Health funding, which support aid for low-income college students and scientific research, respectively. Tuition hikes are predicted to follow the endowment tax, impacting students who have experienced an average 5.6% surge per year.
Here’s a breakdown of which Philadelphia-area universities will be affected by the revised endowment tax.
A Forbes analysis found that two Southeastern Pennsylvania universities that currently pay the 1.4% tax will be exempt from the new endowment tax rate once it goes into effect.
A private liberal arts college in Delaware County, Swarthmore boasts a 1,713-student population with a 7.4% acceptance rate. In 2024, the endowment reached $2.72 billion, and those endowment earnings fund more than half of its $220 million operating budget. Under the previous endowment tax, Swarthmore paid about $2 million to the federal government.
Bryn Mawr is a private women’s liberal arts college in Montgomery County. It has 1,368 undergraduate students with an endowment of $618,000 per student. Only barely surpassing the minimum for the 2017 endowment tax rate, now the university will be exempt due to its small student population. Their endowment earnings fund almost 40% of the college’s operating budget.
This Ivy League institution in the heart of University City will likely be required to pay a 4% excise tax under the new legislation; however, some estimates still place it in the 1.4% category. Regardless, a sizable portion of Penn’s $22.3 billion endowment will continue to funnel to the federal government.
Though Princeton, another member of the Ivy League, is located outside the Commonwealth, it’s just an hour's drive from Philadelphia — and Pennsylvania ranks as the fourth most common home state among its students. With an endowment per student ratio of almost $3.8 million, the university will likely be required to pay the highest tax rate of 8%.
