Yale opposes taxes on graduate student aid, schools’ endowments

Overview of campus
(Photo by Michael Marsland)

Yale has been and will continue to oppose elements of the tax bills recently passed by the Senate and U.S. House of Representatives that would tax university endowments and tuition waivers — which are essentially financial aid for graduate students.

University officials have spent significant time on Capitol Hill this fall, pointing out that these measures would dis-incentivize many highly deserving students from pursuing graduate degrees, and limit resources available for financial aid and innovative research, which benefits society, creating economic growth and jobs — the stated objective of both the House and Senate bills.

National policy should lower, not raise, the hurdles that graduate students must overcome in completing their degrees,” said President Peter Salovey. “I encourage the House leadership to deliver on the assurances it gave during House floor debate to find a solution.”

Salovey added, “I am deeply concerned that the idea of taxing universities’ investment income has passed the House as well as the Senate. Taxing universities will harm the country by taking away funds that would otherwise promote excellence in teaching and research, as well as financial aid. I urge Congress to reconsider the tax. We should not be pursuing policies that create obstacles to spending on education and research, which drives economic growth, global competitiveness, and innovation that creates jobs.”

Yale officials engaged with key members of Congress and senior members of the Trump administration to oppose these provisions. Representative Lamar Smith ’69 (R-TX) organized Republican colleagues to raise concerns before the Ways & Means markup of the bills. He also drafted a “Dear Colleague” letter signed by 43 representatives, including 19 Republicans, urging Congressional leadership to drop the investment income tax. The university also sent to swing-vote Republicans a statement on preserving 117(d) and avoiding a tax on investment income. Yale also advocated for higher education provisions in tax reform, working specifically to preserve Section 117(d)’s tax exemption for tuition waivers for graduate students.

Yale also encouraged alumni and graduate students to write or call their congressmen about the legislation and to write op-eds about the provisions. In an op-ed published in Politico, Yale trustee Douglas Warner III ’68, former chair of J.P. Morgan Chase & Co., wrote: “It seems odd that a tax bill purporting to boost economic growth would take resources away from the institutions most vital to promoting it. … As a former investment banker with 33 years of experience doing commercial and investment banking, I know a good investment when I see one. I know that the way out of the jobs dilemma in America is education and research. America’s global competitiveness depends on both.”

In addition, Yale supported and encouraged the efforts of peer schools and national scientific societies to opposing the legislation both on Capitol Hill and in the media. On Nov. 28, Harry McMahon, a Claremont McKenna College trustee, wrote an op-ed in The Wall Street Journal titled “Leave College Endowments Alone.” In it, he said that taxing college and university endowments would likely restrict funding for financial aid, raise tuition, and discourage philanthropic donations.

 As a result of outreach by Yale, higher education peers and graduate students across the country, including the Yale Graduate Student Assembly, there was a positive colloquy on the House floor with Ways and Means chair Kevin Brady in which he committed to finding a positive solution on tuition assistance in the conference with the Senate.

Yale officials encourage all members of the university community to reach out to their senators and representatives and call for amendments to the tax bill that would remove the taxation of graduate student financial aid and of university endowments.