Taxing College Endowments

Here in Massachusetts, Democratic candidate for governor Jay Gonzalez proposed taxing college and university endowments exceeding $1 billion. This position is brewing backlash from many in higher education who see the proposal as unfair to schools who use these endowments for financial aid and scholarships.

Indeed, many elite colleges and universities are able to use their wealth to nearly eliminate reliance on student debt for their students, however they serve a much smaller number of students, especially in-state students. My own research on student debt found that Massachusetts’s public college and university students, which educate the majority of in-state students, are in fact much more likely to have student debt than their counterparts at wealth, elite institutions (it should be noted that while Massachusetts is home to some of the wealthiest private institutions, the private institution landscape also has vast inequality between wealth, elite schools and those with very limited wealth, high price-tags, and heavy reliance on student debt).

Data Source: Delta Cost Project Database.

Average Percentage of Students with Debt
Academic Year MA Public Colleges MA Private Colleges
2000 59.00 61.33
2001 54.20 62.67
2002 53.00 47.50
2003 54.00 52.50
2004 59.18 53.00
2005 61.64 44.50
2006 61.80 43.00
2007 64.50 55.00
2008 64.90 60.00
2009 71.56 91.00
2010 73.10 66.00

In this research, I had also found a pretty clear correlation between high-debt and in-state enrollment. A fairer tax on endowment wealth could help redistribute that wealth to aid in-state students, and reduce debt loads.

InStateDebtCorrelation

For this reason, public higher education advocates in the state support the Endowment Tax idea as a good start to more equitable funding for public higher education.