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Sunday, December 03, 2017

College Admissions at Elite Schools and the $500,000 Endowment Per Student Cutoff

Under the pending Trump Tax Plan, Universities whose endowments are above $500,000 per student will face an endowment income tax of 1% a year.  A $7 billion dollar school would pay roughly $10 million dollars in cash (that's a lot of Assistant professors slots).  Holding a university's endowment fixed, if this school increases its student population by 20%, it will be less likely to face this tax threshold.  From the link above, I see that Duke, UPENN, Columbia and University of Chicago are all hovering around the threshold.  I predict that they will be admitting more students in the near future.

My son is a junior in high school so this incentive effect is of interest to me.

UPDATE:  This post has been updated to correct my mistake.  The tax is on endowment income (not wealth).  I thank USC Price Professor Nick Duquette for updating me.