The Role of College and University Endowments

This report examines the justification for the tax-exempt status of public and private nonprofit college and university endowments—and the public subsidy that policy involves—and the merits of the arguments for and against modifying this exemption. The authors find that taxing endowments is not the most effective way for the federal government to increase college access, affordability, and success for low-income students. Instead, the federal government should provide more funds to under resourced institutions and students. At the same time, colleges and universities that hold significant endowment assets should redouble their efforts to make larger contributions to increasing educational opportunities for students from low- and moderate-income backgrounds, reducing inequality, and building a society committed to these goals.