President Trump's tax and policy plan drastically raises taxes on wealthy university endowments, which critics say will cut scholarships and research funding at Rice University.
The U.S. House approved President Donald Trump's significant tax and policy package, "The One, Big, Beautiful Bill," on Thursday, which may cost Rice University $10.1 million in annual endowment taxes. The law, which now goes to the president, hikes the tax rate on endowment gains for affluent universities like Rice from 1.4% to 8%, while Rice's will be 4%.
That will double Rice's annual tax contribution by $6.4 million, the equivalent of almost 100 complete financial assistance packages, the university claimed. Nearly half of Rice's $7.6 billion endowment returns are allocated to student financial aid, so the extra expense may impact the university's budget.
Rice University expressed gratitude to lawmakers, particularly the Texas delegation, who have taken the time recently to listen and learn about how our endowment provides scholarships and supports our mission to conduct groundbreaking research. “Despite this new financial challenge, we remain committed to accessibility, affordability, and a high-quality, personalized education.”
Republicans call the plan the most significant tax break in American history, and Inside Higher Ed reports that it slashes Medicaid by $1 trillion, curbs student loan borrowing, and eliminates the Grad PLUS program. The earnings of graduates after college will soon determine federal student assistance eligibility, increasing uncertainty for campuses nationwide.
Beginning in July 2026, full-ride scholarship recipients will be ineligible for Pell grants.
Rice officials said endowment disbursements rose from $215 million in 2009 to $437 million this year, primarily for scholarships and research. Endowment limitations and spending caps preserve this money, but the new tax may compel tough choices.
Representatives claimed Rice's endowment covers nearly 40% of its $1 billion operational budget, more than most of its rivals. Almost 57% of Rice freshmen receive direct aid from the no-loan university.
The endowment tax hikes will significantly impact Rice. Still, administrators at Texas's other large private nonprofit colleges, such as the University of St. Thomas and Houston Christian University, do not expect them due to their lower endowments, which range from $137 to $149 million.
The bill is another triumph for Trump's efforts to hold wealthy institutions, especially those in the Northeast, accountable for their endowments. Rice President Reginald DesRoches has recently told lawmakers how Rice's endowment benefits students and research, despite Rice's relative anonymity.
The tax adjustments come as institutions prepare for new student loan restrictions and changes to financial assistance eligibility regulations, which will alter budgets.
