The Price of Populism: How the Big Beautiful Bill Targets Students, not Schools

While fireworks were going off on July 4th, another kind of spectacle was occurring in Washington as President Donald Trump signed a comprehensive spending and taxation package into law. This legislation, celebrated as a victory within the White House, included policy items such as an excise tax on endowment income and changes to student loan programs, both of which may have long-term effects on higher education. These policies reveal a bias within the Trump administration’s crusade against elite universities and will severely disadvantage low- and middle-income students in accessing high-quality education.


University endowments are often shrouded in mystery, frequently involving proprietary strategies and detailed information kept confidential from the public. In function, they act as a pool of donated assets that are invested and grown over time, with approximately 5% of assets allocated each year to their missions. In recent years, endowments have repeatedly been caught in controversy, most notably through nationwide student protests demanding college endowments to audit their holdings and divest from companies doing business in Israel. This movement made its way to Charlottesville as well, with the University of Virginia Apartheid Divest Coalition presenting a referendum to university leadership. Similarly to nearly all other schools nationwide though, UVA did not make any changes to its investment strategy as a result of the movement. This stubbornness is largely due to how important endowments are to long-term planning for universities. Despite their controversy, endowment proceeds serve as a vital source of funding, going towards research, faculty positions, and student financial aid. Still, endowments have been the target of attacks in the past, most notably in Trump’s 2017 Tax Cut and Jobs Act (TCJA). In an attempt to address university endowments’ burgeoning size and increasing disconnect with the missions of their schools, the TCJA placed a 1.4 percent excise tax on endowments' returns. This measure focused on private colleges with an endowment size of over $500,000 per full-time student and in 2022 raised $244 million from 58 institutions.


Trump’s spending bill revamped the TCJA’s taxation framework, placing universities into a tiered system based on the ratio of a college’s endowment size to their full-time student enrollment. Targets of the Trump administration, such as Harvard, face a 6.6% increase in tax rate, leading to an estimated additional $260 million in tax burden. However, institutions like the University of Richmond and Emory University, which are less frequently at the center of political scrutiny, have also been swept up by the changes. Despite lacking the high political profile of their peers, these schools may see their tax obligations double, raising concerns that the new formula inadvertently punishes institutions for effective fundraising and financial stewardship. 


At the same time, a collection of small, wealthy colleges like CalTech, Swarthmore, and Amherst were also exempted from the tax. A provision to exempt colleges with under 3,000 enrolled students was a relatively last-minute development within the Senate, one that was made in large part to exempt one school from the tax — Hillsdale College. The Christian, conservative liberal arts college in southern Michigan has strong ties to Republican leadership, and due to its large per-student endowment, it would have been saddled with the tax if not for the 3,000-student provision. This favoritism betrays the true motivations of this bill, to punish “woke” universities that don’t conform to the Trump administration. An analysis of this tax from the Financial Times shows that it would raise $760M over the next decade, paying for just 15 hours of the overall BBB tax package. Altogether, this tax does less to reform higher education than to discipline it. Rather than targeting genuine excess, it wields the endowment tax as a weapon to silence perceived opposition.


Trump’s changes to higher education don’t just punish his political enemies; they hurt students in the process. As Steven Bloom of the American Council on Education says, “Our view is that the endowment tax undermines access [to education]. It’s, in fact, a scholarship tax.” This claim is reflected in the data, as a 2024 study of endowments found that 48.1% of endowment spending goes directly to student financial aid. 


Beyond endowments, the bill also changes the landscape of student loans, most notably eliminating the Grad Plus loan program and capping Parents Plus loans at $65,000 per student. While federal student loans are far from perfect, these changes disproportionately affect low- and middle-income students, limiting their access to graduate education. The bill also places a $200,000 lifetime limit on student loan borrowing for professional degrees. Though this is a substantial amount, it falls short of the average cost of attending a four-year medical school, which ranges from $286,000 to $390,000, not including the cost of undergraduate education. Further, a sizable proportion of dentists, doctors, and lawyers would graduate with debt above this cap, forcing them to seek alternative funding, especially through private student loan lenders. These lenders have been much maligned for lacking the safeguards of federal plans, such as income-based repayment and low interest rates, as well as locking students into predatory mandatory arbitration clauses. 

In effect, these changes to student loans reinforce inequality in higher education, separating the “haves” from the “have-nots” by forcing many students into debt. This will be felt by the broad class of middle-income students, who lack both the wealth to pay out-of-pocket for education and the ability to qualify for need-based financial aid. Just as the bill penalizes institutions out of line with the Trump administration, it also limits the tools that make them accessible to the vast majority of students. Together, these actions reflect a reframing of higher education: not a public good, but a reward for those lucky enough to receive it.


The educational policies within President Trump’s Big Beautiful Bill reflect America’s worst populist instincts and the steady erosion of public trust in elite institutions. In gaining the upper hand over perceived enemies, the administration has passed a bill that harms the very same people that higher education is meant to empower: low- and middle-income students just trying to achieve the American Dream. But beyond this specific tax, the implications of this bill open a Pandora’s box - if universities continue to defy this administration, will their tax exemption be removed? Will they lose their accreditation? As Trump has publicly suggested, these are not out of the question, and the only guaranteed losers will be students. Moving forward, it is imperative that higher education reform be centered around improving the experience of students rather than punishing institutions. The “winners” of this bout of taxation should not be celebrating, because once universities are viewed as revenue streams or cultural enemies, the bleeding will never stop. As Professor Phillip Levine of Wellesley College wrote, “Does scoring a few political points warrant the infliction of such pain and the squandering of such opportunity for our nation? Evidently, this administration thinks so.”

Economy, DomesticTejus LakshminarayanComment