Harvard, Yale Among Rich Schools Facing Stimulus Payment Cuts
(Bloomberg) -- The richest private colleges in the U.S. will see about $85 million less in government stimulus money to contend with the Covid-19 crisis.
Harvard, Princeton and Yale are among the wealthy institutions that would be affected because of a provision that singled them out. The American Council on Education, a trade group, estimated the loss for the group of about 30 schools that are subject to the college endowment tax.
The stimulus payments will be reduced by 50% under the legislation passed last month, which allocated about $20 billion for non-profit higher education institutions. The cut is being made as U.S. colleges and universities face financial turmoil with the pandemic leading to a drop in enrollment, empty dorms and increased expenses.
“We’re getting this weaponization of tax and funding policy against institutions that are seen as affluent,” said Steven Bloom, the American Council’s assistant vice president for government relations. “They’re seeing financial challenges too. They’re not immune to it. They’re taking steps to cut costs because they have lost revenue and increased financial burdens across the board.”
Slashing the stimulus is another blow for colleges that in 2017 were hit with the federal endowment tax. The levy, passed with the Republican tax cuts, amounts to 1.4% of net investment income. The wealthiest private schools, those with endowment assets of more than $500,000 per student and more than 500 tuition-paying students, are subject to it.
The same group is slated to receive less money this time -- and with strings attached, legislative documents show. Buried deep in the law is a provision mandating that schools spend the money only on pandemic-related expenses. In the first stimulus allocation, they had some discretion on spending.
Representatives from Harvard and Stanford didn’t respond to requests for comment. A spokesman for Princeton declined to comment while Yale didn’t immediately provide comment.
Washington and Lee University may see its current payment reduced to about $710,000 from $1.4 million in the aid program, according to estimates from vice president for finance Steve McAllister. The school passed on the money from the first stimulus and its finance committee is exploring what to do now, he said in an email.
The University of Notre Dame is expected to forgo the money, having already turned down the first round last year, said Paul Browne, a spokesman.
“The tax is unfair and can be used as a continual model for mischief making, in some cases with malicious intent, toward the most successful universities in the country,” Browne said.
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