The newly enacted tiered tax on university endowments is already impacting the small number of wealthy private institutions now facing annual tax liabilities of tens of millions of dollars. Several of these schools have already announced hiring freezes and administrative cuts, treating the tax as a fixed cost they can absorb through austerity.
That strategy isn't going to work for mid-tier tuition-dependent private universities sitting below the tax thresholds. While they (currently) owe nothing under the new law, they still face indirect exposure from the ripple affects of wealthy university PhD cuts, layoffs, hiring freezes, and the ongoing federal squeeze on research funding. Austerity actions at mid-tier privates won't insulate them from the downstream pressures already eroding full-time residential enrollments and devasting operating budgets.
I'll again suggest that the majority of mid-tier privates have on their campuses a resource to offset the indirect impacts of the endowment tax. Schools, colleges and units of professional & continuing education are one of the few parts of mid-tier privates that can generate new revenues on short timelines. Universities anticipating indirect pressures should be proactively expanding their PCE unit's programming and shifting underused faculty capacity into short, PCE-designed courses and credentials for working professionals that are already generating alternative revenues.
Ignoring the endowment tax and treating it as something that only concerns a handful of wealthy schools will be a disastrous decision for mid-tier privates. Universities that recognize the indirect pressures early and make deliberate investments in their PCE units will be far better positioned to stay ahead of the fallout than those waiting to react.
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