Rice University Faces $10 Million Hit from Trump’s Endowment Tax Increase

Rice University may be looking at a hefty $10.1 million yearly tax obligation on its endowment earnings following the U.S. House's approval of President Donald Trump’s extensive tax and policy package, referred to as "The One, Big, Beautiful Bill," on Thursday. The legislation, now awaiting the president's approval, increases the tax rate on endowment earnings for affluent institutions, such as Rice, from the existing 1.4% to a potential maximum of 8%, with Rice's rate set explicitly at 4%.

According to the university, this indicates that Rice's yearly tax contribution will increase significantly, rising by $6.4 million, which is comparable to more than 100 complete financial aid packages for students. The increased expense may substantially alter the university’s economic plan, primarily as almost 50% of Rice’s $7.6 billion endowment returns are already allocated to student financial assistance.

“Rice University expresses gratitude to the lawmakers, particularly those from the Texas delegation, for their recent efforts to engage with us and understand how our endowment facilitates student access through scholarships and bolsters our commitment to pioneering research,” the university stated. “In light of this recent financial hurdle, our dedication to ensuring accessibility, affordability, and a top-notch, tailored educational experience remains unwavering.”

The comprehensive legislation, hailed by Republicans as the most significant tax reduction in the nation's history, also features $1 trillion in cuts to Medicaid, restrictions on student loan borrowing, and the removal of the federal Grad PLUS loan program, as reported by Inside Higher Ed. New criteria for distributing federal student aid will soon be based on the post-graduation earnings of graduates, creating uncertainty for universities across the country.

While stricter requirements for Pell Grants were removed from the final legislation, it has been decided that students who receive full-ride scholarships will no longer be eligible for Pell funds, effective July 2026.

Rice officials highlighted that the university has significantly raised its endowment distributions, growing from $215 million in 2009 to $437 million this year, with a substantial portion designated by donors for scholarships and research. While endowment restrictions and spending caps are designed to safeguard these funds for the long term, the introduction of the new tax may lead to challenging choices ahead.

Officials noted that Rice’s endowment accounts for more than 40% of its $1 billion operating budget, surpassing the proportion seen at many of its counterparts. Approximately 57% of undergraduates at Rice benefit from financial assistance provided by the university, which maintains a policy of not requiring students to take out loans.

Officials at Texas’s other major private nonprofit universities, including the University of St. Thomas and Houston Christian University, expressed confidence that they won’t face increased tax rates due to their smaller endowments, which are around $137–$149 million each. Meanwhile, the anticipated endowment tax hikes are expected to have a significant impact on Rice.

The legislation signifies yet another success for Trump in his campaign to hold prestigious universities, particularly those in the northeastern region, more responsible for their endowment management. While Rice has generally maintained a low profile on the national stage, President Reginald DesRoches has recently addressed lawmakers to clarify how the university's endowment benefits both students and research initiatives.

The recent tax changes have universities across the country preparing for the impact of new student loan limits and financial aid eligibility rules, which are set to transform higher education budgets in the years to come.

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