Don’t let endowment tax hike harm Iowa’s students

Iowans have a lot at stake in the reconciliation bill working its way through Congress. But one particular provision could have a serious and negative impact on those we all most want to help: low-income students.

The bill includes a proposed increase in the tax on college endowment returns which would harm an Iowa institution like Grinnell College alongside dozens of other small colleges nationwide. More importantly, it will harm the students such schools serve, particularly those from low-income and rural backgrounds.

Grinnell was founded in 1846 by Congregational ministers committed to making a college education accessible widely. I attended Grinnell due to that commitment and the generous financial aid that followed it, which changed my life. I received a superb education and developed a profound commitment to civic engagement and public service which led to a career in all three branches of the federal government.

Today, Grinnell still opens its doors for students of all backgrounds. We are the only college in the Midwest where students are admitted without consideration of their ability to pay. We also meet 100% of demonstrated financial need without requiring student loans. In the 2024—25 academic year, 93% of our students received financial aid, and a full third of our student body — roughly 550 students — received full tuition scholarships. The vast majority of that aid, $77 million last year, came directly from our endowment.

The proposed increase in the endowment tax rate — from 1.4% to a potential 21% — could increase the taxes Grinnell would pay on its endowment returns from $2.4 million last year to more than $30 million annually. That’s the equivalent of over 400 full-tuition scholarships lost.

Grinnell is a small, rural college with just 1,700 students. We’re also the largest employer in town and a critical partner in local economic development. But unlike large research universities, we lack billion-dollar medical centers or vast auxiliary operations. Our endowment is not a luxury — it is a lifeline.

This proposal impacts more than just Grinnell. Small colleges across the country — many in rural communities in neighboring states and serving high-need student populations, including many Iowans — would be harmed by this policy. Their endowments allow them to keep student debt low (42% lower on average than at public institutions), maintain small class sizes, and offer intensive academic and personal support that leads to significantly higher graduation rates.

The Senate will begin considering this legislation soon but there still is time to avoid this problem. Iowa’s congressional delegation can work with their colleagues to refine this legislation before it goes to the president’s desk. A simple exemption for colleges with fewer than 5,000 students would ensure this tax does not disproportionately harm students at institutions like Grinnell.

We want to continue providing transformative opportunities to students from every corner of Iowa and across the country. But we cannot do that if Congress strips away the very resources that make that mission possible.

Sheryl Walter is chair of the board of trustees of Grinnell College.