Swarthmore and Bryn Mawr no longer have to pay tax on their endowments thanks to Trump’s budget bill. Penn will pay more.

Over the last six months, local colleges have been losing federal money or facing such threats, but for Swarthmore and Bryn Mawr Colleges, just the opposite happened last week.

The two highly selective, small private colleges no longer will pay a federal excise tax on their endowment earnings under the budget bill signed by President Donald Trump.

Both had been paying the 1.4% tax since it had been enacted in 2017 during Trump’s prior term. Swarthmore, which has a $2.7 billion endowment, paid about $2 million in fiscal year 2024, while Bryn Mawr, which has a $1.2 billion endowment, paid about $443,000.

» READ MORE: Swarthmore College leader warns endowment tax increase could deal a devastating blow

But the new law exempts colleges with 3,000 or fewer students. Swarthmore, Bryn Mawr, and Haverford, as part of a coalition of 25 small private liberal arts colleges nationwide, had been advocating for small colleges to be exempt because the impact of the tax was greater on their operations.

“While I continue to believe that taxing any college or university endowment is misguided public policy, I am grateful that the exemption granted to small colleges like Bryn Mawr means we can focus our endowment resources on where they matter most — on students and their futures,” said Wendy Cadge, president of Bryn Mawr, where earnings from the endowment fund nearly 40% of the college’s annual operating budget.

Endowment earnings, she said, “are essential to our ability to keep our education accessible for families across the income spectrum, whether through financial aid, low loan amounts, or no loans.”

The University of Pennsylvania, a much bigger school with an enrollment of more than 24,200 full-time students and an endowment of $22.3 billion, wasn’t so lucky.

» READ MORE: Penn, Bryn Mawr, Swarthmore warn increases in the endowment tax could harm financial aid, other programs

Penn’s excise tax will increase to 4% under the new bill, but that is still better than the 14% to 21% that lawmakers had included in earlier versions and for which Penn had been bracing.

Penn paid $10.4 million in fiscal year 2024. The increase comes as the school faces the loss of $250 million in research funding under National Institutes of Health changes. The school’s endowment earnings cover 20% of Penn’s annual academic operating budget.

The new bill sets up a three-tiered system: Private colleges with more than 3,000 students and an endowment per student of $500,000 to $750,000 will pay 1.4%. Those, like Penn, with $750,000 to $2 million per student will be taxed at 4%, and those with greater than $2 million per student, 8%.

Under the 2017 law, all private colleges that qualified ― those with at least 500 tuition-paying students and an endowment that is larger than $500,000 per student ― paid the same percentage. More than 50 colleges have paid the tax in the past. Congress enacted the tax as critics eyed the large endowments of some universities, which also carry high price tags for students.

The only other local college affected is Princeton, an Ivy League university like Penn. Princeton’s endowment is the largest of the four, at $34.1 billion. It appears that Princeton, with an enrollment of 8,952, would fall in the highest bracket, paying 8%.

A spokesperson for Princeton declined to confirm the amount it will pay or comment on the tax.

Harvard appears to be among the hardest hit, according to Phillip Levine, an economics professor at Wellesley College, who wrote a piece in the Chronicle of Higher Education. Its tax bill is expected to jump from $56 million to $324 million. Princeton, he wrote, would pay $223.4 million, up from $39 million.

“This is a little bit better than the House’s four-tiered system,” said Emmanual Guillory, senior director of government relations at the American Council on Education, a higher education advocacy group. “But this is still something that we are not supportive of at all.”

Colleges lobbied hard against increasing the tax, noting that their endowment earnings fund vital financial aid for students, research, endowed professorships, and other programs.

At Swarthmore, a highly selective, 1,730-student school in Delaware County, endowment earnings fund more than half of its $220 million operating budget. It is far more dependent on its endowment earnings for operating revenue than some larger universities, a school official said.

The college puts about $60 million toward financial aid annually. It is one of few colleges in the country that still provides all grants and no loans in its financial aid packages to students, covering full need for all students who qualify.

» READ MORE: Swarthmore College adopts unusual three-month budget given federal funding uncertainty

Swarthmore president Valerie Smith said Wednesday that the version of the endowment tax that passed was “a successful outcome” for the college, putting aside other aspects of the bill.

“I am grateful that members of Congress recognize the vital role endowments play here and at small colleges across the country,” Smith said. “Our endowment is the reason we can admit students without considering whether they can afford a college education. … This exemption helps ensure that we can continue to fulfill our mission and expand opportunities for generations of students to come.”

The college in May took the unusual step of enacting a three-month budget for the new fiscal year because of uncertainty about the tax and other federal initiatives.

“With the endowment tax settled, at least for now, the board will return to the budget discussion in September better positioned to weigh its implications alongside other financial pressures facing the college, such as those related to enrollment, financial aid, and research funding,” Smith said in a message to campus.

The bill that passed includes other measures that have college officials worried, including the elimination of Grad Plus loans, which allowed graduate and professional students to borrow large amounts for their education. In addition, Parent Plus Loans, which allow parents to borrow to help pay for their undergraduates’ education, were capped.

That could lead to a greater reliance on private loans, ACE’s Guillory said, and it may cause some students not to pursue their education.

“It’s much harder to get approved for those loans,” he said.

The bill also changes how Pell Grants, geared toward lower-income families, are packaged. Now, all other aid, including state funds, institutional funds, and scholarships, must be applied to the cost first, he said. That could pose some processing hassles for schools, he said.

“It was easier to start with the Pell Grant, then do everything else on top of that,” he said.