The summer after a semester of protests, immigration threats, and research funding cuts, the Swarthmore community received a message from the college’s senior administration. Its positivity was jarring. In an email on July 9, President Val Smith wrote that while policy experts were “still debating” the implications of the recently signed “One Big Beautiful Bill Act,” (OBBBA) she wanted to share some of the legislation’s “positive developments” for Swarthmore.
By that time, there was already widespread agreement among policy experts on many of the bill’s implications: the legislation will kick over 10 million Americans off of health insurance and/or food stamps, put hundreds of rural hospitals at risk of closure, drastically impede national efforts to transition to renewable energy, dramatically increase the presence of Immigration and Customs Enforcement in local communities, add trillions of dollars to the national debt, and institute a highly regressive tax code.
Smith’s email also followed up on prior notices that she and her senior staff had traveled to Washington, D.C., and partnered with other small colleges to lobby against a dramatic increase in the federal tax on private college endowment returns. Claiming some credit for her and her team’s efforts, Smith shared the news: “Not only will Swarthmore avoid paying an increased tax, but, beginning in 2026, the College will be exempt from paying the 1.4% tax that we’ve been subject to the past several years.” This exemption applied to small colleges, with fewer than 3,000 students, like Swarthmore.
Later reporting suggested small colleges’ exemption from the tax likely had more to do with congressional Republicans’ socially conservative interests. They aimed to spare small religious schools, like Hillsdale College, a far-right aligned Christian school in Michigan, from any endowment tax, but weren’t able to legally make exemptions on religious grounds. This was hardly the only nuance Smith’s letter failed to address.
Because small undergraduate institutions like Swarthmore rely on returns from their invested endowments for a significant part of their budget, an increased tax on those returns would undermine the college’s financial stability. This would threaten financial aid (currently at historically high levels), sustainability efforts such as To Zero by Thirty-Five, faculty growth and retention, and countless other important progressive initiatives. It makes sense for the college’s leaders to fight against the tax. But, if Smith is right, and the college has political influence over key matters, why restrict that influence to minimizing its tax obligation?
The ideas behind an endowment tax shouldn’t just be dismissed as Trumpian lunacy. Scholars of varying fields and persuasions, including 2024 Cooper Series speaker and historian Davarian Baldwin, study the often-exploitative relationship between well-endowed institutions of higher education and their local communities, which provide crucial infrastructure but receive very little tax revenue in return. Republican proposals for an increased endowment tax were a vindictive part of a reactionary agenda. They were designed to score points in culture wars rather than to redistribute resources and address those exploitative imbalances. But, in a time of massive wealth inequality and widespread financial insecurity, the suggestion that a portion of the revenue of huge private funds (i.e. endowments) should go to the public sector might have been one of the only ideas in the bill that, if done differently, could have aligned with Swarthmore’s socially conscious values.
The possibility of such a dramatic endowment tax was made much more real by growing public distrust of elite colleges and universities. To be sure, the GOP’s aggressive campaign against such institutions repeatedly misleads the public to create ill-will and funnel it into support for anti-higher education policies. But colleges like Swarthmore should not stand idly by as their reputations face increasing, and far-too-often legitimate, skepticism. They should not save their only efforts to address this skepticism for closed-door meetings in congressional office buildings. Swarthmore’s failure to acknowledge that there may be some rationality behind the Trump administration’s attempts to redistribute, however maliciously, colleges’ accumulation of wealth represents a missed opportunity.
So, where does this leave us? Wealthy, yet tax-exempt, educational institutions should serve the public that bears their tax burden. Swarthmore, for example, should prove to the borough, the Philadelphia region, the state of Pennsylvania, and the country that public interests and the college’s interests can be aligned.
For Swarthmore, this is a financial possibility. In fiscal year 2026-27, Swarthmore will pay roughly $2 million less in taxes than it has for years. Moreover, because the earliest version of the OBBBA would have included a 21% tax on the college’s endowment returns, Swarthmore will pay $30 million less than it once feared it would have to. But, the constant threat that large swaths of the public would support legislators if they again take up a proposal to increase the endowment tax will limit the college’s ability to plan for the long-term. Alternatively, Swarthmore could work within its local community to build back public support and offer an alternative to far-right narratives about higher education.
Although Swarthmore does not exactly fit the exploitative model of the sprawling urban university that Baldwin and others condemn, it nonetheless has significant influence and economic power, and with them, an obligation. How might the college use its newfound financial flexibility to embrace this social responsibility to a broader community?
It’s worth noting that Swarthmore already spends millions of dollars on social causes. The college covered lost federal research grants for students and faculty (funded through a rise in donations), and its sustainability infrastructure counters Trump’s devastating cuts to renewable energy. The financial aid budget grew significantly this year and should continue to expand as families face layoffs and increasing tuition costs.
In recent years, however, the campus community has placed pressure on the college to improve the wages and working conditions of staff. As a large private employer in the region, meeting these demands would further the college’s socially-oriented mission, while simultaneously countering growing distrust for higher education in politically crucial states like Pennsylvania.
Swarthmore could expand its education, scholarships, programming, research, and activism deeper into Philadelphia and Chester. This would be a small step toward addressing the harsh contrast between the neglect and poverty felt by many in these communities and the vast resources of the college.
In addition, Swarthmore could use the money to further cushion the Trump Administration’s impact. For example, it could create special research grants and opportunities for students going into fields subject to funding cuts, partner with local organizations to provide food support, and fund arts initiatives beyond our campus. While Swarthmore has pledged sanctuary status, the college could also put more resources into protecting and supporting undocumented community members. Whether the college backs nearby affordable housing or subsidizes career and educational opportunities for staff, Swarthmore must actively consider how to give back to its neighbors.
In short, Swarthmore should take an active role in improving the surrounding communities whose public services it uses tax-free.
We, The Phoenix’s Editorial Board, understand why the proposed dramatic hikes of the endowment tax represented a fundamental threat to our college. But, neglecting to consider what made that threat politically plausible would be a moral and strategic failure to realize our ideals of social justice and ensure the college’s ability to maintain financial security in years to come. To that end, the college must thoughtfully evaluate how its savings from an unexpected legislative result can support those who do not reap the direct benefits of a Swarthmore education.
