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October 08, 2015

Swelling College Endowments Draw Scrutiny on Capitol Hill

A New York congressman is drafting legislation that would require institutions of higher learning to steer a portion of their investment earnings into tuition relief as a condition of maintaining their endowments' tax-free status, Bloomberg Business reports.

Republican Rep. Tom Reed discussed the proposal at a House Ways and Means subcommittee hearing Wednesday on university endowments, which have returned to pre-financial-crisis levels while college costs are rising faster than inflation. "We’re taking a very close look and I see some opportunity for reform that will benefit actual kids," he said in an interview.

Mr. Reed also suggested that wealthy universities such as Yale and Harvard that can reap billions of dollars a year on investments distribute unused excess earnings to other institutions. Congress has in the past weighed taxing college endowments' income or seeking minimum annual outlays in the manner of charitable foundations.