The endowment tax, which affects private institutions with more than 3,000 tuition paying students (meaning paying any amount), officially goes into effect in 2 months, but it has already impacted college admissions. The Daily Proncetonian reported that Princeton stayed under the 3,000 by increasing the number of students who get a full free ride. Other schools, like Harvard, Stanford, Vanderbilt to name a few, will be forced to pay the tax and have announced budget cuts as a result. This includes financial aid cuts.
I would also be cautious about assuming much of an admissions effect. Maybe a bit at the margins, but my impression is Princeton more just tweaked its aid formulas to get more students under the no-tuition line. And this only worked for Princeton because it happened to be close, since it has a relatively small undergrad population for a prominent research university with a large endowment.
Unfortunately, my guess is in most cases, universities will if anything just have to cut aid budgets and figure out how to admit more full pay students. Need aware colleges can do this directly, and there are potentially ways for nominally need blind colleges to do it too.
Need-blind colleges can adjust the FA profile of their admissions classes by changing the weight of factors which correlate to FA need (which is almost every factor to some extent). To reduce FA need, they can increase the weight of SAT/ACT (relative to GPA), recommendations, and legacy, while reducing the weight of first generation to college, for example. Increasing ED and reducing Questbridge admissions is another way. Increasing the importance of expensive extracurriculars is yet another way. None of this requires looking at individual applicants’ FA information.
I agree on your second point - which to me is a big impact on admissions.
On your first point, to me it was more than a tweak. Being under 3,000 means that at most 1/3 of the students at Princeton pay any tuition now. In 2024-2025 it was more than 50%. That’s a decent swing in a short period of time. Given the increase in thresholds for full tuition aid, coupled with the fact that Princeton won’t need to make the cuts the schools that are subject to the tax are making, I am guessing Princeton’s admission rate is going to drop even further.
We’d need the full numbers to know the budgetary impact. But per NCES, in 2023-24, 67% of undergrads were getting aid, and the average grant amount was $68,727, versus tuition of $59,710.
So there was already plenty of money in the aid budget to get at least 2/3rds of undergrads tuition free. That’s probably not exactly how they distributed it, like I am sure some had even higher grants, and others less than full tuition. But how much they would really have had to redistribute that, I don’t know.
We will also eventually see if they added more than normal to the total aid budget.
ETA: Of course the new aid formulas at Princeton and some other schools now offering “free tuition below $N (with typical assets)” are in fact in part designed for marketing purposes, and I would not be surprised if they helped attract even more applicants.