WASHINGTON — Congress could save billions of dollars by prohibiting tax-exempt colleges and universities from earning arbitrage indirectly through endowments that are invested at higher interest rates than what they are paying on their tax-exempt bonds, the Congressional Budget Office concluded in a report.

The report, released late Friday, raises questions about whether schools should be able to borrow on a tax-exempt basis “when they have money in the bank,” said Sen. Charles Grassley, R-Iowa, the ranking minority member of the Senate Finance Committee who commissioned it.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.