President Donald Trump is in the process of withholding over $2.2 billion in federal funding from Harvard University due to the institution’s refusal to comply with a series of demands. These demands, which are viewed by many as unconstitutional, include Harvard altering its admissions for international students, closing diversity programs, and auditing for viewpoint diversity among its students and staff. In response to the threat, some suggest that Harvard, with its substantial endowment of $53 billion, should use these funds to cover the potential shortfall. However, a finance expert emphasizes that accessing the endowment is not as straightforward as it might seem.
The standoff between Trump’s administration and Harvard University is part of a broader effort by the White House to exert control over higher education, involving directives on teaching content and staffing at universities. Harvard President Alan Garber has opposed these demands, asserting that no government should dictate the operations of private universities. The federal response has included freezing some of Harvard’s funding, primarily used for research, and considering further actions such as revoking the university’s tax-exempt status and further funding cuts affecting affiliated hospitals.
While Harvard’s endowment seems like a potential financial solution, Sandy Baum, a nonresident senior fellow at the Urban Institute specializing in higher education financing, points out that the situation is more complex. The endowment, which consists of over 14,000 funds, primarily comes from donations with specific conditions on their use, making it not just a single pool of unrestricted funds.
The endowment’s earnings support various aspects of Harvard’s operations, like professorships, financial aid, and research. In the fiscal year ending June 2024, it contributed $2.4 billion to Harvard’s revenue. Around 11% of Harvard’s overall revenue, particularly for research into diseases like AIDS and cancer, comes from federal funding. With most of the endowment directed to specific uses, about 20% remains unrestricted. However, Baum explains that some flexibility does exist to address emergencies, like the current situation.
If Harvard agrees to the administration’s demands, it risks losing its identity as an independent educational institution. While the university can use some previously untapped funds to maintain its autonomy, difficult decisions will still be necessary. The $2.2 billion in federal funding supports research and employment, so budget cuts could be imminent. Harvard is implementing measures like a hiring freeze and seeking to raise additional funds through the bond market. Yet, these actions may not sustain the university in the long term, especially with potential legal battles ahead. Although maintaining the endowment is crucial, Harvard’s extensive operations prevent it from easily absorbing the loss of federal support without significant impact.
The situation highlights the challenges faced by Harvard as it navigates this financial and operational impasse with the federal government.
