Harvard University is currently in conflict with the Trump administration, as the federal government has threatened to revoke its tax-exempt status and has already frozen billions of dollars in grants and contracts. Harvard has refused to comply with the administration’s demands, stating that the government has no legal basis to rescind its tax-exempt status. If the IRS were to revoke Harvard’s tax-exempt status, it could have severe consequences for the university, including diminished financial aid for students, the abandonment of critical medical research programs, and lost opportunities for innovation.
Despite having the nation’s largest university endowment of nearly $52 billion, Harvard cannot use these funds as a piggy bank. The endowment is made up of numerous funds, many of which are restricted by donors for specific purposes such as scholarships and professorships. Harvard is currently shoring up its finances by considering liquidating some of the $9.6 billion in endowed funds that are not subject to donor restrictions, issuing taxable and tax-exempt bonds, and implementing austerity measures such as a temporary hiring freeze and denying admission to waitlisted graduate students.
The university is also considering adjusting its operating budget to manage its financial situation. Moody’s has maintained Harvard’s top-tier AAA rating for its bonds, but has lowered its outlook for higher education as a whole to negative. Harvard’s endowment, which is primarily invested in private equity, hedge funds, and other alternative assets, has given the university financial stability and flexibility to navigate through its current challenges.
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