How can we apply the same emergency measures that Harvard and other universities are using to navigate a financial crisis? Also, how universities invest their endowments and what their performance has been.
Topics covered include:
- What has led to the financial crisis at Harvard
- What actions has the university taken
- How do endowments invest and spend their funds
- How endowments maintain intergenerational equity
- How we can apply the principles universities use in our own investing
Show Notes
Letter Sent to Harvard 2025-04-11—Harvard
Harvard Response 2025-04-14—Harvard
Should Harvard Be Tax Exempt? by The Editorial Board—The Wall Street Journal
2024 NACUBO-Commonfund Study of Endowments—NACUBO
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402: Why Student Debt Is So High and Forgiving It Doesn’t Fix the Problem
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Transcript
Welcome to Money for the Rest of Us. This is a personal financial show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 524. It’s titled, “Facing a Financial Squeeze. What Harvard’s Response Can Teach the Rest of Us?”
Federal Conflict with Harvard
Last month, representatives of the Trump administration from the General Services Administration, U.S. Department of Education, and the U.S. Department of Health and Human Services sent a letter to the president of Harvard University, Dr. Alan M. Garber. The letter stated that Harvard, in recent years, failed to live up to both the intellectual and civil rights conditions that justify federal investment.
Harvard University, including its medical school, receives billions of dollars in federal grants. The letter demanded reforms on the part of Harvard as it relates to governance and leadership, its hiring practices, its admissions practices. It demanded changes regarding its programs, its approach to student discipline and accountability, protections for whistleblowers, and additional reforms related to transparency and monitoring.
The editorial board of the Wall Street Journal, which tends to skew very conservative, said that these demands by the Trump administration were de facto federal receivership. In other words, the federal government taking over Harvard University.
Harvard, in turn, responded with its own letter that said over the past 15 months, the university has undertaken substantial policy and programmatic measures, new accountability procedures, and discipline adjustments in order to combat hate and bias and enhance safety and security measures.
Letters said Harvard’s a very different place today from where it was a year ago. At that point, the letter said that Harvard felt that the federal government’s demand invaded the university’s freedoms that have been long recognized by the Supreme Court, as well as from the First Amendment of the Constitution. They concluded the university will not surrender its independence and relinquish its constitutional rights.
Neither Harvard nor any other private university can allow itself to be taken over by the federal government. Trump administration then froze $2.2 billion in grants for Harvard University and asked the Internal Revenue Service to strip Harvard of its not-for-profit status, which is laid out in Section 501(c)(3) of the tax code that states that corporations organized for educational purposes are entitled to tax exemption as long as they are operated on a nonprofit basis and don’t participate in political campaigns.
This disagreement between the Trump administration and Harvard University as well as other universities, will be resolved in the courts. In the meantime, Harvard has seen a big blow to its budget. Harvard’s annual operating budget is $6.9 billion.
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