Tensions escalated on Tuesday between the Trump administration and higher education institutions when President Trump threatened Harvard University’s tax-exempt status after the institution declined to comply with his administration’s directives concerning hiring practices, admissions, and curriculum changes.
This warning, along with the associated implications, underscored not only the vast sums of government funding that colleges receive annually but also the origins of this financial support and its intended uses.
When did colleges and universities start receiving significant federal funding?
The U.S. government began allocating funds to universities around the era of World War II, aiming to support the war effort by directing resources toward medical research, innovation, and student financial assistance.
This interplay between the federal government and higher education swiftly turned into a mutually beneficial relationship. As the government relied on universities to produce skilled and employable graduates, as well as conducting cutting-edge scientific research, universities found themselves increasingly dependent on sustained federal funding.
In 1970, federal funding for higher education stood at approximately $3.4 billion. Today, colleges can rely on what amounts to billions, primarily allocated for financial aid and research. For instance, Harvard alone receives about $9 billion.
What do government funds finance, and which programs would suffer if these funds were cut?
Funding freezes have resulted in halted work, terminated contracts, endangered medical research, and unsettled students. Budget cuts could also impact hospitals associated with universities, including the Dana-Farber Cancer Institute and Boston Children’s Hospital, both linked to Harvard.
Universities emphasize that loss of federal funding could threaten numerous medical and scientific research initiatives, such as studies focused on cancer and diabetes.
After the Trump administration withheld $1 billion from Cornell, the university highlighted that affected grants included research on advanced materials for jet engines, propulsion systems, extensive information networks, robotics, superconductors, and cancer research.
When Mr. Trump withdrew $790 million from Northwestern, the university reported that the funding freeze would impede its research into robotics, nanotechnology, foreign military training, and Parkinson’s disease.
The University of Pennsylvania, which faced a suspension of $175 million in federal funds, indicated that faculty across seven different schools were impacted. According to the university president, their contracts included research aimed at preventing hospital-acquired infections, conducting drug screenings for deadly viruses, and developing defenses against chemical warfare.
Don’t universities have their own funds to cover these expenses?
Yes and no. While most universities rely on tuition, private donations—including endowments, research grants, and government funding—much of this income comes with specific restrictions.
For instance, Harvard had an endowment fund totaling $53.2 billion in 2024, significantly exceeding that of any other American university.
However, that endowment is not a free-flowing resource for the institution.
Many funds have limitations determining how and when the money may be utilized. At Harvard, 70 percent of the annual distribution from the endowment is earmarked for specific programs or departments as designated by donors. Some endowments might be focused exclusively on the T.H. Chan School of Public Health or dedicated to graduate fellowships. Additionally, there can be legal constraints on these funds, as well as regulations on the extent of discretionary spending.
What happens next?
Harvard made history by being the first university to decline compliance with Mr. Trump’s directives, referencing severe restrictions, including those on free speech. In retaliation, federal authorities froze over $2 billion in grants. Harvard’s decision to reject Mr. Trump’s demands may signify a pivotal moment in his confrontation with U.S. academia.
“Had Harvard not taken this position,” TED Mitchell, president of the American Council of Education, commented to The New York Times, “it would have been almost impossible for other institutions to do the same.”
University administrators across the nation, having observed Columbia capitulate to Mr. Trump to evade a loss of $400 million in federal funds, will now watch closely to see how Harvard and its president, Alan M. Garber, navigate their confrontation with the Trump administration. It remains uncertain what actions the administration may pursue next; possibilities include probing into Harvard’s nonprofit status and canceling additional visas for international students.
