Harvard University has reported an operating deficit of $113 million for the fiscal year ending June 30, 2025, marking its first such loss in over a decade. The deficit comes even as the university's endowment, the largest in the world, grew to a record $56.9 billion.
The university's annual financial report, released Thursday, highlights a growing gap between revenue and expenses. While both slowed compared to the previous year, expenses increased at double the rate of revenue, setting the stage for what officials describe as necessary structural changes ahead.
Key Takeaways
- Harvard University recorded a $113 million operating deficit for fiscal year 2025.
- This is the university's first operating loss in more than ten years, following a $45 million surplus in 2024.
- Expenses grew by 6%, while revenue increased by only 3%.
- The university's endowment grew by $3.7 billion to a new high of $56.9 billion, driven by an 11.9% investment return.
- University officials cite external pressures, including federal policies and potential inflation, as significant challenges.
A Widening Gap Between Income and Spending
Harvard's financial results for fiscal year 2025 present a complex picture. The $113 million operating deficit is a significant reversal from the $45 million surplus reported in the previous fiscal year. This shift is primarily due to expenses rising much faster than income.
According to the report, university-wide expenses climbed by 6%, while revenues saw a more modest increase of 3%. This imbalance underscores a challenging financial environment for the institution, even with its considerable resources. The report indicates that this trend will necessitate difficult decisions in the near future.
- Operating Deficit (FY2025): $113 million
- Operating Surplus (FY2024): $45 million
- Total Endowment Value: $56.9 billion
- Endowment Growth: $3.7 billion
- Investment Return: 11.9%
In a joint statement within the report, Harvard treasurer Timothy Barakett and Ritu Kalra, vice president for finance and chief financial officer, acknowledged the difficult road ahead. They warned that adjustments are unavoidable.
"Structural changes and reductions across our Schools and units will be necessary, and they will not be easy. Our work is far from finished."
This statement signals that departments and programs across the university may face budget cuts or restructuring as the administration works to bring spending back in line with revenue.
Endowment Soars Amidst Operational Strain
While the operating budget is in the red, Harvard's endowment tells a different story. The massive fund, already the largest of any university globally, expanded by $3.7 billion. Its total value now stands at an unprecedented $56.9 billion.
This growth was fueled by a strong investment return of 11.9%, an improvement over the 9.6% return seen in fiscal year 2024. The endowment is a critical source of funding for the university, supporting financial aid, research, and professorships. However, its use is often restricted by donor intent, meaning it cannot simply be used to cover any operational shortfall.
What is a University Endowment?
An endowment is a collection of donated funds and assets invested by a university to support its mission. A portion of the annual investment return is used to fund operations, while the principal remains invested to generate future income. The growth of Harvard's endowment is crucial for its long-term financial health, but it doesn't directly translate to unlimited operational cash.
The success of the endowment stands in stark contrast to the operational deficit, highlighting the different pressures affecting various parts of the university's financial ecosystem.
External Pressures and an Uncertain Future
University leaders point to a series of external challenges that are contributing to the financial strain. The report outlines several areas of concern that Harvard is preparing to navigate.
In their letter, Barakett and Kalra identified several "daunting challenges" facing the institution:
- The declining trajectory of federal research support.
- An upcoming increase in the federal endowment tax.
- Ongoing difficulties in hosting international students and scholars.
- Persistent litigation against the university.
- Broader geopolitical and economic pressures, including the potential for significant inflation.
These factors create a climate of uncertainty and suggest that the financial pressures are not temporary. The mention of the endowment tax, in particular, points to a regulatory environment that university officials view as increasingly challenging for higher education.
Philanthropy and a Vote of Confidence
Despite the operational deficit and external pressures, support for the university remains robust. The report revealed that Harvard received over $600 million in unrestricted gifts from alumni and friends during the fiscal year—a new record for the institution.
This strong philanthropic support is a crucial lifeline, providing flexible funds that can be used to address immediate needs. In his opening message, Harvard President Alan Garber framed this generosity as a powerful endorsement of the university's mission.
"Their generous support, through philanthropy and advocacy for Harvard and its values, has never been more important. It represents a vote of confidence in our enduring ability to welcome talented individuals into our community, to take on the greatest challenges of our time, and to rigorously and relentlessly pursue truth."
Garber acknowledged that supporters see Harvard not as a perfect institution but as a "crucible of change." This perspective suggests that the university community is prepared to adapt and evolve, especially during what leadership describes as a time of crisis and external scrutiny. The combination of a massive endowment and record-breaking donations provides a significant buffer as the university confronts its first operating deficit in more than a decade.
