The United States Department of Education has placed Harvard University on a stricter financial monitoring status, altering how the institution accesses federal funds for student aid. The administration cited concerns over the university's financial position as the primary reason for the new measures, which require Harvard to use its own money for student aid before seeking government reimbursement.
Key Takeaways
- Harvard University is now under "heightened cash monitoring" by the Department of Education, changing its student aid funding process.
- The government is requiring Harvard to post a $36 million letter of credit to guarantee its financial obligations.
- This action is part of a broader campaign by the administration targeting universities over policies on protests, diversity, and admissions.
- Other institutions, including UCLA, Columbia, and Brown, have faced similar pressure, resulting in frozen funds and large financial settlements.
New Financial Controls Imposed on University
The Department of Education's decision places Harvard on what is known as "heightened cash monitoring." This is a significant shift from the standard procedure where universities can draw down federal funds as needed to disburse student aid.
Under the new restrictions, Harvard must first pay for federal student aid programs using its own institutional funds. Only after disbursing the aid can the university request reimbursement from the federal government. This change introduces a delay and places a greater administrative and cash-flow burden on the university.
$36 Million Letter of Credit Demanded
In addition to the monitoring status, the Education Department has demanded that Harvard secure a letter of credit for $36 million. In a formal letter, the department stated this measure is necessary to ensure the university can meet its financial obligations to the government and its students.
The letter cited recent events, including Harvard's decision to issue bonds and implement layoffs, as factors raising concerns about its financial stability. These actions occurred amid ongoing friction between the university and the White House.
What is Heightened Cash Monitoring?
Heightened Cash Monitoring is a step the Department of Education can take when it has concerns about a school's financial or administrative capability. It forces the institution to demonstrate it has the funds to operate its federal student aid programs without relying on upfront government payments, essentially making it a reimbursement-based system.
Administration Cites Multiple Justifications
The Trump administration has been vocal about its issues with several universities, including Harvard. The president has threatened to cut federal funding over a range of topics, such as pro-Palestinian campus protests, transgender policies, climate initiatives, and Diversity, Equity, and Inclusion (DEI) programs.
President Trump has stated that he believes many universities are influenced by what he terms "radical left" ideologies. He has particularly criticized how universities handled campus protests last year, alleging they permitted antisemitism to spread.
Civil Rights Compliance Under Review
A separate letter from the department's Office of Civil Rights warned that Harvard risks losing access to all federal student aid if it fails to comply with requests for records. The office is investigating whether the university continues to consider race in its undergraduate admissions.
This review follows the 2023 Supreme Court ruling that declared unlawful the affirmative action practices many schools had used to increase the enrollment of racial minorities. The investigation seeks to determine if Harvard's current admissions processes adhere to this ruling.
Harvard's Financial Standing
Despite the government's stated concerns, Harvard University holds the largest academic endowment in the world, valued at approximately $53 billion. The university has not indicated it is facing a financial crisis.
A Pattern of Pressure on Major Universities
Harvard is not the only institution facing pressure from the administration. Several other prominent universities have been targeted, with some reaching significant financial settlements.
Earlier this year, the government settled federal investigations with Columbia University, which agreed to a payment of over $220 million. Brown University also settled, agreeing to pay $50 million to support local workforce development initiatives. Both institutions accepted certain government demands as part of their agreements.
The Trump administration has been actively seeking a settlement with Harvard. The president has publicly suggested the university should pay "nothing less than $500 million."
The University of California, Los Angeles (UCLA) has also been a focus. The government proposed a $1 billion payment from the university to settle its probe, an offer that California Governor Gavin Newsom described as an extortion attempt. According to the university, the government has already frozen nearly $600 million in funding designated for UCLA.
University Responses and Campus Policy Changes
In response to the federal pressure and recent campus events, some universities are changing their internal policies. UCLA recently unveiled new rules for protests, formalizing interim policies that were put in place in September 2024.
These new policies at UCLA include:
- Restrictions on unauthorized encampments on campus grounds.
- A ban on masks or face coverings for individuals who are violating other rules.
- Making certain outdoor spaces off-limits for demonstrations that have not been pre-approved.
UCLA stated it will still permit pre-approved overnight events and has designated specific areas for public expression that do not require prior approval. The university warned that violations of the new policy could result in disciplinary action or arrest.
Harvard's Financial and Legal Rebuttal
While Harvard has a substantial endowment, it has taken steps to cut spending. In a July statement, the university estimated that the combined financial impact of recent federal actions could be close to $1 billion annually.
Harvard has also challenged some of the administration's actions in court. In a recent victory for the university, a judge ruled that the administration had unlawfully terminated more than $2 billion in research grants that had been awarded to Harvard.
The University of California system has described this period of federal scrutiny as one of the most serious threats in its history, highlighting the significant pressure these institutions are currently under.