Experts say that Harvard’s financial calculations are an example of how New England colleges are turning to short-term borrowing at an unprecedented clip during a tenuous time for higher education.
While universities routinely tap tax-exempt bonds issued by government agencies to finance operations and capital projects, some of the recent moves are a step beyond. Highly-endowed schools are increasing borrowing at least partly in an effort to stockpile cash to weather a presidential administration that is targeting their typical sources of revenue, including cuts to federal research dollars.
Trump targeted nearly $400 million at Columbia University in New York, before the college capitulated to his demands, and blocked another $510 million in federal contracts and grants at Brown University.
Nationwide, municipal bond sales for higher education are up more than 40 percent since January, compared to the same period last year, surpassing even the prior 2017 record during the first Trump administration, Bloomberg found.
Locally, Harvard is not the only one stockpiling cash. Brown is looking to tap commercial paper notes, a short-term financing tool that lets schools raise money quickly. And Wellesley College recently explored a $142 million bond sale before backing out due to “market conditions,” a spokesperson said.
Meanwhile, many other universities are keeping a watchful eye on Washington. Boston University, Yale, Middlebury, and Emerson College, among others, are on a list of schools warned of potential enforcement actions by the Office of Civil Rights for their alleged failure to “protect Jewish students,” in the wake of campus protest last year over the war in Gaza. (Critics have said the safety of Jewish students is a scapegoat for Republicans’ disdain for universities, which some have long viewed as bastions of left-leaning indoctrination.)
Regardless, the funding threats have already pushed some universities to implement hiring freezes and rescind offers to incoming PhD students — at MIT and UMass Chan Medical School, respectively.
Now universities are upping their financial war chests in response to steps Trump has already taken and those potentially yet to come, said Lisa Washburn, managing director for Municipal Markets Analytics, an independent research firm based in Concord. Those could include steeper taxes on endowments and even ending the ability for universities to issue tax-exempt bonds. There are also fears about how Trump’s immigration crackdown could affect international student enrollments, and how increased tariffs and stock market turmoil could hamper schools’ bottom lines.
Increasing short-term borrowing is “a strategic and understandable move given the extreme uncertainty facing higher education, particularly the Ivy Leagues and other schools cited by the administration in terms of potential funding cuts,” Washburn said. “Right now, cash is king.”
Without cash, even the wealthiest schools could be left short-handed. Endowments at institutions, such as Harvard and Wellesley, are tied up in investments that cannot be easily liquidated, and colleges usually avoid pulling money out of the stock market, preferring to use gains there to maintain financial aid commitments to students.
Schools also learned lessons from the 2008 recession, when some universities lacked adequate reserves and had to resort to painful cuts. Harvard, for instance, sliced its Faculty of Arts and Sciences’ budget by $77 million, laid off hundreds of workers, and delayed construction of its Allston campus.
On the New York Times’ “The Daily” podcast Wednesday, Princeton President Chris Eisgruber referenced the last major recession, when he served as the school’s chief budgetary officer, and noted how elite universities’ wealth gives them options during troubling times.
“You can reallocate across purposes,” he said. “You can sustain your core for a period of time.”
But Larry Ladd, a former budget officer at Harvard and now a financing expert at the Association of Governing Boards of Universities and Colleges, said that can be tough to do long-term, particularly if the funding hit persists.
“There are countless reasons right now to maintain a high level of liquidity, and that’s the sudden surprises from Washington,” Ladd said. “But borrowing money is not a sign of weakness, but a sign of strength” because it ensures universities are prepared to deal with unexpected cuts.
In recent decades, universities large and small have increasingly turned to bonds to maintain their finances. Some use the money to finance campus improvements, while others lean on the market to take on additional debt to balance the budget. And while issuing bonds can free up cash, those bonds must be paid back, with interest.
In 2023 and 2024, the number of university-issued bonds nearly doubled following the COVID-19 pandemic, when many colleges deferred maintenance needs and other projects. Boston University, for example, issued three bonds since January totaling $768 million, including a $300 million sale to finance the renovation of the Warren Towers dorm complex, while Boston College received $375 million in March for construction projects in Newton and Brookline. Bentley is in negotiations to raise $78 million to renovate its academic center and fund other infrastructure improvements. And Northeastern, too, turned to bonds to replace Matthews Arena.
Officials representing the colleges said that these are routine bond issuances, separate from the strategic issuances happening at institutions like Harvard.
“This has nothing to do with the current political climate,” Northeastern spokesperson Mike Armini said in an email.
Others have turned to bonds recently to refinance debt. In January, Emerson College also sold $88 million in bonds to refinance prior debt, a move that was in line with the institution’s long-term goals, a spokesperson said.
Olin College in Needham issued $43 million in bonds last week in a “straightforward refunding … not a new borrowing or response to financial stress,” a college spokesperson said. Its president resigned in January as questions of financial difficulties are mounting at the school.
No matter the reason, universities are in the right to keep their money close and stay ready, as policy changes move quickly under the Trump administration, Ladd said.
“If you’re afraid the federal spigot will be turned off quickly, you have to respond to meet the moment,” he said. “That is what we are seeing now.”
Diti Kohli can be reached at [email protected]. Follow her @ditikohli_.
