TL;DR
- Harvard pushed back. The university rejected sweeping federal demands that threatened its independence—and later were described as having been sent by mistake. Hours later, $2.2B in grants were frozen, and further pressure followed.
- Billions at stake. Harvard now faces $1.2–$5.5B in total annual institutional risk exposure—up to 43% of its adjusted operating budget—across grants, medical revenues, student aid, and potential taxes.
- No easy choices: Relocation, shutdown, or litigation would be symbolic at best and catastrophic at worst. Harvard’s only real choice is weathering the storm and protecting the mission.
- Protect the mission: This is about defending academic freedom, core values, and long-term viability, and doing the right thing through prudent, mission-focused decisions.
As we prepared this issue, we received a late-breaking notification from Acting President Claire Shipman on Friday afternoon foreshadowing reforms to the University Senate. This will require time to digest and think about, and we will have some reactions next week.
This week, we’ll talk about one of our peer institutions, Harvard University, that is going through tribulations of its own. Let’s review the facts.
So What Happened?
On April 3, 2025, Harvard received a letter from the Joint Task Force to Combat Anti-Semitism. Unlike the similar letter sent to Columbia on March 13, 2025, the letter to Harvard was vague and less prescriptive and covered broad categories, such as “Harvard has an obligation to consistently and proactively enforce its existing disciplinary policies.”
On April 11, 2025, in a dramatic escalation, the Joint Task Force sent Harvard an exceptionally detailed list of demands. This included things like commissioning an external party to “to audit the student body, faculty, staff, and leadership for viewpoint diversity, such that each department, field, or teaching unit must be individually viewpoint diverse” through at least 2028. It even named faculty bodies and student clubs to be reformed and derecognized.
On April 14, 2025, in a firmly worded public letter titled, “The Promise of American Higher Education,” Harvard’s President, Alan Garber, rejected these demands. The letter made it clear that while Harvard “remains open to dialogue about what the university has done, and is planning to do, to improve the experience of every member of its community”, it will not “surrender its independence or relinquish its constitutional rights” as “no government—regardless of which party is in power—should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.” Garber also emphasized that Harvard does “not take lightly our moral duty to fight antisemitism” and “[W]e plan to do much more.”
Harvard’s outside legal and lobbying firms, Quinn Emmanuel and King & Spalding, separately sent a letter to the Joint Task Force emphasizing that the university had already made “lasting and robust structural, policy, and programmatic changes” and stating, “[n]either Harvard nor any other private university can allow itself to be taken over by the federal government,” and Harvard “will not surrender its independence or relinquish its constitutional rights.”
Hours later, the federal government froze $2.2 billion in multi-year grants and $60 million in contracts to Harvard.
On April 15, 2025, the IRS reportedly began examining ways to revoke Harvard’s tax-exempt status.
On April 16, 2025, Secretary of Homeland Security Kristi Noem sent Harvard a letter requesting it turn over extensive information on international students and their disciplinary records by April 30, 2025. Failure to do so would result in Harvard being removed from the Student and Exchange Visitor Program (SEVP), which would mean Harvard would no longer be able to enroll international students (about 40% of its student body).
On April 17, 2025, the Department of Education sent Harvard a letter demanding detailed records of all foreign donors and many foreign affiliates, in some cases going back to 2010.
Finally, on April 18, 2025, the New York Times broke the story that the demand letter sent to Harvard on April 11, 2025 was “not authorized” and “sent by mistake.” The letter, however, was not retracted, nor were any of the freezes on government funding lifted.
Across the ideological spectrum, the reaction has been swift: the federal demands constitute serious overreach. Even institutions and voices traditionally sympathetic to conservative perspectives—such as Heather Mac Donald of the Manhattan Institute, the Wall Street Journal’s editorial board, and the Foundation for Individual Rights and Expression (FIRE)—have publicly called out the government’s actions as excessive and intrusive. However, other conservative leaders have unified behind the Trump administration. Congresswoman Elise Stefanik, famously known for her pointed questions at the hearing that led to the resignation of the Presidents of Penn and Harvard, offered a strong defense of the Trump administration’s approach, as has leading anti-DEI conservative Chris Rufo. And of course, Bill Ackman had his own take.
We understand Harvard’s stance. The government’s demands were very far-reaching, and it is difficult to see how an academic leader who values institutional integrity and academic freedom could have simply agreed to these demands as they were written. President Garber did the right thing—for now. And now that we know the letter was a mistake, a window for a deal has potentially opened up.
To understand why a deal might still emerge, this issue dives into Harvard’s institutional risk exposure and explores the alternatives to an agreement with the government. Ultimately, we wonder whether a win-win outcome might involve a deal that looks very different than the one that the government proposed, implementing policy changes that address legitimate concerns—and the government does have legitimate concerns—while preserving Harvard’s institutional autonomy and academic freedom.
Harvard’s Institutional Risk Exposure
Let’s be clear-eyed: rejecting this particular set of demands—while necessary—doesn’t resolve the deeper challenge. Drawing a line is one thing; holding it under pressure is another. Even though the letter was a mistake, the actions the government has subsequently taken have not been rescinded or lifted.
The federal government still holds enormous leverage and the implications for Harvard’s institutional stability are serious. To understand just how serious, we’ve replicated the same analysis we previously conducted for Columbia. Our estimate: Harvard faces $1.2 to $5.5 billion in annual institutional risk exposure, or up to 43% of its adjusted operating budget, once you factor in annual grant funding and patient care revenues currently on the books of its affiliates. (Unlike Columbia, Harvard Medical School does not have its own affiliated medical center but rather has a system of 15 hospitals and research institutions, like Massachusetts General Hospital and Dana-Farber Cancer Institute, where HMS faculty do their research.)
Here’s how we did it.
Lever 1: Government grants. We estimate Harvard has $2.4 billion in annual exposure to government grants.
Harvard’s financial statements record $686.5 million of federal government sponsored support. We suspect the $2.2 billion that the government has announced it has frozen represents the multi-year cumulative total of its “on books” grant revenue.
However, we believe that this figure excludes a significant portion of federal grants awarded to Harvard Medical School faculty practicing at Harvard’s more than a dozen affiliated hospitals, despite claims otherwise. In other words, the $8.7 billion the government is reviewing are “off books”; they include the grants that the more than 11,000 Harvard Medical School faculty bring to their respective hospitals. But only 170 out of those 11,000 HMS faculty are on-site at Harvard; the rest have a primary affiliation with their hospital and a secondary affiliation with Harvard.
So how much is this “off books” bucket? No single source discloses it, and the hospitals themselves don’t distinguish grants between HMS-affiliated and non-HMS-affiliated faculty, but we can triangulate through two methods.
First, we know according to Columbia’s 2023 uniform guidance report that the National Institutes of Health awarded $747.4 million, predominantly to Columbia’s 3,018 faculty members in the Faculty of Health Sciences. This implies an average of $247,656 of grant funding per faculty member (although this is highly skewed—most faculty do not carry a grant-funded research portfolio). Assuming Harvard Medical School’s ~11,000 faculty achieve the same average as Columbia faculty, this implies HMS has annual grant funding of $2.7 billion. (Note this assumes the $686.5 million on Harvard’s financial statements do not include any of this amount as it is unclear as to what grant funding goes direct to HMS vs. to affiliated hospitals where HMS faculty practice medicine; if it does, the number could be as low as $2.0 billion.)
Second, we know Columbia receives $1.3 billion per year in grant funding, but grant funding occurs on a 4-year cycle. The federal government’s notice to Columbia named $5 billion at stake in total commitments, which we took to mean a cumulative multi-year commitment. This implies the average “age” of Columbia’s grant portfolio was 3.76 years. The federal government named $8.7 billion at stake in total commitments to Harvard. If we apply the same average age, this implies Harvard’s annual grants are $2.3 billion.
Taking the average of all three numbers—$2.7 billion, $2.0 billion, and $2.3 billion—triangulates Harvard’s annual grant exposure to be $2.4 billion. The math is below (highlighted fields are the calculated ones).
We want to emphasize that our confidence in the accuracy of this estimate is not high due to the inherent uncertainty of revenues tied to Harvard affiliates kept on the books of other institutions, and the impossibility of separating them out—at least from public sources.
Short-term risk: $1.2 billion
Long-term risk: $2.4 billion
Probability: High
Lever 2: Medicare and Medicaid. We think Harvard earns more than $1.3 billion in Medicare and Medicaid revenues per year. Patient care revenue is not consolidated into Harvard’s income statements (as it is at Penn, Cornell, Duke, and Columbia), which means it sits on the books of Harvard’s affiliated hospitals. Again, we can use Columbia as a proxy.
Columbia’s financials disclose that 32% of Columbia’s $1.1 billion of medical faculty practice revenue, or approximately $350 million came from Medicare and Medicaid. Benchmarking Columbia’s 2024 health sciences faculty on a Medicare and Medicaid “dollar per faculty” yields $114,710 per faculty member. Harvard, at ~11,000 HMS faculty, and again assuming constant “dollar per faculty” yields $1.26 billion in implied Medicare and Medicaid revenue. This number might actually be a bit low because the nationwide share of healthcare spending tied to Medicare and Medicaid is 43%. We view this as a long-term tail risk given that it impacts vulnerable populations, not Harvard.
Again, we emphasize that our confidence in the accuracy of this estimate is not high due to the inherent uncertainty of revenues tied to Harvard affiliates kept on the books of other institutions, and the impossibility of separating them out—at least from public sources.
Short-term risk: $0
Long-term risk: $1.3 billion
Probability: Low
Lever 3: Federal student aid. Harvard’s uniform guidance report indicates it received $118.3 million in federal student loans, Pell grants, and work-study funds. Likewise, we view this as a long-term tail risk given that it impacts students, not Harvard.
Again, we emphasize that our confidence in the accuracy of this estimate is not high due to the inherent uncertainty of revenues tied to Harvard affiliates kept on the books of other institutions, and the impossibility of separating them out—at least from public sources.
Short-term risk: $0
Long-term risk: $118 million
Probability: Low
Lever 4: International student visas. This became salient very quickly in Secretary Noem’s letter to Harvard. The executive branch has widespread discretion to add or remove universities from the SEVP (Student and Exchange Visitor Program) unilaterally. SEVP is what allows the grant of student visas.
In 2024-2025, Harvard had 10,158 international students out of an enrollment of roughly 25,000. This population generated $1.4 billion of tuition income net of financial aid, or approximately $55,000 per student. This implies roughly $560 million of tuition income came from international students. This number may also be conservative as international students generally receive less financial aid.
Short-term risk: $560 million
Long-term risk: $560 million
Probability: High
Lever 5. Endowment tax. Harvard’s endowment generated 9.6% return last year, or roughly $4.5 billion. A 20% excise tax on that is approximately $900 million. We think the risk is material that such an excise tax makes its way into the administration’s tax policy.
Short-term risk: $0
Long-term risk: $900 million
Probability: Medium
Lever 6. Removal of tax-exempt status. We think this could be approximately a $225 million impact, but we don’t have high confidence in this number. There are two avenues here. First, a tax on profits, and second, the knock-on effects of giving if gifts were no longer tax-deductible. Harvard does not run a significant operating surplus ($6.5 billion of revenue versus $6.4 billion of expenses). We don’t know how much of those expenses are tax-deductible, so we will make a simplifying assumption that all of it is; if so, the impact of applying a 21% corporate tax rate to Harvard is negligible. However, Harvard does receive $528 million in gifts for current use and $368 million in gifts for endowment in 2024, or about $900 million. If those gifts were no longer tax deductible, how would that change?
This elasticity very difficult to model. If those gifts came from a charitable foundation, tax deductibility wouldn’t matter—but those foundations might be barred from giving to an entity that is not a nonprofit. If those gifts came from individuals, then the lack of tax deductibility would logically depress giving, but it may not be a linear relationship. In the light of Garber’s letter, Harvard also began receiving a surge of alumni donations, close to 40x average daily intake at one point. This will both need to be assessed for sustainability over time and whether they will offset short-term losses (initial reports had them close to the $1 million mark, which if sustained and annualized over the year would fill <17% of the $2.2 billion already frozen—obviously not close to sufficient).
We’re unable to really model this out with any degree of detail, so we will assume a 25% drop in giving, or approximately $225 million in impact. We think this is a tail risk, given the complexity and multiple avenues for judicial branch intervention.
Short-term risk: $0
Long-term risk: $225 million
Probability: Low
What Does It Mean to “Resist”?
Many of us instinctively sympathize with the call to “resist.” But “resistance” only matters if it’s paired with a workable plan. As far as we can tell, Harvard has five options: four real, one rhetorical.
Option 1: Relocate. Like Central European University did from Budapest to Vienna. Or the New School’s “University in Exile” in 1933. Or the three Chinese universities that fled Japanese occupation in WWII. Professor Rajiv Sethi at Barnard proposes that Norway uses its $1.7 trillion sovereign fund to capitalize universities in exile. “It’s cold in the winters, to be sure, but a warm enough embrace might be enough to compensate.” But relocating 1,500 students in a small liberal arts college, or a 183 faculty when research expense meant “typewriters” in 1933 is not the same as transplanting a research behemoth. And the only country with comparable R&D funding is… China, which is well-known for its strong support of academic freedom and lack of political interference in academia.
Option 2: Shut it all down. Dismantle the research enterprise, keep the teaching, and become Hillsdale-on-the-Charles. No NIH grants, no NSF support, no federal student aid. Just tuition, and not the subsidized kind. Technically possible. But really, do we want to go there?
Option 3: Take the government to court. Yes, Harvard would likely win on some issues in court. But even a perfect litigation strategy would not be likely to prevent the government from refusing to award Harvard new grants and contracts. So unless court victories magically prevent changes in Congressional appropriations, survives a decade of electoral swings, and keeps the money flowing before the cash runs out, the win will be pyrrhic. Even with $10 billion in unrestricted endowment, that’s a 3–5 year runway, assuming perfect conditions. Betting it all on a flawless legal and political sequence is not strategy.
Option 4: Weather the storm and protect the mission. Make the policy changes necessary to protect the mission. Derided by some as “capitulation,” but unless you’re seriously endorsing exile, shutdown, or litigation roulette, this is the only responsible move. It’s not surrender. It’s a strategy.
Option 5 (maybe): Band together. We’re seeing early signs—led by Harvard itself—that the sector may be inching toward a collective response. But so far, it’s mostly statements. Unless that turns into actual solidarity backed by shared financial risk—think mutual defense pact with real cash transfer—this remains a “maybe,” not a real plan.
Unless someone is seriously proposing a mass academic migration to Norway or a return to typewriter-era scholarship, the choice is clear. In the absence of meaningful coordination, this is TINA (there is no alternative) meets academia.
We Have to Stop this Posturing and Get Back to Work
We need to move past the false binary between total capitulation and noble self-immolation. That binary framework may feel righteous, but it’s strategically useless. It boxes us in just when we need the freedom to maneuver. When the crisis is complex, creativity and flexibility matters most. We’re also going to go out on a limb and gently suggest that people who think voluntary martyrdom is a good thing are not people you should follow.
Academic freedom and public accountability aren’t at odds. They never really have been. Since World War II, universities have been deeply embedded in the federal ecosystem—funded by it, elevated by it, shaped by it. That partnership made extraordinary things possible. It also created expectations. And yes, in some ways, we’ve fallen short. The erosion of public trust in higher ed isn’t just a political invention. We had a hand in it. Some of that needs fixing, not because Washington demands it, but because it’s the right thing to do.
Harvard was right to draw a line. But even Garber didn’t say what happens next. Litigation? Endowment decapitalization? Oslo? Or, as Alan Dershowitz confidently predicts, a quiet deal? No one knows. And more to the point, no one seems eager to say.
In the absence of a coordinated, sector-wide defense (and no, sternly-worded statements don’t count) the only real strategy is to protect what we can, fix what we should, and live for another day to carry out our essential, core missions of teaching, learning, research, and patient care. That’s not capitulation. That’s prudence, leadership, and strategy.
Yes, defiance is tempting. But our great universities shouldn’t become the institutional equivalent of a toddler declaring, “I’m going to bed, but only because I’m tired, not because you told me to.” We can reject federal overreach and still get our own house in order. Not out of spite. Not out of fear. But because it’s the right thing to do. There’s an opening now to do just that, and we should take it.
There’s too much at stake—scientific progress, democratic resilience, national competitiveness—to throw it all away for a gesture. We have our red lines, and we will not cross them. Full stop. But let’s not confuse volume with strength. Real strength is knowing when not to burn the house down just to prove it’s yours.
News Roundup
– April 18, 2025. The Spectator reports that Acting President Claire Shipman has announced a summer review of Columbia’s University Senate, citing concerns that the 55-year-old body—established after the 1968 protests—is no longer equipped to function in times of crisis. The move comes amid rising scrutiny of shared governance, internal conflicts over Senate leadership, and the fallout from federal funding cuts and student protests. Shipman also unveiled two new working groups focused on rebuilding public trust and rethinking Columbia’s financial model.
– April 18, 2025. The Spectator reports that despite assurances to faculty that disciplinary meetings were on hold, Barnard has scheduled conduct hearings for students involved in recent protests. Faculty and students say the administration has blurred the line between “inquiry” and “conduct” processes, threatened to withhold graduation from seniors, and bypassed promised checks and balances. Critics call the process opaque, coercive, and retaliatory, alleging Barnard is quietly reshaping its disciplinary system amid federal pressure, with minimal transparency or input from the campus community.
– April 18, 2025. The Spectator editorial board, in a sweeping op-ed, argues that the University has abandoned shared governance in favor of a corporate-style model centered on trustee control. Tracing a year of presidential turnover and rising federal pressure, the piece contends that decision-making has been sealed within the board and executed by Acting President Claire Shipman who now governs as “a board member with presidential power.” The editorial calls Shipman’s rhetoric of listening hollow and warns that student and faculty voices are now seen as risks to be managed, not constituents to be heard.
– April 17, 2025. The NYT reports that hundreds gathered at Columbia University and across Manhattan to protest the federal detention of two Palestinian students involved in pro-Palestinian activism—one a graduate, the other an undergraduate on the path to U.S. citizenship. Demonstrators, including faculty, decried the chilling effect of federal crackdowns, criticized Columbia’s response, and called for protection of academic freedom and international students.
– April 17, 2025. The Spectator reports that the chair of the Columbia Trustees, David Greenwald, sent out an email Thursday announcing the intention of the University to install the next president to take office by January 1, 2026 at the latest. There are still three to four yet-unnamed faculty members who will be added to the search committee; the board will “announce the full committee shortly.” Assuming the timeline outlined by the board is correct and the next president starts in January 2026, it would count as Columbia’s fourth sitting president within four years.
– April 17, 2025. In a powerful op-ed in the Spectator, John Kluge Jr. CC ‘05 warns that the Trump administration’s attacks on Columbia—and other universities—amount to a modern-day “book burning,” threatening free inquiry, financial aid, and the very soul of higher education. Drawing on personal history and his father’s (John Kluge CC ’37, whose landmark gift endowed the Kluge Scholars) immigrant journey, Kluge calls on alumni to defend academic freedom by speaking out, giving generously, and engaging deeply. “Autocrats depend on our apathy,” he writes. “Instead of compliance, we should offer defiance.”
– April 16, 2025. The WSJ reports that some Columbia admits are reconsidering their decision to commit to the school given the unfolding recent events, while Harvard-bound students remain steadfast in their interest, believing the “Harvard brand isn’t that changed.” Many students appreciate Harvard’s hard-line stance in resistance to the Trump administration’s demands. One inbound student reported that Harvard’s statement “was very impactful and very powerful in my decision-making process, and I know that’s the case for a lot of my peers.” Adam Nguyen, who runs college consulting practice Ivy Link, reports that all of his six client’s who got into Columbia this year are “doubting whether now is the right time to attend.”
– April 16, 2025. The WSJ reports that the Trump administration has asked the IRS to begin the process of taking away Harvard’s tax-exempt status after the school refused to comply with the government’s ranging demands. In order to maintain legal tax-exempt status, the IRS mandates that the entity exists solely for educational, scientific, charitable, or religious reasons; it is also necessary that the entity exists not for the “benefit of private interests.” It is still unclear exactly which legal avenue the administration will pursue to attempt to revoke Harvard’s tax-exempt status, but Trump has hinted that Harvard should be taxed as a “political entity” due to its “pushing political viewpoints.” One potential legal pathway for the administration would be to argue that the school’s stance on DEI was unconstitutional or furthering a political agenda. However, because no legal precedent yet exists in this lane, it would take yeast to establish one–if ever.
– April 16, 2025. The Atlantic reports that Harvard has “learned from the mistakes of Columbia University, namely the lesson that if capitulation gets you nowhere, why even agree with the orders of the Trump administration.” Harvard was threatened with the potential of losing $9 billion in federal grants and contracts if they did not agree to a long list of orders, including “screening foreign applicants hostile to the American values and institutions” and allowing a third party to audit different departments of the school for viewpoint diversity. Harvard has definitively declined to align with Trump’s demands, citing its stance that “Neither Harvard nor any other private university can allow itself to be taken over by the federal government. Accordingly, Harvard will not accept the government’s terms as an agreement in principle.”
– April 16, 2025. Columbia history professor and Vice Dean Matthew Connelly writes in the NYT criticizing fellow academics for boycotting the university during its clash with the Trump administration. Connelly, whose federal research grants were canceled, argues that faculty should unite in defense of academic freedom, not punish colleagues already under political siege. He defends Columbia’s refusal to cede curricular or hiring control to the government and warns that internal divisions only strengthen anti-intellectual forces. The real threat, he writes, is political micromanagement—not principled disagreement.
– April 15, 2025. Columbia PhD candidate Daniel Di Martino writes in the City Journal (a publication of the Manhattan Institute) alleging he’s being investigated by the university’s Office of Institutional Equity for expressing Catholic beliefs on social media. He describes being shown posts criticizing gender ideology and supporting conservative policies, which investigators claimed could create a “hostile environment.” The student, backed by FIRE, argues the inquiry amounts to selective enforcement and censorship of religious and conservative views—undermining Columbia’s claim to uphold free expression while cracking down on antisemitism.
– April 15, 2025. In Barron’s, Columbia professor Amar Bhidé argues that elite universities cannot meaningfully resist political pressure—especially from the Trump administration—without making hard, structural changes they’ve long avoided. True academic independence, he writes, would require shedding financial dependency on federal funding and practicing genuine institutional neutrality. But few schools, he warns, are prepared to take those steps. The piece calls for a reckoning with universities’ addiction to “Big Science” overhead, their inconsistent free speech practices, and the prospect of separating research and advocacy into independent entities.
– April 15, 2025. The NYT reports that Columbia has promised to “reject any Trump deal that erodes its independence.” The sitting president of the university expressed that Columbia would “reject heavy-handed orchestration from the government that could potentially damage our institution and undermine useful reforms” and that any attempts of the government to interfere in “what we teach, research, or who we hire” would be unwelcome. The school is apparently going to take a stand against attempts by the government to “require us to relinquish our independence and autonomy.” This new tone was adopted fewer than 12 hours after Harvard refused the Trump administration’s demands, initiating a freeze in $2.2 billion in federal funding in grants over multiple years.