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Elite American universities have secured over $4 billion in additional debt since March that will help protect their finances as the Trump administration takes aim at their budgets.
Harvard University, the face of the fight, has boosted its debt load 16% after a bond sale in April. The Massachusetts Institute of Technology just ramped up its liabilities 18% to $5.2 billion. Top-tier schools have sold taxable bonds, taken out private loans, and increased capacity for commercial paper, according to data compiled by Bloomberg.
Colleges are using a recession-style playbook to respond to the Trump administration's large-scale funding freezes and proposed research spending cuts. House Republicans also hiked the endowment tax in a bill that now moves to the Senate. And the fight is ramping up with the US ordering its embassies worldwide to stop scheduling interviews for student visas as it weighs stricter vetting of applicants' social-media profiles.
The nation's wealthiest colleges are getting a taste of the financial pressure that has long hit small colleges in the wake of the pandemic as they struggle to boost enrollment and stay afloat.
"The colleges that had been doing really well were the big name public universities and wealthy private colleges - but that got all scrambled when federal research funding was challenged in investigations against the elite colleges," said Robert Kelchen, a professor studying higher education at the University of Tennessee at Knoxville.
The A-list schools haven't explicitly spelled out what they're using the money for. But taxable debt can be used for a wider array of purposes than the tax-exempt bonds that universities typically sell. A spokesperson for Brown University, which took out a $300 million private loan, acknowledged "the uncertainty regarding future federal policy related to research and other important priorities." And a representative for MIT said it tries to manage for a "wide range of conditions" and the bond deal would help it do that.
Beyond borrowing, several schools are considering selling stakes of their private equity holdings. Budget cuts are also on the table. Columbia University has cut 180 staffers and Duke University is trying to slash spending, causing it to offer buyouts to employees.
Schools could also look different in other ways next semester. Brett Dalton, a former college administrator who now advises universities at Huron Consulting, said some of his clients are planning to increase the size of their freshmen classes to boost tuition revenue.
"​We are seeing large publics, large privates, more elite schools admitting and enrolling more students than they have historically," Dalton said. "They have opened the doors a little more and that additional tuition and fee revenue is helping to offset some of the losses from other sources."
Even those that have avoided the direct ire of the Trump administration are on alert. In Washington, the Catholic University of America told investors ahead of an upcoming bond sale that, like other colleges, it is monitoring the risks of policy changes.
"While the University's relatively conservative religious orientation provides some insulation against certain types of political risk, particularly those of a social nature, its research focus and global recruitment profile create exposure to others," according to bond documents.
To offset any potential decline in international students, which made up about 11% of last year's fall class, the school is trying to boost domestic enrollment by expanding online offerings and launching an accelerated nursing degree program, according to bond documents. That has been in the works for months as part of regular review of course offerings, and planning started last summer, according to Karna Lozoya, a university spokesperson.
• Bond Sales
There's been a rush to market among colleges and universities as the Trump administration roils the sector. Higher-ed municipal bond sales have exceeded more than $17 billion so far this year, the most since at least 2014, according to data compiled by Bloomberg. Those figures don't include securities sold into the corporate bond market, like what Harvard did. Schools are warning investors about the federal funding threats in bond documents.
Federal agencies have proposed various cuts to research funding, which would hurt large public and private universities. But the move by the National Institutes of Health, for example, is being challenged in court.
"All the way down the spectrum - from the largest to the smallest colleges and highest rated to the lowest rated colleges – there is concern about the various initiatives that are on the table," said Doug Brown, co-head of higher education for Wells Fargo & Co.'s public finance group.
He noted that not all taxable bond deals are in response to the federal funding concerns, and some of the bond offerings in the early spring were long-planned.
Stanford's bond sale was part of the university's normal course of business, according to a spokesperson for the school.
Colleges tend to sell taxable bonds in waves, said Brandon Kanz, head of credit at Galliard Capital Management, who buys the securities sold by well-rated universities. They did so in the aftermath of the 2008 recession when their endowments saw returns plunge. They also did so when interest rates dropped in 2020.
"There is definitely a herd mentality" among colleges, he said. Now, "they're looking to primarily shore up their balance sheets and build liquidity for an uncertain environment."
• Different Levers
The capital markets are an option that's right at schools' "fingertips," according to Diana Hoadley, a longtime banker for universities who previously worked at Goldman Sachs Group Inc.
In addition to bond sales, colleges like Cornell University have increased the size of their commercial paper programs. That's seen as a way for colleges to preserve their cash and fund campus projects. A spokesperson for Cornell said its decision to increase its taxable commercial paper program was planned before the start of 2025.
Taxable commercial paper can have more flexible uses. That could be used by a college as a bridge financing mechanism if federal research dollars are delayed.
Colleges are trying to preserve research activity as they ride out the uncertainty over federal funding, Hoadley said. Still, it would be difficult for a university to completely cover lost research funding using its own resources, she said.
"It's going to be really stressful over the course of the next year," Hoadley said. "A lot of it will depend on how the higher education industry can not just defend itself, but get public support."
Harvard, which has seen more than $2 billion of grants and contracts frozen by the Trump administration, announced it was using $250 million of its own funding to support research. It has also asked alumni for donations to help plug spending gaps. But the school acknowledged there will "undoubtedly be difficult decisions and sacrifices ahead."
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