Money Up, Admissions Down: Harvard’s Endowment Management Amidst Crisis
Graphic by Mia Stewart
In 2025, Harvard University had to completely reevaluate the way its endowment is used.
Harvard’s endowment has historically sought high-return investments in order to sustain annual withdrawals for University operations. In 2025, however, shifts in the national policy landscape—namely, higher tax rates and the Trump administration’s attempt to freeze federal funding—have forced Harvard’s endowment to prioritize liquid assets, potentially risking long-term sustainability.
Around 80% of Harvard’s endowment is held in restricted funds, meaning these dollars cannot be spent for purposes other than those for which they were donated. Of the remaining approximately $11 billion, the majority is held in highly illiquid assets.
The Harvard Management Company follows a 5% rule for withdrawing funds—whenever possible, no more than 5% of the endowment’s value is withdrawn annually. Since Harvard forecasts 5% year-over-year growth in its endowment, this rule ensures the endowment remains sustainable over the long term. Historical violations of this rule, including during the 2008 financial crisis, have resulted in the accumulation of billions in debt. To avoid depletion of endowment funds and maintain long-term sustainability, Harvard has been seeking additional investment opportunities and cutting costs whenever possible.
Research
In April of 2025, the Trump administration announced a $2.2 billion freeze on federal grant funding to the University, much of which was dedicated to scientific research. Over the following weeks, the University was notified that more than 950 expected federal awards had been terminated by seven agencies, including the National Institutes of Health and the Department of Defense, totaling around $2.4 billion.
In response, University president Alan Garber ’76 and Provost John Manning launched the Research Continuity Funding program, allocating $250 million of operating reserves to research over the 2025 and 2026 fiscal years to cover 80% of operating expenses for senior faculty, whose federal grants had been terminated while the legal battle proceeded.
Despite the freeze being ruled unconstitutional in September 2025, the hundreds of millions spent on sustaining research and the uncertainty regarding future funding have required the University to become more conservative with its endowment spending.
Tax Increases
The One Big Beautiful Bill was passed on July 4, 2025, and introduced an increase in federal endowment tax rates from 1.4% to 8% for the wealthiest institutions, more than quadrupling Harvard’s forecasted annual tax payments. Harvard officials estimate that the combined impact of the federal grant cuts, the endowment tax, and related pressures will cost the University up to $1 billion annually.
Faculty
To avoid stretching the endowment too thin, Harvard’s budget cuts began in May 2025, starting with the faculty. Merit-based raises were paused for all faculty and non-union staff university-wide. The Faculty of Arts and Sciences instituted a full hiring freeze and paused all non-essential capital projects. While senior and tenure-track faculty jobs were mostly secure, budget allocations for hiring and retaining non-tenure-track FAS faculty were cut by 25%. Enrollment in graduate programs, particularly PhD programs, dropped drastically across consecutive admissions cycles—by 75% in the sciences, 60% in the arts and humanities, and 50-70% in the social sciences. In comparison, Yale cut its enrollment in graduate programs by 13% in the humanities and social sciences and by 5% in the sciences, while Columbia proposed a 65% decrease in admissions across its Graduate School of Arts and Sciences.
Many key University leadership figures, including President Alan Garber, made symbolic gestures to support the institution during funding cuts. Garber voluntarily took a 25% pay cut in the 2026 fiscal year, while more than 80 faculty and staff pledged 10% of their salaries to a University support fund.
Lobbying
Beyond purely defensive measures, in 2025, Harvard spent over $1 million on lobbying—the highest annual lobbying budget the University has used in over two decades. The aggressive pace has continued in 2026, with $220,000 spent on lobbying in the first fiscal quarter. Lobbying focused on three main areas: restoring and protecting federal research funding, preserving visa pathways for international students, and fighting the endowment tax increase.
At the forefront of lobbying efforts was campaigning to reduce the tax increase on educational endowments to 8% from the 21% initially proposed by the House. Notably, Harvard paid $90,000 per quarter to Ballard Partners, a lobbying firm known to have ties to Trump’s inner circle.
Little information is available about the exact purpose and outcome of these payments, making it unclear whether they influenced the eventual tax-reduction victory.
Expansion
Outside the federal political climate, Harvard’s endowment is still being used to continue growing and expanding the University. In 2024, Harvard submitted an Institutional Master Plan to the City of Boston Planning Department outlining proposed developments in the Allston-Brighton neighborhood. Only about half of the 358 acres of land in Allston owned by Harvard are actively used by the University. The Plan outlines how Harvard intends to further develop this land over the next 10 years and includes six projects—three new and three that were initially proposed in Harvard’s 2013 Institutional Master Plan but were never realized.
Of the new projects, one involves constructing a 200,000-square-foot Tennis and Squash Racquet Center by demolishing the existing Beren Tennis Center and replacing it with a facility that includes indoor and outdoor tennis courts, indoor squash courts, locker rooms, athletic offices, and an equipment shop. A second involves a 20,000-square-foot support building for the Mignone Rugby Field, providing the Harvard Women’s Rugby Team with a training room, locker rooms, office space, and equipment storage, as well as visitor amenities, including restrooms and concessions. The third is a renovation of vacant kitchen space at 168 Western Avenue for use by Crimson Catering.
Projects being proposed a second time include a 110,000-square-foot, three-story Faculty and Administration Office for the Harvard Business School, and a renovation of Harvard’s football stadium focused on preserving the building and improving accessibility and amenities. The final and largest project proposed in the Plan is the Gateway project at Barry’s Corner at the intersection of Western Avenue and North Harvard Street. The new development, proposed to span 300,000 square feet and rise six to nine stories tall, would include ground-floor retail and upper-level office and administrative space.
The Institutional Master Plan was proposed prior to federal funding cuts. Despite receiving unanimous approval from the Boston Zoning Commission, it is unclear which, if any, of these projects will actually be realized in the next decade. Although preliminary budget information is not available, Harvard’s 2013 Institutional Master Plan, including construction of the Science and Engineering Complex, renovations to HBS, and renovations to Soldiers Field Housing, is estimated to cost upwards of $1.2 billion. In addition, the 2025 Plan includes a $53 million pledge to support community development in Allston-Brighton, including housing and education.
Next Steps
The future of Harvard’s endowment, particularly in the context of federal legislation, remains unclear. The increase in endowment taxes outlined in the One Big Beautiful Bill will remain in effect, and research continues amid uncertainty about whether its funding will survive another political shift.
Despite the uncertainty of the past year, Harvard is entering the 2026-27 school year with its largest endowment ever. In 2025, amid federal budget cuts and changing legislation, the University’s endowment increased from $53.2 billion to $56.9 billion and recorded higher returns than in the previous two fiscal years. In a climate where government funding remains uncertain and where changes in administration can disrupt decades of research, however, it is evident that Harvard must continue to reevaluate its endowment management strategy to maintain long-term sustainability.
Lucy Duncan ’28 (lduncan@college.harvard.edu) writes News for the “Harvard Independent.”