Tapping Bonds to Fend Off Trump?

As President Donald Trump has clamped down on federal research funding for institutions in his crosshairs, Harvard University and Princeton University have both announced plans to issue hundreds of millions of dollars in bonds, providing a potential financial backstop.

Last month the Trump administration ordered a review of nearly $9 billion in federal grants and contracts flowing to Harvard and has demanded a series of changes, spurred by alleged antisemitism tied to pro-Palestinian campus protests. In order for the university to have a “continued financial relationship” with the U.S. government, a letter from an antisemitism task force called for reforms to governance and leadership and in other areas.

The Trump administration also froze $210 million in federal research funding at Princeton, a move that came less than two weeks after the university’s president, Christopher Eisgruber, wrote an op-ed in The Atlantic accusing the government of undermining academic freedom.

Amid threats to federal funding, Harvard plans to issue $750 million in bonds. Meanwhile, Princeton is moving forward with its own plan to issue $320 million in bonds later this month. Bonds, which are a type of loan funded by investors, would provide an immediate infusion of cash.

Dozens of other colleges are also facing investigations over allegations of antisemitism and other matters, which has prompted funding freezes or reviews at Cornell University (more than $1 billion), Northwestern University ($790 million); Brown University ($510 million), the University of Pennsylvania ($175 million) and others. The most dramatic example, of course, has been Columbia University, which has now had more than $650 million in federal funding frozen over its handling of protests and alleged antisemitism. Although the university yielded to sweeping demands from the Trump administration, the federal government still has not released its funding and has reportedly pressed Columbia to agree to a consent decree, undercutting institutional autonomy.

The whiplash on federal research funding has prompted some institutions to freeze hiring and graduate admissions as they hang in fiscal limbo. Amid the uncertainty a question has emerged: Can colleges leverage debt to ride out Trump’s attacks?

Issuing Bonds

Harvard’s plan to issue bonds precedes the federal funding freeze.

In public documents posted March 11, the university noted the Trump administration had capped reimbursement for indirect costs through the National Institutes of Health at 15 percent—an issue still under litigation. Harvard also pointed to the possibility of “increasing taxes,” a seeming nod to efforts in Congress to hike the current endowment excise tax from 1.4 percent to a much higher rate.

“While the financial impact on the University resulting from the totality of potential developments at the federal level cannot be quantified at this time, any such developments may, directly or indirectly, have a material adverse effect on the current and future financial profile and operating performance of the University,” officials wrote in public bond documents.

Spokesperson Jason Newton told Inside Higher Ed by email that Harvard is planning ahead.

“As part of ongoing contingency planning for a range of financial circumstances, Harvard is evaluating resources needed to advance its academic and research priorities,” Newton wrote.

Princeton has been less vocal about its motives for tapping $320 million in bonds. But as at Harvard, the move was in the works before the federal government froze research funding.

“The university regularly issues debt, largely to support its extensive capital initiatives. As with most of our debt, the planning for the upcoming bond sale began months ago to meet plans for a spring issue,” university spokesperson Jennifer Morrill wrote to Inside Higher Ed by email.

Officials did not respond to a request for more details about the bond sale.

An Untested Strategy

Harvard had the largest endowment in higher education for fiscal year 2024 at almost $52 billion, while Princeton has the fifth largest at $34 billion, according to the latest study by the National Association of College and University Business Officers and the Commonfund Institute.

Comparatively, the median endowment for 658 study participants was $234 million.

Given their vast resources, many observers have questioned why Harvard and Princeton have not leveraged their endowments to wage a legal battle to preserve their federal funding and push back on Trump’s attacks on higher education. But presidents claim that isn’t feasible.

Eisgruber seemed to indirectly reject that idea in a Jan. 29 State of the University letter in which he argued that “an endowment is nothing like a savings account” but “more like a retirement annuity that must provide income every year for the remainder of the owner’s life.” He noted that the endowment supports “every aspect of the University’s operations,” including “faculty and staff salaries, financial aid, graduate stipends, building maintenance, athletics, libraries” and more.

“To state the obvious: absent additional fundraising and investment income, if we expend an amount equal to 5% (or more) of today’s endowment value year after year into the future, then the entire University endowment, no matter how large, will be gone in 20 years or less,” Eisgruber wrote.

But some critics disagree with the notion colleges can’t use their endowments to fend off Trump.

Charlie Eaton, an economic sociologist, professor at the University of California, Merced, and author of Bankers in the Ivory Tower, recently wrote in a New York Times op-ed that well-heeled institutions can and should lean on their endowments in the current moment. Using Columbia as an example, Eaton argued that it could afford to resist Trump’s demanded reforms and replace $400 million in federal funding by raising the annual draw on its $15 billion from 5 percent to about 8 percent. Additionally, he suggested that aggressive fundraising efforts could also play a role.

(Former president Barack Obama also encouraged universities to use their endowments to defend academic freedom in a recent public appearance. Former Harvard president Larry Summers has also endorsed the idea.)

Asked if leveraging bonds could help plug holes in federal funding or bankroll a legal fight against the Trump administration, Eaton told Inside Higher Ed that it’s a smart idea. He said the strategy is viable as long as the interest paid on bonds is lower than endowment investment returns, which have historically been around 10 percent a year (though that number has fluctuated.) That strategy also allows them to spread costs out over time—rather than taking a big chunk out of the endowment at once, colleges can pay the bonds back over multiple years.

But he noted the strategy won’t be successful for all institutions but could help “the wealthiest schools that have the largest endowments and the endowments with the highest rates of return.”

However, he added that there is an outstanding question about “what Trump’s destructive economic policy is going to do to bond borrowing prices.” For example, will bond yields fall?

Those questions aside, Eaton said colleges are locked in a political fight, which is unusual territory for them. Considering the slim majority Republicans hold in Congress, Eaton said, colleges need to buy time. With midterms looming next year and Trump’s approval ratings falling, Eaton said colleges need to develop strategies to turn public sentiment in their favor.

“For now they have to get themselves through the crisis,” Eaton said. “One of the things that I also have suggested is they—especially private universities—need to turn these attacks into fundraising opportunities to pull together their university community to financially help the institution survive as long as it takes. But you at least need a plan to make it to the midterms.”