{shortcode-cf89a55b0739b75b25f8d3b69d662184ba5224b9}
The Trump administration has turned toward federal financial aid as a new pressure point for Harvard — but recent threats have yet to present a significant risk to Harvard’s financial footing or College students’ access to aid.
The Education Department slapped a new sanction on Harvard when it placed the University on heightened cash monitoring status on Sept. 19. The classification, often applied to struggling technical and for-profit colleges, is typically used to ensure the federal government isn’t sending aid to schools that are likely to collapse midyear.
“Harvard must now seek reimbursement after distributing federal student aid and post financial protection so that the Department can ensure taxpayer funds are not at risk,” Education Secretary Linda E. McMahon wrote in a press release announcing the decision.
Under HCM1 status, the designation Harvard was placed in, there are no changes to the University’s payment method — unlike the more restrictive HCM2 status, which would require Harvard to use its own funds to cover aid for students eligible for federal grants, rather than first drawing down federal funding through the Advance Payment Method.
But for Harvard, even that change would be unlikely to make much of a difference: Harvard has always first distributed aid to students and then requested federal reimbursement for financial aid awarded, according to a University spokesperson.
Robert J. Kelchen, a professor of higher education at the University of Tennessee, said that HCM status could subject Harvard to additional scrutiny and bureaucratic hurdles, but is unlikely to make a significant dent in the University’s budget.
“It may take a while for Harvard to get reimbursed for the federal aid money, but in the grand scheme of things, federal financial aid at Harvard is something like $100 million a year. It’s a relatively small part of Harvard’s budget relative to many other institutions,” Kelchen said.
The Trump administration has not taken cuts to Harvard’s federal aid dollars off the table.
The University “risks losing access to all federal student aid funding due its noncompliance with requests from the Department’s Office of Civil Rights,” the Education Department wrote in a press release announcing its decision to place Harvard under heightened cash monitoring.
Earlier cuts to Harvard’s federal grants and contracts — which topped $2 billion in multiyear commitments, before a judge restored the funding in September — targeted research, not financial aid. Since the judge’s order, the Trump administration has continued to threaten Harvard’s federal financial assistance, which could include everything from cancer research funding to Pell grants.
Losing access to federal financial aid could put up a new hurdle for Harvard, but it is unlikely to be as catastrophic to the University as losing research funds, which have clocked in at well over $600 million annually in recent years.
Harvard does not rely heavily on federal funds for its undergraduate financial aid awards, instead drawing on its own budget — which includes $275 million for Harvard College financial aid this academic year.
In the 2022-23 academic year, the last year for which complete data is available through the National Center for Education Statistics, Harvard undergraduates received more than $250 million in financial aid. Only about $8 million of that total came from the federal government in the form of Pell grants. The federal government also made roughly $3.6 million in loans to Harvard students. (The NCES data includes funding for students at the College and in the Division of Continuing Education’s undergraduate programs.)
“Taking away federal financial aid is a relatively small thing for Harvard, relative to, say, taking away research funds or threatening the tax preferred status of a private nonprofit institution,” Kelchen said.
Threats to federal aid to graduate students, provided in the form of loans, could be more disruptive. Harvard graduate students have received close to $100 million in federal loans annually in recent years. Without access to federal aid, graduate students may have to pay more upfront, turn to private lenders, or forgo attending Harvard entirely.
But tax and spending legislation passed by Republicans in July has already shaken up the federal student loan system, particularly for grad students. Starting in July next year, Grad PLUS loans will no longer be offered to new borrowers, and graduate students will face new caps on unsubsidized direct loans. Parent PLUS loans will also be subject to new limits.
The Trump administration’s other threats to Harvard have already proven pricey, and the Education Department used Harvard’s austerity measures to justify its decision to place the University under HCM status, saying they pointed to “growing concerns regarding the university’s financial position.”
A hike to the endowment tax, passed this summer, could cost the University $300 million per year — and Harvard officials have repeatedly said that the tax could threaten the flexible funds used for financial aid.
The new tax, combined with uncertain access to future federal research funding, has pushed Harvard to shore up its finances — including staff layoffs at multiple schools, a hiring freeze, and pauses on capital spending. The University also issued $1.2 billion in bonds last semester, citing federal funding threats from the Trump administration.
But higher education experts widely agreed that Harvard’s financial challenges would not ordinarily justify subjecting the University to HCM.
Ozan Jaquette, a professor of higher education at the University of California Los Angeles, said that Harvard didn’t meet the criteria that the government has historically used to decide whether a university needs extra financial oversight.
“It’s completely illegitimate,” Jaquette said. “There are a set of financial composite measures that the Department of Education has used for decades to identify organizations that are potentially in trouble financially.”
More than 500 schools were under HCM as of June 1. The majority are classified under HCM1 status, a lighter designation that does not affect how schools draw down funds from the Advance Payment Method. Only 26 schools — including 16 for-profit institutions — were under HCM2.
Kelchen said that the typical HCM designee would have “somewhere around 500 students, they have no endowment, many of them are for-profit, and they are on the brink of closure.”
Dominique J. Baker, an education and public policy professor at the University of Delaware who has helped universities calculate the financial responsibility scores that the Education Department uses to decide HCM designations, said she thought the decision to tighten monitoring of Harvard was irregular.
“From the data that I have access to, there is no reasonable reason to put Harvard on this list, unless you are interested in intimidating Harvard into capitulating to your demands,” Baker said.
Correction: October 22, 2025
A previous version of this article incorrectly stated that Harvard was placed under Heightened Cash Monitoring 2 status. In fact, Harvard was placed under HCM1.
—Staff writer Cassidy M. Cheng can be reached at cassidy.cheng@thecrimson.com. Follow her on X @cassidy_cheng28.
—Staff writer Elias M. Valencia can be reached at elias.valencia@thecrimson.com. Follow him on X @eliasmvalencia.
