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The U.S. Department of Education placed Harvard University on heightened cash monitoring status, citing concerns about the institution’s financial health and a recent $1.2 billion bond issuance that federal officials say may undermine its ability to meet financial obligations.
The designation, announced Thursday, imposes significant new restrictions on Harvard’s access to federal student aid. Under the new HCM regime, the University must now first disburse federal aid to students using its own funds and then seek reimbursement from the Education Department — a reversal of the standard advance payment method used by institutions in good standing.
As an additional safeguard, the Department of Education is requiring Harvard to provide a $36 million irrevocable letter of credit, amounting to approximately 30 percent of the federal aid the University received in the previous fiscal year through Title IV of the Higher Education Act of 1965. The financial guarantee is intended to ensure that taxpayer funds are protected in the event of further financial instability.
The Department of Education cited Harvard’s bond sales and recent austerity measures — undertaken to absorb the financial impact of the Trump administration’s own funding cuts and an endowment tax hike — as evidence of the University’s deteriorating financial profile, framing them not as prudent adjustments but as signs of institutional fragility.
Harvard joins more than 500 colleges and universities around the world currently under similar scrutiny by the Department of Education. However, Harvard — the wealthiest university in the world with a more than $53 billion endowment — stands out sharply on a list that predominantly consists of trade schools, community colleges, and small for-profit institutions.
In a press release, the Education Department announced that the rare move stemmed from three “triggering events” under federal financial responsibility standards: the Department of Health and Human Services’ determination that Harvard violated Title VI of the Civil Rights Act, noncompliance with requests from the Education Department’s Office of Civil Rights, and the University’s issuance of $1.2 billion in bonds to support its operations.
Harvard tapped into the debt markets twice in spring, issuing $450 million in tax-exempt bonds in March and a taxable bond sale of $750 million in April. The April bond issuance was accompanied by a memorandum — released a day after the White House announced a $2.2 billion federal funding freeze — in which the University warned investors that federal actions targeting Harvard’s financial standing could have a “material adverse effect on the University’s business, reputation, financial profile, and operations.”
U.S. Secretary of Education Linda McMahon wrote in the press release that the University’s disclosure alongside its April bond sale raised questions about its financial health.
“Today’s actions follow Harvard’s own admission that there are material concerns about its financial health,” McMahon wrote. “As a result, 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.”
The move comes after the federal government repeatedly sought to tighten control over Harvard through its own financial levers, including three rounds of funding cuts totaling approximately $2.7 billion. Harvard officials have warned in July that the cumulative impact of recent federal actions could cost the University more than $1 billion annually.
In response, Harvard has laid off workers at the Harvard Medical School and School of Public Health, frozen salaries for non-union staff, and announced, then later extended, a University-wide hiring pause. University-level guidance has encouraged schools to cut costs and pause non-essential capital projects.
The reclassification on Friday came alongside a separate letter from the Education Department’s Office of Civil Rights warning Harvard it could face further enforcement actions if it does not submit additional records concerning its admissions practices within 20 calendar days.
The Education Department’s dual moves on Friday are the latest step in the federal government’s campaign to force Harvard to buckle — and a sign that the White House is not stepping down from its onslaught of investigations and penalties against the University.
Since Trump took office, the White House has frozen billions in funding, threatened Harvard’s ability to host international students, and launched a barrage of civil rights investigations against the University. A federal judge struck down the freeze on Sept. 3 and ruled that the White House’s actions targeting federal funding were unconstitutional.
The White House vowed to appeal quickly after, but it has not yet formally appealed the ruling. In the meantime, it has quietly resumed the flow of grant funding to Harvard, with $46 million released on Friday.
Harvard and the White House began talks in June to both restore federal funding and end the government’s myriad investigations with a negotiated settlement carrying a $500 million price tag. But talks have reportedly stalled in recent weeks.
—Staff writer Dhruv T. Patel can be reached at dhruv.patel@thecrimson.com. Follow him on X @dhruvtkpatel.
—Staff writer Saketh Sundar can be reached at saketh.sundar@thecrimson.com. Follow him on X @saketh_sundar.
