In its latest attempt to make Harvard University buckle, the Trump administration just sent a letter demanding proof of financial stability and a multimillion-dollar financial guarantee from the school.
Why the sudden concern about Harvard’s finances? Well, you see, the Trump administration is worried that Harvard is facing an increased risk of financial instability because it’s dealing with more than a dozen investigations … by the Trump administration.
So the Trump team first ginned up a whole bunch of obviously fake reasons to withhold money from Harvard, which it then used as the foundation for a different obviously fake reason to withhold money from Harvard.
Secretary of Education Linda McMahon
The letter placed Harvard on Heightened Cash Monitoring status, which requires “Harvard to post an irrevocable letter of credit for $36 million or provide other financial protection that is acceptable” to the Department of Education. That’s roughly 30% of all federal financial aid received by the school in the last year.
Since it’s now in HCM status, Harvard will be required to disburse all federal financial aid with its own funds and then get reimbursed from the federal government—because surely there won’t be a problem getting this administration to reimburse a school it’s been attacking for months.
The Department of Education places schools in HCM status over longstanding concerns about things like misuse of federal financial aid, danger of closing mid-year, or poor student outcomes.
This makes sense when there’s a genuine concern about federal student aid fraud, such as a school obtaining student aid for a nonexistent student. The financial guarantee ensures that schools don’t stick their debts on the government, and the requirement for schools to spend their own money first ensures that they don’t take aid from the government and then close their doors.
But, of course, none of that really applies to Harvard.
Schools that actually belong on HCM status are much more like the Education Corporation of America, a large for-profit college chain that faced dozens of complaints from students alleging fraud, false advertising, and misrepresentation to get them in the door. ECA ultimately lost its accreditation, filed for receivership, and sued the Department of Education.
Only after that did ECA get placed on HCM status in November 2018, at which point it collapsed completely, closing its doors on three colleges and more than two dozen campuses in the middle of the 2018-2019 school year.
In contrast, Harvard has an endowment of $53.2 billion and an annual budget of $6.4 billion. Its founding predates the founding of the United States by 120 years. And despite the Trump administration’s best attempts, it remains one of the most sought-after schools, accepting only about 3% of applicants.
A cartoon by Clay Bennett.
Harvard isn’t running out of money any time soon, and it’s not going to close its doors or try to keep the lights on by illegally diverting federal financial aid.
But wait, says the Trump team! Harvard has already admitted that it’s facing financial challenges, issuing more than $1 billion in bonds.
Yes, those would be the bonds that Harvard had to issue because the Trump administration has been illegally withholding billions in research grants and threatening the school with sham investigations. That has indeed made things financially precarious.
Harvard has been fighting the Trump administration for months now, so it has to keep coming up with new ways to try to make the school give in, including threatening to take away its patents,
And it’s hard not to see that this latest demand for cash is a reaction to last week’s lower court decision ordering the Trump team to unfreeze $2.6 billion in research funds. How dare a court tell the government it has to give Harvard the money that was already allotted to Harvard, right?
Giving the Trump team $36 million would not financially break Harvard, but there’s no negotiating with this administration. The only way to win is to keep standing strong.
