The Trump administration threw higher education officials into a panic last Tuesday when the Office of Management and Budget issued a memo ordering federal agencies to halt outgoing grants and loans—effectively cutting off colleges and universities from billions in research and administrative funding. Colleges rely on federal grants to not only fund essential research but also to maintain facilities, pay administrator salaries, provide IT support and more. For some schools, even a temporary pause in this revenue stream could wreak havoc on their research apparatuses, but the universities with giant endowments are well-equipped to handle a freeze.
“The idea that a temporary pause in an inflow of research funding should be hugely problematic for flagship state universities or Ivy League institutions would only seem to be [true] in the case of egregiously bad financial management,” explains Rick Hess, senior fellow and director of education policy studies at the American Enterprise Institute.
According to government disclosures, the top 30 private university recipients of federal grant, appropriations and contract funding received $20 billion in fiscal 2023 (see table). America’s richest college, Harvard University, received $649 million in federal grants, appropriations and contracts in fiscal 2023. It would have no problem outlasting a payment pause, even if the pause lasted for another four years. The $649 million made up 11% of its revenues but only 1.3% of its $51 billion endowment in fiscal 2023. Each year, the Ivy League university spends about 4% to 5% of its endowment. Thanks to investments in private equities and hedge funds, Harvard’s endowment returned nearly 10% in 2024 (or nearly $5 billion) and is now worth $53.2 billion. For rival Princeton, the $208 million in federal funding it received in 2023 accounted for nearly 43% of its revenues in 2023 but less than 1% of its burgeoning $33.4 billion endowment.
The top beneficiaries of federal government funding are science and medical research oriented colleges Johns Hopkins University, which took in $4 billion in fiscal 2023, and the Massachusetts Institute of Technology, which received $1.6 billion in federal funding in 2023. Federal funding accounts for 52% of MIT’s operating revenues and for Johns Hopkins, 40%. While MIT’s government handout only makes up 7% of its $23 billion endowment, for Johns Hopkins the amount is 38% of a $10 billion endowment. Most schools limit annual endowment dipping to 5%, but with board approval, it’s possible for any school to tap into their unrestricted assets to support ongoing research while the federal funding is paused.
Even for the wealthiest colleges, temporarily upping annual endowment spending could require a bit of finagling. Large portions of college endowments are restricted and earmarked for specific purposes, such as undergraduate financial aid. In addition, most nonprofit colleges and universities are bound by the Uniform Prudent Management of Institutional Funds Act, which dictates that they cannot spend more than 7% of their endowment unless the board can prove that higher spending meets the standards of prudence.
If federal grant funding halts, it’s not just ongoing and future research that will be affected. Grant funding typically includes two big components—the first is money for the research team to spend directly on the project, which can include expenses like equipment, materials and salaries for PhD students. The second component—sometimes called overhead, indirects, or F&A (facilities and administrative costs)—goes to the university and pays to “keep the lights on and the power going,” says David H. Feldman, an economics professor at William & Mary and expert on higher education finance. Overhead dollars pay for things like facilities maintenance, IT support, administrator salaries and insurance. The portion of a grant that goes to overhead can vary widely from sponsor to sponsor and university to university, but at many top research schools, 50% to 60% of federal research dollars pay for facilities and administrative costs.
One major research sponsor, especially for universities with medical centers, is the National Institute of Health. In the fiscal year that ended on June 30, 2024, the top three recipients of NIH grants were Johns Hopkins University, which received $858 million; the University of California-San Francisco, which received $815 million; and the University of Michigan-Ann Arbor, which received $734 million. The National Science Foundation is also a big sponsor of university research—In fiscal 2024, Johns Hopkins received $42 million from the NSF, the University of California-San Francisco received $10 million and the University of Michigan-Ann Arbor received $140 million.
Presidential administrations have restricted colleges’ access to federal money before, Hess says. In 2023, the Biden administration implemented regulations that required for-profit colleges to ensure graduates earned sufficient salaries in order to receive federal funds. But, “the scope of the pause government-wide is unprecedented,” Hess says of the looming freeze. “It’s not clear whether the pause is intended to be days or weeks or months.”
A flurry of legal challenges, including a suit from multiple state attorneys general and another from a group of nonprofits, have stalled the freeze. As of Monday afternoon, a judge in the United States District Court for the District of Rhode Island issued a temporary restraining order that would postpone the freeze while the court has a chance to hear arguments for and against a preliminary injunction, says Cori Mishkin, an associate in the higher education practice at law firm Reed Smith. The restraining order overrides a previous stay that would have postponed the freeze only until Monday, Feb. 3. Over the past week, the Trump administration has provided few details about what programs would be impacted by the freeze, but did note that federal student loans and Pell grants—two major streams of federal funding to universities—would be exempt.
Even if the federal funding freezes never go into effect, Feldman expects federal grant funding to become more tenuous and more political under Trump. “For schools that are well endowed, I hope they will begin to rediscover that funding basic research is their job and stop relying on the federal government as much.”
See here for a look at which colleges are most vulnerable to a federal funding freeze.