Trump Administration Takes Aim at Wealthy Universities

Facing criticism from the president and a warning from Education Secretary Betsy DeVos, Princeton, Stanford and -- eventually -- Harvard say they won't take millions in stimulus funds to help their needy students.

April 23, 2020
 

As the world's richest university, with an endowment of roughly $40 billion, Harvard University is frequently an easy target for those who want to make a point about the uneven distribution of wealth. So it's not surprising that Harvard was at the center of a dispute Wednesday in which Trump administration officials sought to embarrass universities with big endowments for considering taking federal stimulus funds meant to help needy students.

Wednesday afternoon, 24 hours after President Trump predicted at a news conference that “Harvard’s going to pay back the money” and Education Secretary Betsy DeVos urged institutions "with large endowments" to forgo funds from the CARES Act Higher Education Emergency Relief Fund, the university announced that it would, indeed, do just that.

The university will face "significant financial challenges" because of the COVID-19 pandemic and the ensuing recession, and it neither requested nor received any funds awarded through the congressionally approved program, its officials said in a statement. But "we are … concerned … that the intense focus by politicians and others on Harvard in connection with this program may undermine participation in a relief effort that Congress created and the President signed into law for the purpose of helping students and institutions whose financial challenges in the coming months may be most severe."

The CARES Act, which Congress approved in March as an initial attempt to blunt the economic pain of the coronavirus pandemic, included roughly $12 billion in funding for higher education, split about equally between funds for students displaced by the pandemic and for institutions facing unexpected costs. The law's formula -- "purely mechanical," as one higher education lobbyist pointed out -- allocated the money for students to colleges based on how many low-income students they enroll, and the money for the institutions based on their enrollments of full-time students.

In recent days, conservative websites had criticized Harvard and other wealthy institutions for considering taking the money it was in line to receive. Harvard was allocated $8.6 million. Tuesday evening, President Trump joined the fray, bringing up Harvard in response to a question about the flow of money from a different stimulus program designed to help small businesses survive the coronavirus-driven economic shutdown.

“They have one of the largest endowments anywhere in the country, maybe in the world, I guess, and they’re going to pay back that money,” the president said.

That led Harvard to respond in a war of words of sorts with the president -- via Twitter, perhaps appropriately enough.

"President Trump is right that it would not have been appropriate for our institution to receive funds that were designated for struggling small businesses," the university said, noting that it was in line for funds from the higher education relief fund.

"Harvard has committed that 100 percent of these emergency higher education funds will be used to provide direct assistance to students facing urgent financial needs due to the COVID-19 pandemic," it continued. "This financial assistance will be on top of the support the university has already provided to students -- including assistance with travel, providing direct aid for living expenses to those with need and supporting students’ transition to online education."

Wednesday morning, though, DeVos -- echoing the sentiments of an April 9 letter to college and university presidents -- issued a statement saying that "wealthy institutions that do not primarily serve low-income students do not need or deserve additional taxpayer funds." She also urged Congress to change its rules for distributing the stimulus funds. "This is common sense. Schools with large endowments should not apply for funds so more can be given to students who need support the most."

DeVos did not single Harvard out by name. But she praised Stanford University, which earlier Wednesday had announced that it would forgo the stimulus funds, even though, “like all universities, Stanford is facing significant financial pressures during this time of unprecedented uncertainty. However, we realize that this crisis represents an existential threat for many of the smaller colleges and universities that are such a critical part of the fabric of higher learning in the United States.”

Princeton University, another of the wealthiest universities in the country, followed suit later Wednesday afternoon, though with a twist. Its statement said that the university would not accept funding allocated under the CARES Act, and specifically mentioned its need to support students who are in the U.S. without proper documentation, whom the Trump administration determined Tuesday would be ineligible for the emergency aid.

Late Wednesday afternoon, perhaps boxed into a corner by its peers, Harvard conceded that it, too, had "decided not to seek or accept the funds allocated to it by statute."

"We will inform the Department of Education of our decision and encourage the department to act swiftly to reallocate resources previously allocated to Harvard," university officials said. "While we understand any reallocation of these resources is a matter for the Department of Education, we hope that special consideration will be given to Massachusetts institutions that are struggling to serve their communities and meet the needs of their students through these difficult and challenging times."

Politics or Policy?

Iris Palmer, a senior adviser for higher education and workforce in the education program at New America, a Washington think tank, said administration officials were "not wrong that [Harvard] can afford to provide for all their needy students without federal money." She called Harvard a "politically convenient punching bag" for politicians like President Trump.

But she noted that the lines are not clear-cut about which institutions might be deserving, and not, of stimulus funds. While Harvard was certainly due more money than many of its surrounding community colleges, the congressionally approved formula allocates funds for institutions (as opposed to the money directed to students) in part to compensate colleges for housing disruptions, which would by design affect residential colleges more than commuter institutions.

And while Harvard's endowment may strike many observers as unequivocally too large to warrant receiving taxpayer money, "how far down the endowment list" do you say that? Palmer said. "That's why this is more of a political question than a policy question."

An official of a major research university said it was "totally predictable" that the Trump administration would use the current situation for an "attack" on prestigious universities. Every wealthy university would essentially be a "pass-through" for the funds to its financially neediest students, the official said, citing numerous students whose "summer earnings are not going to happen, or whose families' financial circumstances have changed for the worse."

"Of course you’re going to help your neediest students," the university representative said. "And you'll use whatever money that frees up to maybe help students who aren't the absolute neediest neediest … or maybe loosen up some money so we could continue to find a cure" for the coronavirus.

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