Ivy League Schools Rush to Raise Debt Amid Poor Endowment Returns and Federal Funding Risks
Colleges and universities in the U.S. have raised more money through bond issuance in 2025 so far than in any year over the past decade, as institutions rethink their financial strategies amid rising political pressure and uncertainties around federal funding. Earlier this month, Harvard University—home to the world’s largest university endowment—issued $434 million in tax-exempt bonds to buffer against potential cuts from Washington. Altogether, colleges have raised 40 percent more through debt financing in 2025 than during the same period last year, according to data compiled by Bloomberg.
The surge comes as the Trump administration sent shockwaves through higher education circles by canceling $400 million in funding to Columbia University. The White House criticized the school for failing to adequately protect students from “antisemitic violence and harassment,” referencing pro-Palestinian demonstrations on campus. The move was part of a broader crackdown on diversity, equity and inclusion (DEI) programs—Columbia being the first of what officials have signaled could be many. The Trump administration is currently investigating more than 50 universities over their DEI initiatives and campus policies.
Federal funding remains a major pillar of elite universities’ budgets. Between 2018 and 2022, the eight Ivy League schools, along with Stanford and MIT, received a combined $33.1 billion in federal research grants and contracts. While these institutions are not entirely reliant on government support, such cuts can still punch meaningful holes in their financial plans. Harvard, for example, funded most of its $6.4 billion in operating expenses in fiscal 2024 with tuition revenue, donations and other income. The amount it received from the federal government, $686 million, represented just over 10 percent of its operating expenses.
Despite their reputations for savvy investing, Ivy League endowments have lagged behind markets in recent years. For the fiscal year ended June 30, 2024, they returned an average of 8.3 percent, underperforming the S&P 500 by 15.2 percentage points. Harvard’s endowment declined slightly to $50.7 billion at the end of fiscal 2023, from $50.9 billion the year prior, as the school withdrew more more from the endowment than it gained on investments.
What assets do university endowments invest in?
A key reason for Ivy League endowments’ underperformance is their heavy allocation to private markets—particularly private equity and venture capital assets—which have struggled in a high-interest-rate environment in recent years. Most Ivy League schools dedicate around 30 percent of their portfolios to these asset classes, a significantly larger slice than the average university, according to financial data firm Old Well Labs.
With endowment returns under pressure and federal policy in flux, universities are increasingly turning to the bond market for stability. Thanks to long-standing fiscal discipline, schools like Harvard still enjoy top credit ratings and access to relatively low borrowing costs. Last March, the university maintained its AAA rating and raised $750 million through bond sales to offset a 15 percent decline in alumni donations.
While these debt instruments have helped universities maintain operations with minimal disruption, challenges could surface as these elite schools expand financial aid. Harvard recently announced it will waive tuition for families earning under $200,000 per year, joining peers like the University of Pennsylvania and MIT. Yet, both Harvard and MIT have also implemented hiring freezes, citing federal scrutiny and financial uncertainty as driving factors.