Implications of Losing Federal Funding and Tax-Exempt Status for Harvard
Historically, private for-profit colleges have struggled to maintain financial stability.
For many years, Harvard University has consistently ranked among the top educational institutions, alongside seven other Ivy League universities, Stanford, MIT, and some of the most prestigious, costly, private nonprofit colleges in the country.
If President Donald Trump successfully revokes its tax-exempt status or eligibility for federal grants—which he has threatened to do multiple times recently—America’s oldest institution, founded in 1636, might find itself categorized differently as it approaches its 400th anniversary.
It could be listed alongside the University of Phoenix, Hillsdale College, the University of Austin, and Bob Jones University.
These schools are part of a small group of post-secondary institutions that have either operated without tax-exempt status or were ineligible for federal aid, as noted on their websites.
In contrast to Harvard, most of them have functioned as either a business or a conservative religious organization, lacking the status of major research universities.
They also do not possess the billion-dollar endowments supported by affluent alumni.
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However, each of these institutions possesses a distinct character.
Currently situated in a modest office, it aims to develop into a residential campus with continued support from affluent benefactors.
This institution functions under a nonprofit, tax-exempt model, yet does not receive public funding, as stated on its website.
“If we followed the traditional higher education model, launching a new university would indeed cost billions. But we are not doing that,” the website asserts.
“Constructing a university from scratch allows us to reassess the traditional practices of academia and significantly reduce administrative costs, ensuring that funds are primarily directed towards academics.
“UATX is creating a new financial model that counteracts bureaucracy in higher education, enhances student experiences, and keeps tuition fees lower.”
The college was active in the abolitionist movement during the 1860s and educated numerous Union soldiers.
However, when mandated to monitor student enrollment by race in the 1970s, school administrators resisted federal requirements and have since rejected federal aid tied to those mandates, according to the college’s website.
However, after enduring years of financial difficulties, the university transitioned to a nonprofit model in 2024 through a partnership with the University of Idaho, as stated on their website.
Bob Jones University has recently gained attention as a case study for what might occur with Harvard.
In the 1970s, the federal government revoked Bob Jones’s tax-exempt status due to discriminatory admissions policies against Black applicants involved in interracial relationships.
Given the decline in America’s population, the rise of vocational training options, and waning trust in higher education, numerous institutions, both public and private, are facing financial troubles, even with state and federal subsidies.
Colleges and universities that operate without tax relief or government support face even greater challenges.
In 2023, out of the 99 higher education institutions that closed, 54 were for-profit private colleges, 17 were private four-year universities, 15 were public two-year colleges, seven were private two-year institutions, and two were public four-year colleges.
The conflict between Trump and Harvard arises from a series of executive orders banning DEI (diversity, equity, and inclusion) initiatives in higher education and a directive to address campus anti-Semitism in alignment with the 1964 Civil Rights Act and a 2023 Supreme Court ruling.
The wealthiest universities underwent scrutiny, and several, including Harvard, are accused of permitting anti-Semitic activities on campus following the October 7, 2023, attack on Israel by the terrorist group Hamas.
The Trump administration froze over $2.2 billion in grants and contracts, primarily concerning Harvard’s medical and scientific research funding, threatening further cuts unless the university complied with requirements to discontinue DEI initiatives and address campus anti-Semitism.
Harvard refused to comply, prompting Trump to publicly threaten the revocation of the university’s tax-exempt status.
On April 30, Trump suggested that Harvard should no longer receive federal grants.
Harvard has yet to respond to Trump’s latest declaration.
Harvard University spokesman Jason Newton previously commented that losing its tax-exempt status would jeopardize the university’s educational mission.
“It would lead to reduced financial aid for students, a halt to important medical research initiatives, and a loss of opportunities for innovation,” he stated via email to The Epoch Times.
“The improper use of this measure could have severe repercussions for the future of higher education in America.”
Kim Hermann, executive director of the Southeastern Legal Foundation, noted that as the legal battle between Harvard and the president unfolds, defenders of the existing higher education framework should recall that just two years earlier, the Supreme Court determined Harvard cannot admit or deny students based on race.
The foundation has engaged in several legal cases involving DEI policies in education.
Hermann believes this indicates that the federal government is likely to prevail once again, whether the issue involves federal grants or the revocation of IRS tax-exempt status.
Even though Harvard’s lawsuit claims that federally funded research initiatives are unrelated to the occurrences of campus anti-Semitism, she argued that a university exhibiting discrimination based on race or national origin and fostering a hostile environment should not receive taxpayer money.
“You cannot simply make accounting adjustments to identify where discrimination is happening,” Hermann stated to The Epoch Times. “If the evidence supports it—if Harvard continues racial discrimination—they [the Trump administration] have a strong case.”
The Epoch Times reached out to Harvard for an updated comment.
