Why colleges like Harvard can't easily use endowments to replace federal funding

After the Trump administration announced a $2.2 billion freeze on grants to Harvard, some critics have questioned why it can’t just make up for federal funding with endowments.

So why can’t Harvard just dip further into its famously steep endowment?

As the Trump administration announced a $2.2 billion freeze in grants to the university this week after the school rejected its demands, some critics have questioned why the Ivy League institution and other wealthy schools like it can’t just make up for federal funding that way. 

Finance and higher education experts say endowments aren’t a simple replacement for government funding because of restrictions related to donor earmarking, legality and research priorities.  

“If there’s a major source of revenue that has disappeared, which is the threat from the administration, it’s like any family with a shock to their income stream,” said Catharine Bond Hill, former president of Vassar College. “You’d have to decide how you were going to allocate your spending priorities.”

The Trump administration said in a statement Monday that it would cut the $2.2 billion in multiyear grants and $60 million “in multi-year contract value” to Harvard because of what it considers the university’s “troubling entitlement mindset.”