Ivy League Schools Raise Debt at Record Levels Amid Fed Funding Risks

In 2025, colleges and universities in the U.S. are turning to bond issuance to bolster their financial strategies amidst political pressures and uncertainties surrounding federal funding. Harvard University, home to the world’s largest university endowment, recently issued $434 million in tax-exempt bonds to safeguard against potential cuts from Washington. Overall, institutions have raised 40 percent more through debt financing this year compared to the same period last year, according to Bloomberg data.

The surge in bond issuance follows the Trump administration’s decision to cancel $400 million in funding to Columbia University, citing concerns over antisemitic violence and harassment on campus. This move is part of a broader crackdown on diversity, equity, and inclusion programs, with more than 50 universities currently under investigation for their initiatives and policies.

Federal funding plays a crucial role in the budgets of elite universities like the Ivy League schools, Stanford, and MIT. These institutions received a combined $33.1 billion in federal research grants and contracts between 2018 and 2022. While they are not entirely dependent on government support, funding cuts can still impact their financial plans significantly.

Despite their reputation for savvy investing, Ivy League endowments have struggled to keep pace with the markets in recent years. For example, Harvard’s endowment declined slightly in fiscal 2023, as the school withdrew more from the endowment than it gained on investments. This underperformance is attributed to heavy allocations to private markets, such as private equity and venture capital assets, which have faced challenges in a high-interest-rate environment.

In light of these challenges, universities are increasingly turning to the bond market for stability. Schools like Harvard, with top credit ratings and access to low borrowing costs, have been able to raise funds through bond sales to offset declines in other revenue sources. However, the expansion of financial aid programs and ongoing financial uncertainty pose potential challenges for these institutions in the future.

Overall, the landscape of university endowment investments is evolving, with a shift towards diversification and strategic planning to navigate changing financial climates. As institutions adapt to new challenges and opportunities, the role of bond issuance in their financial strategies is likely to continue to grow.