What Loss of Federal Funding and Tax-Exempt Status Could Mean for Harvard

For decades, Harvard University has remained atop many prestigious rankings, alongside seven other Ivy League schools, Stanford, MIT, and the most elite, expensive, private, nonprofit institutions across the nation.

If President Donald Trump succeeds in revoking its tax-exempt or federal grant eligibility status—which he’s threatened to do on multiple occasions in the past month—America’s oldest university, founded in 1636, could be on a much different list of schools ahead of its 400th birthday.

It could join the University of Phoenix, Hillsdale College, the University of Austin, and Bob Jones University.

Those institutions are among a few dozen post-secondary schools that, either currently or in the past, have operated without tax-exempt status or did not receive federal aid, according to their respective websites.

Unlike Harvard, most of those schools have operated either as a business or a conservative religious institution, and none are major research centers.

They also lack multi-billion-dollar endowments sponsored by wealthy alumni donors.

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Still, each of those institutions has a unique identity.

It’s located in a small office, but plans to expand into a residential campus with continued help from wealthy donors.

This institution operates with a nonprofit, tax-exempt status, but it does not receive public funding, according to its website.

“If we were mimicking the traditional model of higher ed, then yes, starting a new university would cost billions. But we’re not doing that,” the website says.

“Building a university from the ground up affords us the opportunity to reexamine the legacy practices of universities and dramatically slash the cost of university administration, ensuring funds are directed as much as possible to academics.

“UATX is developing a new financial model that reverses higher ed’s bureaucratic bloat, improves student experience, and keeps fees to a minimum.”

The school played a role in the abolitionist movement in the 1860s and educated hundreds of Union soldiers.

However, when forced to track student enrollment by race in the 1970s, school administrators resisted the federal mandate and have refused federal aid with strings attached ever since, according to the college’s website.

After years of financial struggles, however, the school changed its status to nonprofit in 2024 under a partnership with the University of Idaho, according to the university’s website.

Bob Jones University has been in the news recently as an example of what could happen to Harvard.

In the 1970s, the federal government revoked Bob Jones’s tax-exempt status because of discriminatory admissions practices against black applicants who were in interracial marriages or relationships.

With America’s population decline, the growth of vocational training programs, and decreasing confidence in higher education nationally, many institutions, public and private, are struggling financially, even with state and federal grants.

Colleges and universities that go it alone without tax breaks or government aid have an even bigger disadvantage.

Of the 99 higher education institutions that closed in 2023, 54 were for-profit, private institutions, 17 were private four-year schools, 15 were public two-year schools, seven were private two-year schools, and two were public four-year schools.

The fight between Trump and Harvard stems from a series of executive orders prohibiting DEI (diversity, equity, and inclusion) programs in higher education and a mandate to combat campus anti-Semitism in accordance with the 1964 Civil Rights Act and a 2023 Supreme Court decision.

The wealthiest schools were investigated, and several of them, including Harvard, are accused of allowing anti-Semitic activities on campus in the wake of terrorist group Hamas’s attack on Israel on Oct. 7, 2023.

The Trump administration initially froze more than $2.2 billion in grants and contracts, most of which were related to Harvard’s medical and scientific research, and threatened to cut off billions more if the university didn’t satisfy a list of conditions for ending DEI and addressing campus anti-Semitism.

Harvard refused to comply, and Trump posted on social media his first of two threats to revoke the university’s tax-exempt status.

Trump suggested on April 30 that Harvard receive no more federal grants.

The institution has yet to respond to Trump’s latest announcement.

Harvard University spokesman Jason Newton previously said losing its tax-exempt status would endanger the university’s educational mission.

“It would result in diminished financial aid for students, abandonment of critical medical research programs, and lost opportunities for innovation,” he said in an email response to The Epoch Times.

“The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America.”

Kim Hermann, executive director of the Southeastern Legal Foundation, said with a court battle between Harvard and the president now in play, those who defend the status quo of higher education in this country should be reminded that just two years ago the Supreme Court ruled that Harvard cannot admit or deny students admission on the basis of race.

The foundation has litigated several cases involving DEI in education.

Hermann said that means there is no reason to doubt the federal government will prevail again, regardless of whether the issue involves federal grants or revocation of IRS tax-exempt status.

Even though Harvard’s complaint notes that the federally funded research programs have no connection to the events of campus anti-Semitism, she said, a university that is discriminating by race or national origin and allowing a hostile environment should not be receiving money from U.S. taxpayers.

“You cannot make an accounting entry into where discrimination is occurring,” Hermann told The Epoch Times. “If the facts pan out—if Harvard continues to discriminate based on skin color—they [Trump administration] have a great case.”

The Epoch Times reached out to Harvard for an updated response.