After Trump’s Criticism, Harvard Turns Down Federal Relief Money
New York Times
By Anemona Hartocollis, April 22, 2020
Harvard University’s campus last month. Harvard said in a statement that it faced “significant financial challenges” because of the pandemic and the resulting economic crisis.
Harvard University announced Wednesday that it would not accept $8.6 million in taxpayer money that the university was set to receive as part of an emergency relief package for higher education, whose losses have been mounting during the coronavirus pandemic.
The school’s decision came a day after President Trump criticized Harvard for receiving federal relief funds despite its large endowment, valued at $41 billion before the pandemic. “Harvard’s going to pay back the money,” he declared.
Harvard said on Wednesday that there had been a lot of “confusion” surrounding the emergency fund, and that the university “did not apply for this support, nor has it requested, received or accessed these funds.” Mr. Trump had criticized the university in response to a reporter’s question on Tuesday about a different relief fund meant for small businesses.
Harvard, which had previously said it would use all of the federal money to support students in need, opted not to take it after two days of attacks by an array of critics, including Mr. Trump and several Republican congressmen, who said it was unseemly for the country’s richest university to take taxpayer money during a crisis that has left millions of Americans without jobs.
At least two other elite universities, Princeton and Stanford, also announced on Wednesday that they would not be taking the money designated to them through a $14 billion federal aid package for higher education. The money was part of a $2 trillion relief package that Mr. Trump signed into law on March 27.
Some 5,000 American colleges, universities and trade schools are set to receive federal funding. Although the money was allocated through a formula taking into account the size and income of their student bodies, universities could not access the funds without requesting it from the Education Department. Harvard said it would not submit its paperwork.
Harvard said in a statement that it faced “significant financial challenges” because of the pandemic and the resulting economic crisis.
“We are also concerned, however,” the university said, “that the intense focus by politicians and others on Harvard in connection with this program may undermine participation in a relief effort that Congress created and the President signed into law for the purpose of helping students and institutions whose financial challenges in the coming months may be most severe.”
Here is a closer look at the higher education relief fund and the controversy surrounding it.
Why were Harvard and other colleges receiving federal money?
The Higher Education Emergency Relief Fund was created as part of the Coronavirus Aid, Relief and Economic Security Act. Known as the CARES Act, it was passed by Congress in late March to provide economic assistance for workers, families, small businesses, students and schools affected by the coronavirus pandemic.
Colleges and universities have been among the institutions facing the biggest losses. Beginning in about mid-March, they ordered most students to evacuate dormitories and campuses. They shut down dining halls, libraries, gyms and science centers, and moved classes online.
The cost of these shutdowns was high, and schools are still not sure whether they will be able to open normally in the fall. Senior executives at many universities have taken pay cuts; faculty salaries have been frozen and construction projects suspended. Many schools have returned unused room and board fees and continued to pay contract workers even when they are not needed.
The relief package included nearly $14 billion to help higher education, and institutions said much more was needed. About half of the money is designated for emergency grants to students to cover food, housing, course materials, technology, and health care needs associated with the disruption caused by the virus.
How was the money awarded?
Almost all of the higher education relief money, $12.6 billion, was designated by Congress for about 4,500 colleges and universities that are eligible for federal financial aid, ranging from Ivy League universities to trade schools.
The rest was reserved for institutions that primarily serve minority populations, and for grants to institutions that were particularly hard hit by the virus, mainly smaller colleges whose economic survival is threatened.
The distribution formula set by Congress is based on the federal financial aid distribution system, weighted toward students who receive federal Pell Grants. The bigger a school’s student body, and the more low-income students, the more money a school is entitled to receive.
The formula excludes students who were enrolled exclusively in online coursework before the pandemic.
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Because it was based on a formula, the actual distribution of the money is “purely mechanical” and not influenced by other factors, including the size of a university’s endowment, said Terry Hartle, a senior vice president at the American Council on Education, a trade group.
In a letter to college and university presidents on April 9, Betsy DeVos, the education secretary, acknowledged the crudeness of the formula and urged universities to donate their grants to more needy institutions within their state or region if they saw fit.
Why was the fund criticized for awarding $8.6 million to Harvard?
Harvard is the most well-heeled university in the world, with an endowment of $40.9 billion as of last June. Harvard has said that like other endowments, its investments have suffered significant losses during the crisis.
In an April 13 message to the Harvard community, its president, Larry Bacow, acknowledged that the university was better positioned to weather the economic hardship than most institutions. Still, he said, he was announcing an immediate hiring freeze, a pause in discretionary spending and a review of capital projects.
But the optics of a wealthy university receiving taxpayer money when 22 million Americans have lost their jobs did not sit well with many. Several members of Congress, including Senator Ted Cruz, Republican of Texas, and Rep. Mark Green, Republican of Tennessee, criticized Harvard on Twitter in recent days. Mr. Cruz, a Harvard Law School graduate who voted for the CARES Act, said that for Harvard to get taxpayer relief was “ridiculous.”
Mr. Trump added to the criticism at his nightly briefing on Tuesday. His treasury secretary, Steven Mnuchin, was asked about Shake Shack, the restaurant chain, which had received and returned $10 million in stimulus money from the Paycheck Protection Program, a different part of the CARES Act.
Mr. Mnuchin said he was “pleased to see that Shake Shack returned the money.” The intent of the program, he said, was “not for big public companies that have access to capital.”
At that point, Mr. Trump jumped in to say, “And not for Harvard, you might say, Steve.”
Asked by a reporter if other big companies were going to return their money, Mr. Trump said, “Yup, Harvard’s going to pay back the money.”
How did Harvard’s share compare with other institutions?
Because of the funding formula, Harvard’s share was in line with that of other similar institutions. Some of the biggest grants went to state universities, which tend to be very large and have large shares of low-income students.
Arizona State University, for instance, was allocated the most, $63.5 million, because it has 83,000 students and 40,000 of them are low-income, according to the trade group.
The formula for disbursing funds to universities did not take a school’s endowment into account. The University of Texas system, which had a $31 billion endowment in 2018, the second-largest in the country, will get $172.5 million from the stimulus package, including $31 million for its flagship institution, the University of Texas at Austin.
Mr. Trump’s alma mater, the University of Pennsylvania, had a $14 billion endowment as of 2018 and is set to receive $10 million in stimulus money.
Ms. DeVos called on Congress in a statement on Wednesday “to change the law to make sure no more taxpayer funds go to elite, wealthy institutions.”
Can Harvard return the money?
To gain access to the funds, schools have to fill out some paperwork. As of Tuesday, only about half of the eligible colleges, universities and trade schools had applied for the emergency financial aid grants to students, according to the Education Department.
Many institutions, including Harvard, indicated that they were unhappy with restrictions issued Tuesday on the way the money could be used. The guidance directs emergency financial aid grants to U.S. citizens or permanent residents with a valid Social Security number, seemingly omitting stranded foreign students and students brought to the U.S. illegally as children, commonly known as “Dreamers.”
It prohibits universities from reimbursing themselves with student grants for money they have already paid to students, including refunds for unused room and board and providing laptops and Wi-Fi hot spots.
It was unclear Wednesday whether Harvard could control where the money went now, since the university had never officially requested it. But in a statement announcing that it was renouncing the money, Harvard said that it hoped “special consideration will be given to Massachusetts institutions that are struggling to serve their communities and meet the needs of their students through these difficult and challenging times.”
Who else is giving the money back?
Princeton and Stanford also announced on Wednesday that they were returning the money allocated to them.
Stanford, with an endowment of about $28 billion in 2019, was due $7.3 million. It said it was returning the money so that the funds could go to smaller schools facing an “existential threat.”
Princeton, with an endowment of more than $26 billion last year, was due $2.4 million. It issued a statement on Twitter, saying it had never requested funding under the CARES Act and would not accept it.