How are America’s elite universities financed?

In a sweeping assertion of federal power barely months after returning to the White House, President Donald Trump has begun reshaping American higher education by targeting elite universities with deep funding cuts.
The most dramatic move came last week, when Trump moved to revoke $2.2 billion (€1.9 billion) in multiyear research grants for Harvard. Earlier in April, he froze nearly $1 billion in funding for Cornell and $790 million for Northwestern, signaling that no institution is exempt.
The funding freeze is part of a broader campaign to shrink publicly financed science and penalize US campuses that the Trump administration has accused of ideological bias, antisemitism and failing to handle pro-Palestinian protests in their campuses. Cuts have extended beyond higher education, affecting research in areas such as climate science, vaccine development and gender inequality.
In response, more than 100 universities issued a joint letter on April 22 denouncing what they called “unprecedented government overreach.”
“We are open to constructive reform and do not oppose legitimate government oversight. However, we must oppose undue government intrusion. We must reject the coercive use of public research funding,” the letter stated.
US elite universities have a unique financial system
Federal funding for elite universities dates back to the Great Depression in the early part of the 20th century, and was solidified during the Cold War.
In 1958, Congress passed the National Defense Education Act in response to the Soviet Union’s launch of Sputnik, the world’s first artificial satellite, which initiated major investments in science and technology.
That funding laid the groundwork for a long-standing partnership in which the federal government helped transform American universities into global centers of research, innovation and talent.
In 2023, US colleges and universities spent $108.8 billion on research and development —$60 billion of which, or roughly 55%, was provided by the federal government, according to the National Science Foundation.
Harvard sues Trump administration over funding freeze
Unlike many nations, the United States does not have a national university. American education is primarily the responsibility of states, and elite institutions rely on a complex web of revenue streams to operate, of which federal funding is just one part.
The financial strength of top US universities lies in their diversified models, particularly in their endowments — vast investment portfolios built through decades of philanthropy and capital growth.
For example, Harvard’s endowment, which reached $53.2 billion in 2024, making it the largest among all universities worldwide, exceeds the gross domestic product (GDP) of countries such as Jordan, Georgia or Iceland.
The universities of Texas, Yale, Stanford, Princeton and MIT follow closely behind, with endowments ranging from $23.5 billion to more than $40 billion, according to National Association of College and University Business Officers (NACUBO).
But these endowments are not limitless lifelines. Most of the capital is tied up in donor-restricted funds, which are legally earmarked for specific purposes, such as scholarships, professorships or targeted research initiatives. Harvard’s endowment comprises more than 14,600 individual funds, nearly all of which are bound by donor restrictions, according to university disclosures.
Philanthropy, fundraising campaigns and tuition
Philanthropic donations remain a fundamental part of university finances, often driving capital expansion and boosting institutional prestige. However, these gifts frequently come with conditions. According to NACUBO, approximately 90% of university endowment funds are designated for specific uses, such as scholarships, research or infrastructure.
High-profile fundraising campaigns can generate billions, but most donations are earmarked for long-term projects such as new buildings, endowed faculty positions or academic program development — not for emergencies or sudden budget shortfalls. Unrestricted gifts, which universities can use to cover operating deficits or respond to abrupt funding cuts, are comparatively rare.
During the COVID-19 pandemic, for example, many institutions faced financial strain despite having significant funds, because much of that capital was locked in long-term projects and could not be accessed freely.
Tuition revenue, meanwhile, covers only part of the operational costs at elite private universities. It also remains a politically sensitive and limited source of income. The same applies to auxiliary revenues, such as campus housing, dining, technology licensing and executive education, which are typically reinvested in core academic functions rather than optional expenditures.
How US universities compare to non-American counterparts
Elite American universities operate on a scale unmatched by their global peers. Oxford University’s endowment, when combining its 43 colleges and the central university, totals about £8.3 billion ($11.05 billion, €10 billion) — about one-fifth of Harvard’s alone, according to the University of Oxford.
The Cambridge University Endowment Fund stands at approximately £210 million, with the broader institution’s total net assets at £2.62 billion, excluding the assets of individual colleges.
In much of Europe and China, revenue models lean heavily on government subsidies and tuition caps. According to the European Tertiary Education Register, few European institutions hold endowments exceeding $1 billion.
What are the consequences of research budget cuts?
While America’s top universities boast immense endowments and diversified revenue streams, their capacity to lead in global research remains deeply intertwined with public funding. That dependence is now being tested. Harvard Medical School has begun preparing for possible layoffs, ended leases on several buildings and suspended some research grants.
The NIH, the nation’s primary source of biomedical research funding, faces a proposed 40% budget cut. At Columbia University, the Vagelos College of Physicians and Surgeons has responded with immediate spending freezes — an early signal of the broader fallout to come.
The funding squeeze extends far beyond health sciences. NASA’s $7.6 billion science budget could be nearly halved under current proposals. Nasa has confirmed that it is reviewing budget recommendations submitted by the White House Office of Management and Budget (OMB), which has not commented publicly on the matter.
The impact is not limited to elite schools. Smaller universities and specialized scientific operations that primarily rely on federal support face potential disruptions that could stall local innovation and weaken regional economies.
The Atomic Spectroscopy Group at the National Institute of Standards and Technology, a key global reference lab used in fields from cosmology to manufacturing, is reportedly set to shut down.
For many learning and research institutions, the question is no longer whether they will be affected, but how deeply — and how long the damage will last.