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The that at least 60 U.S. colleges and universities change their policies or lose out on billions of dollars in federal funding.

In Harvard University's case, the government has accused the Ivy league school—so far —of violating some students' civil rights by allowing other students to engage in what the authorities characterize as antisemitic speech. The government has demanded broad oversight of Harvard's admissions policies, along with and campus culture.

out on more than US$2.2 billion. It may seem to be better insulated from this pressure than many other schools because it has the —a reservoir of stocks, bonds and other financial assets that helps fund its operations, research and scholarships. Harvard's endowment in 2024.

As a , who served in the Treasury Department's Office of Tax Policy in the 1980s, I study and write about both state and federal law as it applies to nonprofit organizations. I believe that the law permits most colleges and universities to increase spending from their endowments in light of the so many of them are facing.

Precedents for boosting endowment spending

Not all endowments are alike.

They tend to be composed of an array of smaller funds, some of which are subject to legal restrictions that make it impossible for the schools they support to freely use those assets.

Universities must respect the limits donors put on their gifts, such as tying them to specific scholarships, funding jobs held by certain kinds of professors or supporting the construction or maintenance of a particular building.

It's up to a to decide how much of the school's endowment will be spent in a given year.

As Harvard's puts it: "There is a common misconception that endowments, including Harvard's, can easily be accessed like checking accounts." That is definitely not the case.

Nonetheless, some college and university boards did allow increased endowment spending and , which lasted from late 2007 until mid-2009.

During that downturn and the financial crisis that precipitated it, the value of endowments, along with most financial assets, plummeted.

About 80% of are reserved for "specific programs, departments or purposes." But others , Harvard has stated in the financial reports it makes available to the public.

While it's always important to proceed with care when spending money reserved for use on a rainy day or to ensure the long-term existence of a revered institution, most colleges and universities are freer to dip into their endowments than they may realize .

Leeway in an important law

In , U.S. endowments are subject to a 2006 model law known as the .

Under this law, managing and investing an endowment requires the university to consider its charitable purposes and financial needs, while respecting the intentions of the donors who provided its assets. These are state laws, not federal statutes. In most states, a university may spend as much of an endowment fund as it deems "prudent."

Exercising that prudence requires the consideration of several factors.

They include the purposes of the institution as a whole and the particular endowment fund, prevailing economic conditions, and what other financial resources the institution can tap. However, in almost one-third of states, including California and New York, annually spending more than 7% of an endowment's fair market value, measured by a three-year average, is .

But that isn't a legal maximum because the model law's drafters noted that "circumstances in a particular year" could easily void that presumption. Based on my study of nonprofit law, including the laws that apply to higher education, I'm confident that this caveat could easily apply to the Trump administration's , just as it did during the pandemic and the Great Recession.

What's more, endowment . As a result, many universities, including those in states with a 7% cap on prudent spending, will likely be able to increase their use of endowment funds to maintain their budgets at prior levels.

In addition, living donors can release any restriction they placed on the funds they gave universities that are still held in their endowments. Even when those funds are from donors who have died, a university can that have become impractical or wasteful.

The Uniform Prudent Management of Institutional Funds Act also permits institutions to lift restrictions on all endowment funds that are more than 20 years old and relatively small. This amount varies from state to state and

A bias toward accumulating

In addition to Harvard, other examples of the largest higher education endowments include and . All three are the Education Department is investigating for allegedly failing to "protect Jewish students on campus."

Why do the boards of even these universities tend to hesitate to dip deeply into their endowments when their revenue declines?

One explanation is that because , its leaders and endowment donors have a bias toward accumulating rather than spending. Another is that board members have an obligation to . Boards also bear a responsibility to preserve funds for a future rainy day, no matter how severe the current turbulence may be, how large the endowment has become or how successful the school's current fundraising efforts are.

That may explain why about that will allow the school to meet its spending needs without dipping so deeply into its endowment.

More attacks could be on the way

At the same time, the Trump administration's trade, fiscal and other policies may continue to , reducing the value of university endowments, for months or years to come.

The federal government is reportedly looking into whether it can , a drastic move that .

In mid-April 2025, , saying that they violate the free speech rights protected by the Constitution's First Amendment and "invade university freedoms long recognized by the Supreme Court." to the resistance of the school's leaders with a flurry of new gifts.

In my view, it's reasonable for colleges and universities to consider stepping up their endowment spending due to the Trump administration's actions that could interfere with higher education revenue. Increasing endowment payouts now could ease, although not fully solve, the mounting crises that colleges and universities of all kinds now face.

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