Among President Donald Trump’s many executive orders targeting diversity, equity, and inclusion, two have profound implications for higher education and should spur such institutions to rethink whether they should continue to accept government funding.
The most significant of those executive orders explicitly requires universities and colleges that receive federal funds or participate in federal student loan assistance programs to demonstrate that they have dismantled their DEI initiatives. The failure to do so will result in the loss of an institution’s government funding.
A second order halts all DEI-linked funding for universities and colleges. This would include research, conferences, and special initiatives focused on DEI.
Some schools have taken steps to comply. Others have adopted a wait-and-see attitude. A few are publicly fighting back. The Association of University Professors, along with several other organizations, has filed a federal lawsuit to block the orders. Trump, however, seems unlikely to rescind or soften his action.
So, what should universities do? One answer may be found — somewhat ironically — at Hillsdale College, a small conservative Christian liberal arts school in Michigan.
In 1984, faced with the imposition of federal Title IX anti-discrimination regulations on its operations, Hillsdale decided to forgo all government support. Here’s how the college explains the decision on its website: “To maintain our institutional independence, we accept no state or federal funding—even indirectly in the form of student grants or loans. Our financial aid packages are thanks to the gifts of hundreds of thousands of generous donors nationwide.”
This choice was not without consequences for Hillsdale in terms of support for research and other areas where government dollars often make a difference. Nonetheless, the principle of institutional freedom is so strong at the school that its donors, board, faculty, and students accept the costs.
Could other universities and colleges that have forcefully proclaimed their belief in DEI — institutions as varied as Harvard University, Grinnell College, and the University of Vermont — follow a similar course and refuse all forms of federal support? And will they have the courage to take that step?
In the aftermath of the Supreme Court’s 2023 decision on affirmative action and college admissions, Lawrence Bacow, Harvard’s president at the time, said that “deep and transformative teaching, learning, and research depend upon a community comprising people of many backgrounds, perspectives, and lived experiences.” If he was truly reflecting the values of the institution, then a refusal to accept federal money, directly and indirectly, would be the principled course of action.
An Existential Choice?
For many public and private institutions, that choice would be an existential one. Federal support for students, research, and programming is so significant that refusing this money is simply not an option.
The Trump administration, however, may have made the decision a little easier for well-endowed research universities when it announced its plan to slash the indirect costs attached to grants from the National Institutes of Health. The administration wants to reduce funding for facilities and administrative expenses to just 15 percent. Those overhead costs currently account for up to 75 percent of research grants. While such a change would be painful and has been put on hold by a federal court, the upside is that universities would have much less to lose if they decided to forgo government funding.
What would it take for universities to free themselves from federal interference? For starters, it would require finding alternative funding sources for government-funded research, conferences, seminars, DEI training and other projects. It would also mean privatizing the school’s student loan system, something that should be relatively easy for wealthy schools with large endowments and a surplus of major donors to draw on. Many Ivy League universities, for example, already have their own loan programs.
Harvard has a robust scholarship and loan program for undergraduates, so only a small percentage even need to take out government loans. The bulk of federal loans goes to students in law, business, medical and other professional schools. Working with outside financial institutions, the university could likely find a way to help these potentially high-earning students without relying on governmental support.
For broader operations and research, Harvard is also well positioned to follow the Hillsdale path. Harvard’s endowment of more than $53.2 billion in 2024 provided $2.4 billion to its operating budget. In the same year, the university raised nearly $1.2 billion in charitable contributions and brought in another $1.3 billion in tuition and other student-related payments.
Harvard’s current annual budget is more than $6 billion, so the above sources wouldn’t cover annual operations. But with some creative budget cutting, Harvard could break free of government funding.
Donor Incentive
In 2024, Harvard received about $686 million in federal research grants. The loss of that money would certainly have an impact on the institution — even if the overall impact would effectively be reduced by the Trump administration cuts. Regardless, much of the money that goes for medical and scientific research could be replaced by philanthropic and corporate sources. Indeed, Harvard could use its decision to defy the Trump dicta as a surefire way of raising even more money from donors than it now does.
The formula for cutting the government cord doesn’t only work for the largest and wealthiest institutions. Consider the case of tiny Grinnell College in Iowa. The school has annual expenses of $165 million and an endowment of $2.67 billion. It receives about $5.4 million in federal student aid loans and another $511,046 in federal research and program support. The endowment currently contributes $112.5 million to the budget. By slightly increasing the endowment distribution by a fraction of a percentage point, it could easily cover the first-year shortfall caused by refusing federal support and operate independently into the future.
Some public institutions in blue states are also well positioned to stop accepting federal funding. The University of Vermont, for example, has a small student body, a healthy endowment, and a modest amount of federal research funding. Most importantly, Vermont’s liberal state legislature should be supportive of maintaining DEI at this flagship institution and willing to increase the annual subsidy to the school to cover the loss of federal funding.
It’s worth noting that all these schools would still receive a federal subsidy through the charitable deduction on private contributions to the university. Not even Hillsdale has banned its donors from using the deduction.
Still, independence for these schools and others would certainly present challenges. It would, in the first instance, make administrators much more cost-conscious and focused on efficiency. It would also force them to think carefully about how they price their product. Some might raise tuition so that wealthier students more substantially subsidize those who are less wealthy.
Some researchers would undoubtedly leave for greener academic pastures where federal funding is still possible. And some students, faced with tuition increases, may opt for cheaper alternatives.
These outcomes are not minor, but they should be bearable if universities and colleges truly believe that DEI is essential for their institutions. If they adopt the Hillsdale model, they can proudly proclaim their independence as a reason for old and new donors to increase their contributions.
Unfortunately, I doubt any will take such a bold step. DEI is nice and good and virtuous, but are these institutions willing to cut salaries, lose famous researchers, and generally tighten their belts in support of this cause? Unlikely.
Instead, I expect them to publicly gnash their collective teeth at the regressive policies of the Trump administration, drop overt DEI programs, and otherwise continue business as usual. I hope I’m wrong.
