This post has been updated to reflect Harvard’s decision to not accept any money from the CARES Act Higher Education Emergency Relief Fund.
Harvard was set to receive nearly $9 million from the federal government through a higher education relief plan amid the coronavirus pandemic, and President Donald Trump was angry about it.
But the allocation was actually determined by Congress — and the school denied even receiving any stimulus money.
“Harvard should give back the money now,” the president said in a tweet on Tuesday. “Their whole ‘endowment’ system should be looked at!”
“I actually spoke to the president of Harvard already this morning,” Treasury Secretary Steven Mnuchin said on Fox Business on Wednesday, later adding: “I think Harvard thinking seriously about whether it’s appropriate for them to keep the money or give it to other institutions that need it.”
However, a Harvard spokesman denied receiving any stimulus money or sending an application. (Only 50% of all eligible colleges have applied for the funding as of Tuesday night.)
“Harvard has not applied for or received any funds from the Higher Education Emergency Relief Fund,” Harvard spokesperson Jonathan Swain told Yahoo Finance. “We continue to review the additional guidance from the Department of Education related to the Fund and will make a determination as to whether we will seek to access the allocation that was made to Harvard by statute.”
On Wednesday afternoon, the school announced that “Harvard has decided not to seek or accept the funds allocated to it by statute. We will inform the Department of Education of our decision and encourage the department to act swiftly to reallocate resources previously allocated to Harvard.”
The school previously stated that it would refund room and board for students ordered to leave campus and pay thousands of dining, custodial, and administrative workers through May 28, 2020. Furthermore, the school said, 100% of the funds received from the federal government would go towards students.
(4/5) Harvard has committed that 100% of these emergency higher education funds will be used to provide direct assistance to students facing urgent financial needs due to the COVID-19 pandemic.— Harvard University (@Harvard) April 21, 2020
The pressure on wealthy schools mounted further on Wednesday when Education Secretary Betsy DeVos singled out Stanford University as an example of how schools who don’t need the money should return federal dollars. Stanford was expected to receive around $7.3 million.
Kudos to @Stanford for withdrawing its application for #CARESAct funds. As I’ve said since day 1, wealthy institutions like @Harvard don't need this money. They should follow Stanford's lead & embrace the @ShakeShack principle – leave the $$ for those with the greatest need!— Secretary Betsy DeVos (@BetsyDeVosED) April 22, 2020
On Wednesday afternoon, DeVos applied more pressure on wealthy colleges with endowments, stating that they should all consider returning the funds they were allocated.
"Congress required by law that taxpayer Emergency Relief funds be given to all colleges and universities, no matter their wealth,” DeVos said in a statement. “But as I’ve said all along, wealthy institutions that do not primarily serve low-income students do not need or deserve additional taxpayer funds. This is common sense. Schools with large endowments should not apply for funds so more can be given to students who need support the most.”
She also stated: “It’s also important for Congress to change the law to make sure no more taxpayer funds go to elite, wealthy institutions."
‘The fault lies entirely with Congress’
If anyone is to blame for Harvard potentially receiving $9 million from the government, it was Congress.
“Congress said that they made a formula that was reasonably simple and easy to understand,” Seton Hall University’s Robert Kelchen told Yahoo Finance. “They could have tried to make it more complex to exclude colleges with large endowments. But changes like that could have slowed down the entire stimulus package. And the whole goal here is to get money out the door as quickly as possible.”
And in creating a blanket formula, Congress’ actions have led to situations like Harvard’s and Stanford’s.
“The fault lies entirely with Congress,” Ben Miller, VP of postsecondary education at the Center for American Progress, told Yahoo Finance. “It created a formula that put all institution types together and made all colleges that participate in federal aid eligible. Once it did that, everyone from Harvard to Jay’s Technical Institute was going to get something.”
That formula for the higher education relief was derived from two factors. First, 75% of the funds will be awarded to the school based on its share of full-time equivalent enrollment of Pell Grant recipients who were not enrolled exclusively in distance learning prior to the pandemic, relative to the total full-time enrollment of such individuals in all higher education institutions.
The remaining 25% will be awarded to the college based on the share of full-time enrollee students who are not Pell Grant recipients and and were not enrolled exclusively in distance learning prior to the pandemic.
Hence, it made some sense that schools like Liberty University, which has a “large on-campus operation,” will get $15 million. Liberty University’s total enrollment is more than 100,000, according to the university’s website. Around 12,600 undergraduates and 1,200 graduate students were on campus.
Miller conceded that the formula was fair. “The major flaw in what ED did isn’t really around the formula methodology,” he added. “It’s the cruel limitation to only students eligible for federal financial aid.”
In other words, most international students and Deferred Action for Childhood Arrivals (DACA) students are deemed to be ineligible to receive funds despite the economic cost of the pandemic.
Aarthi is a writer for Yahoo Finance covering consumer finance. She can be reached at email@example.com. Follow her on Twitter @aarthiswami.