Harvard Reports First Deficit Since Pandemic in Fiscal Year 2025, Sees 12% Endowment Growth

Updated October 17, 2025, at 5:46 a.m.

Harvard reported an operating loss of $113 million — its first budget deficit since 2020 — as its financial footing shakes from disruptions to federal funding, even as the total value of its endowment grew by 11.9 percent to $56.9 billion, according to its fiscal year 2025 financial report.

The deficit, a 1.7 percent operating shortfall on $6.7 billion in total revenue, marks a reversal from last year’s $45 million surplus and reflects the steep financial impact of the Trump administration’s spring termination of nearly all federal research grants.

Most of Harvard’s funding was recently restored after a federal judge ruled the White House’s funding freeze unconstitutional — though the reinstatement is not reflected in the 2025 report, which reflects the fiscal year through June. The realized gains on the University’s endowment in fiscal year 2026 will also be taxed at more than 400 percent of the current rate.

Harvard last reported a deficit in fiscal year 2020, a $10 million shortfall driven by Covid-19 pandemic-related declines. This year, Harvard’s rhetoric pointed to a dire situation — driven by deliberate federal policy rather than a public health crisis.

Harvard Treasurer Timothy R. Barakett ’87 and Chief Financial Officer Ritu Kalra wrote that the financial consequences of the White House’s attacks on Harvard “are only beginning to be felt.”

“This result could have been worse. It reflects not only the magnitude of the disruption, but also the discipline of a university community that acted quickly and with resolve,” they wrote, citing cost-cutting measures across the University including pauses on wage increases, layoffs, and the University-wide hiring freeze.

At least four faculties have laid off staff since April. Harvard’s School of Engineering and Applied Sciences announced last week that it would lay off 25 percent of unionized clerical and technical staff, in addition to other non-union workers, even after the majority of the University’s funds were reinstated last month.

Despite the austerity measures, the University’s operating expenses still rose by $367 million in fiscal year 2025. The rise was driven by salary and employee benefit hikes prior to the March hiring freeze, legal fees, and investments in technology infrastructure, according to the report.

Barakett and Kalra credited the endowment’s strong investment return — the highest since the economy’s post-pandemic recovery — as “central to navigating the uncertainty” caused by the White House’s actions.

University President Alan M. Garber ’76 thanked donors and Harvard affiliates for adapting to “uncertainty and threats to sources of revenue” the University has long-relied on for support.

“Even by the standards of our centuries-long history, fiscal year 2025 was extraordinarily challenging, with political and economic disruption affecting many sectors, including higher education,” Garber wrote.

The endowment accounts for 37 percent of the University’s operational revenue, resulting in a $2.5 billion spend in the past fiscal year. The University also tapped $250 million in contingency reserves to support researchers while awaiting reinstatement of federal payments.

Still, Barakett and Kalra wrote that the endowment cannot be used indefinitely as a stopgap measure because 80 percent of its funds are restricted and cannot be reallocated at will.

Harvard’s federal sponsored revenue fell by 8 percent to $629 million in fiscal year 2025, after the suspension of nearly all federal research grants earlier this year. Without grant freezes and cuts, federal sponsored revenue would have been on track for a 9 percent increase over the previous year. Non-federal sponsored revenue rose by 6 percent to $345 million, driven by new multi-year awards.

But the endowment’s strong returns, which increased the fund’s value for the second year in a row, still serve as a rebuke to criticism of HMC’s historical underperformance.

Under the helm of HMC CEO N.P. “Narv” Narvekar, the fund management team was dramatically restructured, with a shift to external managers and private equity holdings. The fund had previously struggled in comparison to the investment returns of Ivy-Plus peers.

HMC furthered that shift in 2025 — allocating 41 percent of the endowment to private equity compared to last year’s 39 percent — even as it sold off $1 billion of private equity stakes in the spring. The financial report also disclosed the distribution of its private equity investments for the first time.

Aside from the unprecedented boom in returns in 2021, this year HMC saw the highest return rate since Narvekar began his term in 2016. But the endowment tax hike, which will apply to the following fiscal year, presents a major challenge for Narvekar.

Signed into law in July, the Republicans’ mega tax and spending bill raises the highest tax rate on endowment returns from 1.4 percent to 8 percent. Harvard estimates that the tax will cost the school around $300 million each year.

—Staff writer Avani B. Rai can be reached at avani.rai@thecrimson.com. Follow her on X @avaniiiirai.

—Staff writer Saketh Sundar can be reached at saketh.sundar@thecrimson.com. Follow him on X @saketh_sundar.