Harvard has released its Fiscal Year (FY) 2025 Financial Report. At first glance, the numbers may seem subdued. After months of upheaval including billions in frozen research funding, multiple lawsuits, ongoing investigations, and a shrinking research landscape, a $113 million operating deficit is less severe than many expected.
That relative stability, however, tells only part of the story. Covering Harvard’s fiscal performance from July 1, 2024 through June 30, 2025, the FY25 report captures a university in transition. The federal government froze Harvard’s research funding in mid-April, just weeks before the fiscal year closed, so many of the financial effects will surface in FY26.
The FY25 report ultimately tells a story of resilience and restraint. University leaders describe a swift, disciplined response that contained immediate fallout. They also acknowledge deeper challenges ahead, signaling more layoffs, cost reductions, and structural shifts across schools and operations.
What You Need To Know
Harvard reported an operating deficit of $113 million on $6.7 billion in revenue, a 1.7% shortfall. Last year, Harvard had a slight $47 million surplus.
The University’s endowment grew to $56.9 billion, returning 11.9% under Harvard Management Company. This is up from 9.6% the prior year but trails MIT (14.8%) and Stanford (14.3%).
Interfaculty Initiatives posted a standout 15% gain ($81 million) in endowment market value compared to 6-7% growth across the endowments of other major units, such as the Faculty of Arts and Sciences and the President’s Funds.
Most major operating categories shifted only modestly year over year, typically within a 2-6% range. (Adjusted for inflation, that represents little real change.) A few notable exceptions:
Federally-sponsored research declined 8% to $629 million, reflecting both the temporary freeze of federal funds in April and broader contractions in the national research funding pool.
Operating revenue from degree-seeking students rose 12% to $869 million, reflecting higher tuition and fees rather than enrollment growth as the number of degree-seeking students slightly declined.
Employee benefit expenses rose 9% to $756 million, outpacing salary and wage growth amid federal funding-related austerity measures, rising healthcare costs and expanded benefits eligibility.
Philanthropic gifts rebounded 11% but remained the lowest total since the pandemic year of FY20. Current use gifts surged 19% from FY24 to $629 million, the highest in Harvard’s history, even as endowed gifts slipped 1% to $364 million.
Total Harvard Business School gifts and pledges dropped roughly 17% to $121 million from $145 million recorded in FY24 when unrestricted HBS giving drove over half the University’s growth in current use gifts.
Endowment distributions continued to serve as Harvard’s largest funding source, accounting for roughly 37% of operating revenue.
President Garber suggests more layoffs and financial strain may lie ahead as Harvard continues to adapt to new federal funding threats and shifting policy constraints.
What might sound like a bleak warning about the challenges ahead instead is a reminder of what President Alan Garber (AB ’76, PhD ’82) told Wall Street Journal editor-in-chief Emma Tucker in a May interview: “Harvard is the oldest university in North America…We’ve succeeded by correcting our mistakes, by pivoting, by being self-critical. That’s what we need to do today.” In the FY25 report, Garber acknowledges the strain and difficult choices still ahead but frames the University’s strength as its capacity for renewal. Nearly four centuries after its founding in 1636, that conviction will be tested as Harvard dedicates itself to its mission of teaching, research and truth-seeking amid continued uncertainty.
1636 Forum’s Key Takeaways
We analyzed Harvard’s FY25 Report so you don’t have to. Keep reading for 1636 Forum’s Key Takeaways on:
Trends in endowment performance, philanthropy, research funding, tuition revenue, and health benefits year over year
Insights (or lack thereof) into the Medical and Dental schools’ financial footing after recurring deficits
Key themes in how Harvard’s leaders describe FY25’s financial discipline and long-term strategy
Here’s what stood out from this year’s report:
Harvard Management Company posts 11.9% return, trailing peers but above the national median.
This year’s gain also fell short of several peers: MIT reported 14.8%, Stanford 14.3%, and the University of Virginia 12.4%. The median university endowment returned 10.9%, according to Cambridge Associates.
Philanthropy rose 11% to $993 million, driven by a 19% increase in current use gifts despite a 17% decrease in HBS giving.
Philanthropic revenues followed recent trends in FY25. Current use gifts rose 19% ($101 million), from $528 million in FY24 to $629 million in FY25 — the highest on record, according to Harvard’s treasurer. This continues a pattern from FY24, when current use gifts rose 9%, marking two consecutive years of growth in unrestricted funds that can be used immediately for operations.
Harvard’s endowment gifts dipped 1% ($4 million), from $368 million in FY24 to $364 million in FY25, a stabilization after FY24’s sharp 34% decline (from $561 million in FY23) following campus unrest.
The pattern flipped from FY24, when HBS accounted for more than half of the University’s growth in current use gifts. In FY25, giving to the HBS Fund fell 10%, and total HBS gifts and pledges dropped $24 million (17%) to $121 million.
The growing share of unrestricted and spendable gifts gives Harvard greater flexibility to manage operations and respond to uncertainties, including potential disruptions to federal funding.
Harvard’s overall operations remained stable year over year, with a few exceptions.
Across most major categories, revenues and expenses change minimally from FY24 (typically within a 2-6% range). After adjusting for inflation, they shrink even more. A few categories, however, moved outside that range and are notable for the size or direction of their change:
Federally-sponsored research (-8%):
Federally-sponsored research revenue declined 8% in FY25 to $629 million, down from $687 million in FY24, after the federal government suspended and terminated Harvard’s grants. Non-federal sponsored research rose 6% to $345 million, not enough to offset the federal decline.
The report notes that before the funding freeze, research revenues had been trending toward a 9% increase over FY24, which is why the gap between the two years is relatively small. To maintain research activity, the University allocated $250 million in contingency funding.
Degree seeking education (+12%)
Operating revenue from degree-seeking students rose 12% in FY25 to $869 million, reversing a 2% decline in the prior year. The increase was driven by higher tuition and fees, with tuition up 3% and room and board up 5% from the prior year. The gain reflects higher revenue per student, as degree-seeking enrollment dipped slightly from 24,596 to 24,519 students. Although financial aid spending also rose 5%, a larger tuition base meant that tuition revenue grew more, modestly reducing aid as a share of total tuition.
Health benefits (+9%)
Employee benefit expenses rose 9% in FY25, or $65 million, to $756 million, outpacing the 5% growth in salaries and wages. While Harvard’s hiring freeze and salary cap in the wake of the federal government’s funding freeze helped moderate payroll growth, according to the University, the benefits increase was driven by higher health care costs and growth in benefits-eligible headcount.
After nearly two decades of consistent deficits, there was little indication Harvard Medical School was on less shaky financial ground.
Even before the federal funding freeze, Harvard Medical School (HMS) had been in prolonged financial distress. At the start of FY25, HMS was “facing up to a $37 million unrestricted cash budget shortfall,” according to Dean George Daley (AB ‘82).
HMS has long struggled, running deficits in nine of ten years between 2008 and 2018. In FY2022, it reported positive discretionary cash flow for the first time since 2009 — a milestone — but in FY23 and FY24 it still posted operating losses of $28 million and $27 million, respectively.
Harvard’s FY25 report offers no indication that HMS, or the School of Dental Medicine (HSDM), which also projected a FY25 deficit, is on track for firmer footing though both schools’ endowment market values grew 7%. Despite these gains, HMS’ recurring deficits highlight ongoing structural challenges.
Garber frames FY25 as the start of a longer period of budget tightening and operational streamlining.
President Garber opens the report by recounting the “painful layoffs” and “hard choices” already made to steady operations, which included hiring freezes, deferred projects, and budget cuts across schools.
He then warns that more “structural changes and reductions across our Schools and units will be necessary, and they will not be easy” and that Harvard is “examining operations at every level of the University as we seek greater adaptability and efficiency.”
Garber has projected a $1 billion shortfall for FY26, driven by ongoing federal investigations, new costs like the 8% endowment tax, and continued funding uncertainty. Even with most federal research grants restored, the National Institutes of Health (NIH) funding pool shrank by 28% last year. Meanwhile, the Department of Health and Human Services (HHS) has opened suspension and debarment proceedings that could cut Harvard off from future grants indefinitely. Harvard also remains under countless investigations that could threaten everything from its IP royalty revenue to its ability to host international students.
In this light, Garber’s emphasis on both the difficulty of the past year and the challenges ahead signals continuity, not closure. The measures that defined FY25, such as budget cuts across schools, hiring freezes, and paused capital projects, were not temporary responses but early steps in a longer adjustment to a new higher education and research paradigm.
Intergenerational equity serves as both rationale and warning.
The FY25 report emphasizes intergenerational equity as the core principle of Harvard’s financial strategy. The concept refers to using the endowment in a way that balances the needs of current students and faculty with those of future generations. It recognizes that Harvard’s resources are finite. As the report notes, the endowment is not an unlimited reserve or “piggy bank” to be drawn down in moments of strain, it is a “covenant across generations.” What Harvard spends today affects how much the endowment is worth tomorrow, and by extension, what remains possible for future students and faculty pursuing the University’s mission of teaching and research.
This principle is not new. Harvard has invoked intergenerational equity in its financial reports for years, and it guides how most university endowments are managed. Yet in a year defined by federal scrutiny, shrinking research support, and rising costs, the emphasis on it feels less theoretical (as it sometimes does in years of surplus) and more of reality (as it did in other years of hardship like 2009).
It currently functions as both an explanation and a justification of why Harvard tightened spending, deferred projects, and accepted short-term strain, and signals that the University intends to continue doing so as uncertainty persists.
We’ll keep unpacking the numbers as Harvard’s finances move further into the spotlight — so send us your questions, and if you found this useful, forward it to a friend and encourage them to subscribe!