Richest private colleges decline federal stimulus money

Five of the wealthiest private colleges in the U.S. have declined to accept their allocations of federal stimulus money designed to help institutions blunt the economic impact of the coronavirus, following criticism from the president and secretary of education.

On Thursday, the University of Pennsylvania joined fellow Ivy League members Harvard, Yale and Princeton universities, saying they wouldn't take their share of the sweeping package for colleges. Stanford University also declined the cash.

The U.S. government's $2 trillion stimulus to combat the effects of coronavirus lockdowns across the country provided for about $12.5 billion in direct aid for all colleges. Distribution of the funds was determined by a formula that meant some of the richest institutions were eligible for millions of dollars in aid.

Yale said it won't accept its allocation of $6.9 million even though it is experiencing "great budgetary pressure" because of the pandemic.

"Instead, we hope that the Department of Education will use Yale's portion of the funding to support colleges and universities in Connecticut whose continued existence is threatened by the current crisis," Yale, the second-richest private U.S. college, with an endowment of $30.3 billion, said Wednesday in a statement.

UPenn would have been eligible to receive roughly $10 million, based on government data.

"Despite the serious financial impact to Penn as a result of the pandemic, after analyzing the full scope of the regulations involved, Penn has determined that it will not apply for nor accept the funds that would be available through the CARES Act," said spokesman Ron Ozio.

The five schools collectively had about $140 billion in endowment assets as of June, though the funds may have lost value as financial markets have declined because of the pandemic.

The Massachusetts Institute of Technology, the fifth-wealthiest private U.S. school, said it hadn't applied for funds and its leadership is "still reviewing information from the government, considering the range of needs facing our students, and determining how best to proceed."

While the richest schools are feeling the hit, including refunding room and board for thousands of students, they have the biggest cushions from their endowments. Yet some of those funds are legally restricted to specific uses by donors. The same schools are also paying the new endowment tax, enacted in the December 2017 tax cut.

"It looks bad for them to take the money, but it wasn't really their fault," said Bob Shireman, deputy undersecretary of the Education Department in the Obama administration.

The government was following a formula that needed to be determined quickly so that needy schools wouldn't be waiting to receive their money, said Mr. Shireman, now director of higher education excellence at the Century Foundation. "It was in the interest of being clear quickly that those schools would be eligible," Mr. Shireman said. "It was a balance."

President Donald Trump denounced Harvard earlier this week, saying the school should return the money. None of the schools had yet to receive any of the funds from the government.

Under the federal plan, money will be distributed based on a formula of schools' low-income population, who receive Pell Grants, as well as the total number of students who don't get the aid.

That calculation meant Harvard was eligible to receive $8.7 million. Its endowment was valued at $40.9 billion as of June, the most recent publicly available date.