Brown University Secures $300 Million Loan Amid Federal Funding Threats and Budget Deficit

Brown University has taken out a $300 million loan to navigate financial uncertainties stemming from potential federal funding cuts and an existing $46 million budget deficit, according to a recent report by The Brown Daily Herald. The loan, secured last Friday from an undisclosed lender, carries a 4.86% interest rate and is set to mature in 2032, as detailed in a regulatory filing dated April 15. This move comes as the Trump administration threatens to freeze $510 million of Brown’s federal funding, citing concerns over alleged antisemitism and the university’s diversity, equity, and inclusion (DEI) initiatives.

The decision to borrow follows a turbulent period for Brown and other Ivy League institutions, with the administration targeting universities it perceives as failing to address antisemitism or supporting certain activist movements. A White House official informed The Brown Daily Herald that the proposed $510 million freeze would make Brown the fifth Ivy League school to face such cuts, following Columbia University’s $400 million funding reduction in March. Brown’s federal funding, which accounts for 19% of its operating revenue (over $253 million in 2024, projected to reach $300 million in 2025), is critical for research and operations. The potential loss of these funds, combined with a $46 million structural deficit, has prompted the university to seek additional liquidity.

Brown’s endowment, valued at $7.2 billion as of June 2024, is the smallest among Ivy League schools, limiting its ability to absorb financial shocks without external borrowing. The university has already implemented cost-saving measures, including a staff-wide hiring freeze affecting 90% of positions, restrictions on non-essential travel, and plans to reduce PhD admissions while expanding revenue-generating master’s programs. These steps aim to address the deficit, which is driven by Brown’s transition from a liberal arts model to a research-intensive institution—a shift that has increased costs faster than undergraduate tuition revenue.

“Given the volatility in the capital markets and the uncertainty regarding future federal policy related to research and other important priorities, Brown is fortunate to have a number of sources of liquidity,” university spokesperson Amanda McGregor told Inside Higher Ed. Unlike peers such as Harvard and Princeton, which have recently issued bonds, Brown opted for a direct loan to tailor terms to its specific needs.

The federal funding threats are part of broader actions targeting higher education. In January, President Trump signed an executive order to end federal DEI programs, and the Department of Education warned universities against maintaining “illegal” race-conscious initiatives. Brown has responded by renaming its Office of Institutional Equity and Diversity to the Office of Diversity and Inclusion and appointing Matthew Guterl as its new vice president for diversity and inclusion. Additionally, the university has hired two lobbying firms to advocate for its interests in Washington.

Brown is also challenging some federal actions legally. On April 14, the university, alongside eight other institutions and three higher education associations, filed a lawsuit against the U.S. Department of Energy to block cuts to indirect research costs, which would cost Brown over $2 million annually. This follows a similar lawsuit in February regarding National Institutes of Health grants.

The financial strain is already impacting Brown’s research community. At least nine grants totaling over $8 million have been terminated since Trump took office, affecting studies on topics like HIV prevention and mental health for LGBTQ+ individuals. Researchers have reported layoffs and disruptions to ongoing projects, with some participants losing access to treatment.

Brown’s leadership, led by President Christina Paxson, has emphasized defending academic freedom and the university’s mission. At a recent faculty meeting, Paxson outlined contingency plans, including potential layoffs and scaling back investments in projects like the William A. and Ami Kuan Danoff Life Sciences Laboratories. Despite these challenges, Brown Corporation members and Brown-RISD Hillel leadership have praised the university’s support for its Jewish community, citing initiatives like the Kosher Kitchen at Sharpe Refectory as evidence of inclusivity amid accusations of antisemitism.

As Brown navigates this complex financial and political landscape, the $300 million loan provides a critical buffer. However, with federal funding uncertainties unresolved and legal battles ongoing, the university faces tough choices to maintain its academic and research ambitions.

Originally published on University Herald