Higher education is under siege on multiple fronts, putting funding and future sustainability at risk and leaving many scrambling to find a positive path forward. The first 60 days of the new Administration have been nothing short of a wild rollercoaster ride for campus stakeholders trying to keep up with twists and turns and policies and practices that have been turned upside down. On March 20, 2025, President Trump signed an executive order directing, “The Secretary of Education shall, to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education and return authority over education to the States and local communities while ensuring the effective and uninterrupted delivery of services, programs, and benefits on which Americans rely.”
Why should state and local governments care? The answer is easy – institutions of higher education (IHEs) fuel the economies of their host communities. They are often the largest employers in rural and suburban communities. Populations of students live off campus, contributing to a stable real estate market along with faculty and staff. The community of employees and students, along with alumni and parents, frequent local stores, restaurants, hotels, and other attractions in the area, supporting the local workforce. IHEs also provide services to host communities, not just for formal education to residents in the region, but they also offer important cultural and sporting events, as well as informal community public education. In addition to local economic impacts, as noted, the Executive Order expresses the intention to give back control over education (including pre-K-12) to state and local governments. The exact timeframe and what a new normal will look like are currently unknown.
New York State Comptroller Thomas DiNapoli released a report in September 2024 detailing the economic impact of higher education in the state, describing in monetary terms the importance of higher education, highlighting that in 2022, consumer spending related to higher education nationally was $261,339 million. He noted that since 2021, six institutions of higher education have closed, which resulted in the permanent loss of 2,235 jobs, amounting to $167.8 million. The report points out that two New York counties were affected more severely than others, “bearing more than half of the total impact in employment and payroll loss,” and the report observed that the closures have negatively impacted business in host communities, including entertainment venues and restaurants.
While many seem surprised or caught off guard by the sea changes in federal government support for the higher education sector, much of what has unfolded was previewed in Project 2025. The College Cost Reduction Act (CCRA), introduced in the 118th Congress in 2024, while not enacted last year, has gained attention in the current Congress. The CCRA would, among other things, place limits on student loans and hold institutions of higher education liable for student loans that former students do not pay off. The recent barrage of executive orders and actions by the federal government, some of which have been met with resistance from state attorneys general, may deal significant economic blows to IHEs, and this is cause for concern as it threatens the sustainability of local economies. In response to many of the executive orders and agency actions discussed below, presidents of colleges and universities across the country announced hiring freezes and/or spending cuts in February and March in anticipation of the loss of federal funding. These cost-saving campus measures will have ripple effects on host community ecosystems. In addition, as noted below, many lawsuits have been filed challenging executive orders and agency actions on numerous grounds, and while some have been successful in temporary restraints, there is no clear indication of the likelihood of success, and the only certainty is that the litigation may take years to wind through the court system. On March 18, 2025, Moody’s downgraded the higher education sector from stable to negative citing potential cuts to research funding, actions against campuses for diversity programs, staff reductions at the U.S. Department of Education (DOE), uncertainty about the future of federal student aid, and the possible expanded taxes on endowments.
As of March 20, 2025, President Trump had signed 95 Executive Orders, 20 proclamations, and 23 memoranda this term since taking office mid-January. A number of these directly impact higher education. For example, three executive orders address diversity, equity and inclusion, (with two related executive orders addressing gender and transgender issues), an order (and follow-up actions) addresses antisemitism on college and university campuses, an executive order that prohibits institutions of higher education from mandating a COVID vaccine for students, faculty and staff, and as noted earlier, one directs the dismantling of DOE. These executive orders are highlighted because they carry significant negative economic impacts for colleges and universities, which could have a spillover effect on their host communities.
On January 20, 2025, President Trump issued Executive Order No. 14151 entitled “Ending Radical and Wasteful DEI Programs and Preferencing,” which directs the Office of Management and Budget to identify and terminate all diversity, equity and inclusion (DEI) and diversity, equity, inclusion, and accessibility (DEIA) mandates, policies, programs, and activities within the federal government. The following day, the President signed Executive Order No. 14173 entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This order expressly addresses DEI as it applies in higher education and directs the Attorney General and the Secretary of Education to issue joint guidance within 120 days to state and local educational agencies and institutions of higher education receiving federal funds as well as all institutions of higher education that receive federal grants or participate in the federal student loan assistance program under Title IV of the Higher Education Act. The guidance was directed to inform educational entities about the measures and practices that are required to comply with in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA).
Following these Executive Orders, the Department of Education (DOE) Office of Civil Rights (OCR) issued a Dear Colleague Letter (DCL) on February 14, 2025, to “clarify and reaffirm the nondiscrimination obligations of schools and other entities that receive financial assistance” from the federal government. The DCL states that SFFA provides a “framework” for “evaluating the use of race by state actors and entities covered by Title VI.” Although the scope of SFFA addressed admission decisions, the “framework” set out in the DCL asserts that the case applies to decisions pertaining not only to admissions but to “…hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life.”
In connection with the February 14, 2025, DCL, DOE OCR released Frequently Asked Questions (FAQs) on March 1, 2025, with the stated purpose of seeking “to provide helpful information about how the decision in…(‘Students v. Harvard’ or ‘SFFA’), applies to racial classification, racial preferences, and racial stereotypes, as well as how OCR will interpret the ruling in its enforcement of Title VI of the Civil Rights Act.” The FAQs begin with how to file a complaint and address 15 topics in total.
One concern is the potential loss of revenue for colleges and universities due to failure to fully comply with the Executive Orders. On March 14, 2025, the Office of Civil Rights of the U.S. Department of Education (DOE) announced investigations into activities at 45 institutions of higher education since the February 14, 2025, DCL. On February 13, 2025 the DOE cut $350 million in grants and contracts that supported regional educational laboratories and equity assistance centers, and on February 17, 2005, the DOE announced $600 million in cuts to college and university teacher preparation programs that promoted “Critical Race Theory; Diversity, Equity, and Inclusion (DEI); social justice activism; “anti-racism”; and instruction on white privilege and white supremacy.” Although the U.S. District Court in Maryland ordered the $600 million in teacher preparation grants to be restored on March 17, 2025, an appeal is likely.
In response to the Executive Orders, several lawsuits have been filed. For example, on February 3, 2025, university and college professors, as well as diversity officers, nonprofits, and local governments, filed a lawsuit in Maryland District Court asking that the anti-DEI orders 14151 and 14173 be declared unlawful and placed under injunction. The plaintiffs, the National Association of Diversity Officers in Higher Education (NADOHE), the American Association of University Professors (AAUP), Restaurant Opportunities Centers United, as well as the Mayor and City Council of Baltimore, mainly argue that the orders violate the First and Fifth Amendments, and threaten academic freedom for all. More specifically they argue that the President lacks constitutional authority to “unilaterally terminate ‘equity-related’ grants and contracts” without express statutory authority as he directs in Executive Order 14151; that the same Executive Order is unconstitutionally vague because it does not provide fair notice of what is prohibited as it “fails to define key terms, including ‘DEI,’ ‘DEIA,’ ‘equity,’ or ‘equity-related.’” Plaintiffs further argue that Executive Order 14173 is unconstitutionally vague because the Order “fails to define material terms that determine whether [the parties]…will be subject to civil investigation, civil enforcement, claw back funding, or other enforcement actions by the federal government.” Additionally, the Order “does not define the term ‘illegal DEIA and DEIA policies’ ‘illegal private-sector DEI preferences, mandates, policies, programs, and activities’ nor ‘illegal DEI discrimination and preferences….” “Given the vagueness of the material terms, the Attorney General and each agency head charged with identifying the ‘up to nine’ investigation targets are ‘encourage[d]’ to engage in ‘discriminatory enforcement.’” Additionally, the complaint states that the “Order provides no rubric or clear criteria for how the ‘up to nine’ entities will be selected by each agency, nor does the [O]rder define ‘DEI programs or principles’ or ‘illegal discrimination preferences.’ Without any definitive criteria or information, any of the over 130 colleges and universities of the United States with endowments over $1 billion…are potentially in the crosshairs of the order.”
Plaintiffs NADOHE and AAUP further argue that Executive Order 14173 “impermissibly restricts the exercise of [their] constitutionally protected speech based on its content and viewpoint…due to the threats of investigation of their institutions.” It is also alleged that the Order “penalizes the protected speech of NADOHE’s institutional members with endowments over $1 billion by threatening to bring enforcement actions against them to ‘deter’ ‘DEI programs or principles.’”
Lastly, that complaint alleged that Executive Order 14173, Section 3, violates the separation of powers clause of the Constitution. because although the Constitution vests spending powers exclusively with Congress, the Order imposes a certification requirement that places a condition on the receipt of federal funds where recipients of contracts or grants must certify that they “do not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” In so doing, the President is exercising the spending powers vested in Congress, which Congress has not delegated to him.
On February 21, 2025, the District Court for the District of Maryland issued a nationwide preliminary injunction that blocked enforcement of several provisions articulated in the January 2025 orders. Under the injunction, the federal government was prohibited from requiring federal contractors and grantees to certify they do not operate DEI programs that violate federal anti-discrimination laws, and from bringing enforcement actions. The court order did, however, allow other enforcement provisions, such as the one that directs the Attorney General to prepare a report identifying potential civil compliance investigations of major organizations, to continue.
Following the imposition of the preliminary injunction, the plaintiffs accused the Trump administration, on March 13, 2025, of failing to comply with the court order. In response, the government filed a Motion for a Stay Pending Appeal seeking a stay of the district court’s preliminary injunction. On March 14, 2025, the Fourth Circuit reversed the district court and lifted the preliminary injunction. Accordingly, while the appeal is pending, federal agencies can now resume presenting federal contractors and grantees with the certifications required under the Executive Orders, including certifications that contractors do not operate DEI programs violating federal anti-discrimination laws, opening the door to potential liability under the False Claims Act. The Fourth Circuit’s opinion also lifts the injunction’s restrictions against the government from bringing enforcement actions against contractors with allegedly discriminatory DEI programs.
Other lawsuits have been filed by education colleges and associations representing teachers in training to challenge the February 2025 termination of more than 100 educator-preparation grants that touched on diversity, equity, and inclusion by DOE; and challenges by three federally recognized tribal nations and students to the Trump administration’s decision to reduce staff at the two higher institutions operated by the Bureau of Indian Education, Haskell Indian Nations University in Kansas, and the Southwestern Indian Polytechnic Institute in New Mexico.
While uncertainty remains as to the outcomes of the various lawsuits, much of which will take months if not years to resolve, many IHEs (e.g., Ohio State University, University of Pennsylvania, Ivy Tech Community College, University of Alaska, University of Iowa, and Des Moines Area Community College) have already announced actions taken to comply with the executive orders with the hopes of avoiding loss of significant revenue. In addition to the federal restrictions on diversity activities on campuses, there are a growing number of states, including Alabama, Idaho, Indiana, Iowa, Kansas, Kentucky, Texas, Utah, and Wyoming that are introducing and enacting legislation calling for various campus bans on diversity programs.
Following the President’s January 29, 2025, Executive Order combatting antisemitism on college campuses, on February 3, 2025, the U.S. Department of Justice announced the formation of a multiagency task force to combat antisemitism. On the same day, the U.S. Department of Education announced investigations into five universities for alleged antisemitic harassment on campus in the aftermath of the October 7, 2023, massacre by Hamas (Columbia University, Northwestern University, Portland State University, The University of California, Berkeley, The University of Minnesota, Twin Cities). On March 10, 2025, the list of institutions of higher education being investigated was expanded to sixty. These investigations are being conducted under Title VI of the Civil Rights Act (hereinafter “Title VI”).
Title VI and the implementing regulations prohibit discrimination on the basis of race, color, and national origin in programs or activities receiving federal financial assistance. While Title VI does not prohibit religious discrimination itself, it does protect students of any religion when the discrimination or harassment is based on actual or perceived shared ancestry or ethnic characteristics. Any institution of higher education that receives federal funding is obligated to comply with Title VI. OCR is responsible for the enforcement of Title VI at such institutions. Discriminatory actions may violate Title VI under a different treatment framework or a hostile environment framework.
Since the campus unrest related to October 7, 2023, began, OCR has announced settlements with many institutions in an effort to ensure compliance with Title VI including resolution agreements with Brown University, the City University of New York (CUNY), Drexel University, Lafayette College, Muhlenberg College, Temple University, the University of Illinois-Urbana Champaign, and the University of Michigan.
On March 7, 2025, the White House announced the cancellation of $400 million in grants and contracts to Columbia University as a result of the University’s failure to protect the safety of Jewish students due to the protests following the October 7, 2023, terrorist attack by Hamas against Israel. On Friday, March 21, 2025, Columbia University announced that it had reached an agreement with the federal government that includes, among other things, an overhaul of policies and the hiring of special campus security officers who will have the authority to remove people from campus or arrest them. Exactly how these special forces will collaborate with local, state, and federal law enforcement authorities remains to be seen, and this could lead to additional security personnel on campuses across the country.
There are many sources of revenue for institutions of higher education, for example: tuition, government appropriations, research, auxiliary enterprises, and investment and gifts. Appropriations from both the state and federal governments are important revenue drivers for campuses and can be pivotal in the financial viability of significant pieces of the university enterprise.
As a result of federal cuts to the USAID, enabled by the Executive Orders creating the Department of Government Efficiency, and Reevaluating and Realigning United States Foreign Aid, Johns Hopkins University announced it would be forced to lay-off over 2,000 employees mostly affiliated with the Hopkins Bloomberg School of Public Health, the medical school, and a related nonprofit. It should be noted that not all of these employees are located in the United States and therefore not all reside or work in Baltimore, Maryland, where the University is headquartered. A lawsuit was filed in the District of Maryland by current or recently terminated employees and contractors of USAID to halt the efforts to dismantle the agency. On March 18, 2025, following a hearing, the federal district court in Maryland issued a preliminary injunction based on the belief that the Government’s “…actions to shut down USAID on an accelerated basis…likely violated the United States Constitution…”
The Director of the National Institutes of Health (NIH) issued supplemental guidance on February 7, 2025, clarifying a cap on indirect costs on grants and contracts of 15%. Many universities have negotiated indirect rates that far surpass this cap, necessary to defray related costs of lab space and administrative support for researchers. The rate cap was planned for implementation on February 10, 2025, along with halts to payments on existing NIH contracts, but that same day, the U.S. District Court in Massachusetts issued a temporary restraining order enjoining NIH from enforcing the new policy nationwide. Three lawsuits have been filed: one by 22 state attorneys general, one by three higher education institutions and a dozen universities, and one by the medical and health care education associations and teaching hospitals. A temporary restraining order was granted by the District Court of Rhode Island, at least temporarily halting implementation of the withholding of federal assistance awards already made by the federal government.
In addition to these major potential setbacks for higher education funding, a January 28, 2025, Executive Order restricts grant funding to institutions that have conducted research related to pediatric gender dysphoria. On March 11, the University of Maine system reported that its USDA funding was temporarily paused while the federal government explored alleged Title VI and Title IX violations related to its athletic programs and the participation of transgender athletes, but the funding was restored shortly thereafter. On March 19, 2025, the federal government announced it would suspend $175M in funding to the University of Pennsylvania due to its stance on transgender athletes.
One thing is certain – there is a lot of confusion and uncertainty, and the future economic stability of the higher education sector is at risk. It is going to take a while for all of the lawsuits to wind their way through the court system, and the sector will not have definitive answers for quite some time. Preceding the Trump Administration, there had already been an uptick in the number of college and university closures – 14 non-profit schools closed in 2023 and 16 in 2024. A November 2024 study released by the Federal Reserve Bank of Philadelphia predicts that up to 80 schools could close annually due to a variety of economic factors. As noted above, by mid-March 2025 a number of institutions of higher education have announced hiring freezes and other cuts in response to loss of funding threats (e.g., University of California, Harvard and MIT, Brown University, Duke University, the University of Pennsylvania, the University of Washington and dozens of others). This alone will begin to have a noticeable impact on the local economy.
The stability of many local governments and regions that serve as host communities to institutions of higher education is inextricably intertwined with the economic viability and health of these institutions. A threat to the financial security of higher education should be of concern to municipal attorneys and the localities they serve in terms of economic and social stability. In the famous words of Bob Dylan, “Times They Are A Changin’,” and host community resiliency will be challenged.
