Why America’s richest universities are laying off staff: The hidden cost of federal funding cuts

In 2025, a surprising trend is unfolding across US higher education: some of the country’s wealthiest and most prestigious universities are laying off staff in large numbers. With endowments in the tens of billions, institutions like Harvard, Stanford, and Johns Hopkins might seem financially bulletproof. But this year’s sweeping federal funding cuts have revealed just how reliant even elite universities are on government support.As the federal government slashes research grants, international aid, and imposes steeper taxes on endowments, even well-endowed institutions are scrambling to adjust. Staff layoffs, hiring freezes, and budget contractions have become unavoidable, marking a turning point in how wealth is managed, and tested, on America’s top campuses.

The federal funding squeeze: What changed in 2025?

This year’s cuts stem from a combination of legislative and executive actions. The 2025 federal budget drastically reduced allocations for:

Additionally, the 2025 budget expanded the excise tax on university endowments, raising the rate and widening the eligibility pool. This affected dozens of private universities with large endowments.The result: an immediate strain on operating budgets, project pipelines, and institutional planning—even at the top.

Stanford University’s $40B endowment couldn’t prevent layoffs

Despite a $40 billion endowment, Stanford University announced the layoff of 363 employees, effective September 2025. The administration cited declines in federal research funding, the rising endowment tax, and the need to cut over $200 million from its budget.Notably, the layoffs followed a hiring freeze and operational review affecting multiple departments. Nearly half of Stanford’s sponsored research was previously federally funded, exposing the university’s vulnerability despite its perceived wealth.

Johns Hopkins: $800M in USAID cuts devastate global programs

Johns Hopkins University, globally renowned for its medical and public health programs, saw over 2,200 layoffs this year. The primary driver? An $800 million reduction in USAID funding, which supported global health initiatives, fieldwork, and faculty-led development projects.Though its $10B endowment is substantial, much of it is restricted, and cannot be freely reallocated to cover salaries or federal shortfalls. The scale of layoffs reflected not just fiscal loss—but a sudden strategic decoupling from international development.

Duke University: $108M grant freeze leads to restructuring

At Duke University, a freeze on $108 million in federal grants prompted a wave of layoffs, voluntary buyouts, and the consolidation of research units.Duke’s endowment—just over $13 billion—is robust but heavily committed to long-term investments and restricted use. With funding pipelines disrupted, university officials said immediate staffing changes were necessary to stabilize core operations.

Northwestern: 425 job cuts after research funding halted

Northwestern University—home to a growing research portfolio—was forced to eliminate 425 jobs after a sudden $790 million freeze in research funding. Affected roles included research staff, lab managers, and project-specific hires.While Northwestern’s $15 billion endowment provided some cushion, administrators noted that cutting deep into it would undermine long-term financial health. Faculty leaders expressed concern about lasting damage to innovation and graduate research pipelines.

Harvard University: Tax burdens, legal battles, and quiet cuts

Harvard University, the richest academic institution in the world with a $50B+ endowment, is also trimming back. Without specifying numbers, the university has acknowledged staff contract non-renewals, a freeze on pay raises, and legal challenges related to the expanded endowment tax.Critics argue Harvard could afford to shield workers from the fallout. But university officials say they are preparing for a “structural realignment” in an environment where large endowments now attract higher scrutiny and heavier taxation.

Why endowment size doesn’t guarantee flexibility

A common misconception is that endowments function as liquid savings. In reality:

So while a university may have billions “on paper,” it may lack the flexibility to redirect those funds toward payroll or short-term fiscal shocks.

What the layoffs reveal about higher ed’s future

The layoffs at wealthy universities are more than belt-tightening—they are a wake-up call about the fragility of even elite institutions when public funding recedes. They also signal a new era where universities must rethink how they balance endowment management, federal reliance, and workforce stability.As the ripple effects of federal funding cuts continue, stakeholders across higher education—students, faculty, and policymakers—must confront a key question: What is the role of government in sustaining knowledge institutions, and who bears the cost when that support is withdrawn?TOI Education is on WhatsApp now. Follow us here.