Higher ed under the ax

The exact impact of President Donald Trump’s budget reconciliation bill remains uncertain pending a final vote on Capitol Hill, which could come as early as today. But this much is clear: The One Big Beautiful Bill Act, which narrowly passed the U.S. Senate in a 51-to-50 vote Tuesday, with Vice President JD Vance casting the tiebreaker, signals a bleak outlook for colleges and universities here and nationwide.

The budget measure could bring dramatic reductions in student financial aid and research funding. Along with policy changes already put in place by the Trump administration, the cuts represent an unprecedented threat to federal funding of higher education in the U.S. (Update: This afternoon, the House of Representatives passed the bill, 218-214, with all Democrats and two Republicans opposed. Trump is expected to sign the measure on Friday, meeting his July 4 deadline.)

Led by institutions such as the University of Rochester and Rochester Institute of Technology, the Rochester region has a long history of attracting substantial federal dollars to advance various fields of study. A Rochester Beacon analysis shows that for the 2023-24 fiscal year, the most recent data available, expenditures of federal grants by seven private universities and colleges in the Rochester area totaled more than $894 million. Typically, these grants are multiyear awards, some as long as five years.

Much of that funding helped students pay for higher education through federal student loans, Pell Grants, work programs, and other avenues. Department of Education grants accounted for $422 million, or 46 percent of the total federal grant expenditures by the local higher education institutions. The Senate version of the OBBBA makes significant changes to student loan programs, including eligibility for federal PLUS loans and Pell Grants.

Research grants were the other large portion of funding. Money from the National Institutes of Health, the National Science Foundation, and the Department of Energy together totaled $377 million, or 42 percent of the federal awards going to the private universities and colleges in Rochester.

Already, universities, including RIT, have warned of cuts and tightened budgets. Cornell University last month warned of job and spending cuts in the coming academic year. The school is under particular scrutiny—the Trump administration has announced plans to freeze funding for Cornell and issued stop-work orders.

With a final version of the OBBBA yet to pass both houses of Congress, many higher-ed institutions this week were taking a “wait and see” approach. Some would not provide comments to the Beacon due to the uncertain nature of federal funding. However, the data for the 2023-24 fiscal year underscore what’s at stake for the local schools.

Funding by institution

Among all local universities, UR had the largest portion of federally awarded money, with 686 awards across 30 federal departments. Expenditures of direct and pass-through federal awards at UR topped $481 million, or 54 percent of total here.

The single largest award for UR was from the Department of Energy, amounting to $99.5 million in 2023-24. This Stewardship of Science grant supports UR’s Laboratory for Laser Energetics, which is focused on nuclear fusion research and plans to build the biggest laser in the world. The multiyear grant ends in September 2028.

Per federal agency, the largest amount came from the National Institutes of Health, which accounted for $216 million in direct and pass-through awards. Most grants went toward medical research, with the highest-funded grants for extramural research programs in the neuroscience and neurological disorders; allergy, immunology and transplantation research; biomedical research and research training; and aging research. All received at least $15 million.

RIT reported the second-highest amount of federal award expenditures, with 212 grant awards totaling $281 million in the 2023-24 fiscal year. Most of that funding came from the Department of Education for the National Technical Institute for the Deaf, which was awarded $97.3 million; for federal direct student loans, $86.7 million; and for federal Pell Grants, $22.8 million.

Research grants also were a significant component of federal funding to RIT, with $42 million in awards from the National Science Foundation, Department of Defense, NIH, National Aeronautics and Space Administration, Department of Energy, and Department of Health and Human Services, mostly for STEM-related projects. 

For example, a $1.3 million grant from the Department of Defense’s Office of Naval Research was for remanufacturing legacy Marine Corps combat vehicles to a “like-new condition.”

The other five private higher-education institutions—Roberts Wesleyan University, Nazareth University, St. John Fisher University, Hobart and William Smith College, and Keuka College—spent a total of $131 million in federal awards, representing 15 percent of Rochester’s total. Of that, the most significant proportion ($81 million) came from the Department of Education for student financial aid programs such as federal student loans, Pell Grants, and workforce development.

All of Roberts Wesleyan’s $19.2 million in federal awards were from the Department of Education, compared with 99 percent of Nazareth’s $31.7 million and Keuka College’s $17.9 million. Ninety-six percent of St. John Fisher University’s $48.5 million and 89 percent of Hobart and William Smith Colleges’ $14.1 million also were from similar sources.

University responses

Institutions have been bracing for the impact of federal funding cuts. In June, outgoing RIT president David Munson issued statements to faculty and staff outlining a period of financial pressure stemming from rising costs and threats to research funding. While the college is not a research institution, it received more than $24 million in NIH awards.

According to Munson, 24 research awards to RIT were canceled earlier this year, though some were reinstated later. With declining enrollment placing further pressure on tuition revenue, the college’s proposed budget for the next fiscal year anticipates cuts hitting the NIH and National Science Foundation, the two agencies that provide the most funding.

A majority of RIT’s federal funding is sourced from the Department of Education, nearly half of which is allocated for NTID. The institution is the world’s first and largest technological college for deaf and hard-of-hearing students, with over 400 enrolled and 1,110 served at RIT.

“We will be monitoring federal policies throughout the summer as we gear up for the first day of classes, August 25th,” RIT spokesperson Bob Finnerty says.

At UR, where nearly $500 million in federal expenditures equaled roughly 7 percent of total operating expenses in the 2023-24 fiscal year, nearly half of the federal funding came in the form of research awards from NIH. 

This February, the NIH announced plans to impose a 15 percent cap on indirect cost reimbursements, which research institutions commonly use to cover overhead costs, including laboratory maintenance, staffing, and insurance expenses. In response, UR joined 12 other universities in a lawsuit against the federal government, claiming the cuts are far too drastic for the institution.

“We estimate that if the 15 percent cap remains in place, the cost to the University will be at least $40 million a year, which will have serious ramifications on the University’s finances,” wrote UR president Sarah Manglesdorf in a Feb. 12 statement. “We also expect that other research-funding agencies may follow the NIH in establishing such a cap, further eroding our research budget and potentially crippling our position as a research university.”

UR has joined colleges in similar lawsuits against federal departments including the Department of Energy, after similar announcements to impose hard caps on indirect cost reimbursements. After the NIH, the university receives the most funding from the Department of Education, allocated primarily toward research laboratories.

In preparations for the upcoming fiscal year, the university’s finance team has continued to develop a series of contingency plans to ensure the preservation of operations and services. In an April announcement, Manglesdorf announced UR would immediately take steps to navigate uncertainties stemming from “several pending federal policy changes affecting our funding sources.” These include:

■ Prioritizing activities critical to the university’s mission, including the pursuit of its 2030 strategic plan.

■ Instituting advance review from senior financial leadership for all multiyear financial commitments. 

■ A review and reassessment of all existing capital commitments for the current and upcoming fiscal years. Next year’s budget will include a comprehensive reassessment of all capital renewal projects.

UR spokesperson Sara Miller this week declined a request for comment, citing uncertainty concerning the budget reconciliation bill. 

Student aid

While RIT receives most of its federal funding from the Department of Education, that category accounts for nearly all funding for smaller institutions such as Roberts Wesleyan and Keuka. If these funding streams disappear, it could have drastic implications for student financial support.

“As an institution that provides direct financial assistance to 100 percent of its students, Keuka College understands the importance of ensuring that students in all income brackets have the opportunity to access a quality education,” says Kevin Frisch, Keuka spokesperson.

Changes resulting from OBBBA could have a dramatic impact on student aid. Cuts to Pell Grants, which more than 6.8 million students nationwide rely on, could decrease the number of low-income students who are able to afford college. The seven Rochester-area schools spent a total of $44 million in Pell grant funds in the 2023-24 financial year.

“While the final legislation remains in flux, we are hopeful that Pell Grant eligibility is not negatively affected, as approximately 40 percent of Keuka College students are Pell Grant-eligible,” Frisch says. “Any changes in grant availability or requirements would potentially impact those students.”

The Senate-passed bill struck out a measure that required recipients to be enrolled in 30 credits per year to receive the maximum Pell grant amount, preserving eligibility for part-time students. Still, the program would remain underfunded, with the Student Borrower Protection Center stating the $10.5 billion will cover less than a third of the anticipated shortfall in the next fiscal year.

Federal student loans would also be capped under OBBBA, with the Senate version limiting parents to borrowing $20,000 per year per child, with a $65,000 total cap per student. SBPC warns that this could drive students instead to private loan lenders, who typically do not have the same protections or “income-driven repayment” options. The Rochester-area universities and colleges reported total expenditures of $274 million in federal direct student loans.

“Keuka College serves a larger percentage of students from lower-income families than many private colleges, so any changes to student loan availability—for instance, reducing the number of loan options—could potentially make securing loans more onerous and expensive for our student population,” says Frisch.

An increase in the tax rate on net investment income from endowments would also impact student aid. The levy, as first proposed by the House to be as high as 21 percent for large endowments, raised alarm last month. The Tax Policy Center at the Urban Institute and Brookings Institution say an increase in the endowment tax would mean fewer dollars for poorer student populations, a brief shows. 

While the Senate version of the bill has scaled the tax rate back to around 8 percent for endowments of more than $2 million, it is a harbinger of fewer resources for students, especially those from poorer families. Previously, the tax rate was a flat 1.4 percent. Institutions with endowments of $500,000 to $750,000 retain that rate.

In a May post, Preston Cooper, a senior fellow at the American Enterprise Institute, argued that the OBBBA would hold colleges accountable. He pointed to a Congressional Budget Office estimate that the bill’s provisions would reduce new student loan volume by 20 percent.

“While the federal government will save $6.2 billion, the most profound impact of these policies could be to help students avoid taking on debts they have little hope of repaying,” Cooper wrote.

Jacob Schermerhorn  and Narm Nathan are Rochester Beacon contributing writers. Beacon Managing Editor Smriti Jacob assisted with this article.

The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. See “Leave a Reply” below to discuss on this post. Comments of a general nature may be submitted to the Letters page by emailing [email protected].Smriti Jacob, managing editor, assisted with this article.