We’ve all read and heard of the Federal Department of Government Efficiency (DOGE) and the ostensible effort to reduce government spending. Regardless of your point of view, these initiatives are impacting DU. However, Colorado public universities will be more directly impacted by cuts from the Feds. Moody’s Investors Service recently downgraded its outlook for the higher education sector from stable to negative, citing the potential negative impact of federal policy changes on the operating environment for colleges and universities.

Private universities like DU receive direct and indirect benefits from the federal government. DU benefits primarily through student aid programs (like Pell grants and federal student loans) and research grants. Additionally, DU benefits from work-study grants, tax-deductible endowments, and donations.

Johns Hopkins University, a private Maryland school with a popular foreign service program, announced on March 13 that it would eliminate more than 2,000 domestic and foreign employees due to cuts to international aid programs. While Denver has announced no such plans, Hopkins and others receive large federal grants and are exposed to funding changes.

At DU, 11 research projects have been affected by recent cuts in federal funding, school officials said. No dollar amount was provided.

According to CBS News, 350 university presidents signed off on a letter to the federal government regarding the program cuts. Chancellor Haefner offered his thoughts on the matter:

“There are core principles and values that we’re deeply concerned are threatened, whether it’s academic freedom, our ability to really explore the research that has driven so much economic prosperity in our country,” Haefner told CBS News Colorado.

“Universities and colleges have to take ownership in some of the factors that have created this decline in public trust of higher education. This is what drove the letter to offer constructive engagement,” he continued. “You can’t have open and free inquiry unless you’re dedicated to free expression, you’re dedicated to diversity of perspectives, diversity of experiences, diversity of different types of people coming together.” 

Students at private universities like DU receive federal grants or loans and the funds are used to pay for tuition, fees, and other educational expenses, effectively providing indirect funding to the institution. DU recently achieved R1 status as a designated high-level research university. Private universities, particularly those schools with historically strong research programs and medical schools, apply for and receive federal funding for research projects through agencies like the National Institutes of Health (NIH) and the National Science Foundation (NSF).

Private universities can also benefit from federal programs like work-study opportunities and technology grants. The federal government provides tax-deductible treatment of private donations to universities, which can be a significant source of funding. Private universities are often funded by endowments, which are investments that generate income for the university. The size and growth of some endowments have opened the possibility of challenging their federal tax status or capping their tax-free exposure.

The recent Moody’s downgrade has identified the enrollment bubble, cost pressures (state and federal), federal fiscal policy, student demand, value perception, and competition as key drivers of uncertainty.

In this case, DU derives most of its operating budget from tuition and private sources. While student loans backed by the federal government may pose a potential risk, DU, like many other private universities, appears relatively stable, especially if it can stabilize class sizes and counter a projected demographic decline in eligible students.

The Colorado state university system is another story. In the past year, the University of Colorado (CU) system received approximately $471.86 million in federal grants and contracts, excluding indirect cost reimbursement, representing 19.3% of its total current funds budget. However, system-wide federal payouts, particularly by the National Institute of Health and Anschutz Medical Center, drove the Colorado total to $1.27 billion in 2024. Colorado’s state universities may face significant financial stress.

The biggest challenge faced by DU will be attracting and retaining students while facing demographic headwinds. DU is developing strategies to target a stable slice of eligible students by executing an effective marketing strategy and delivering on the promise(s). Secondly, as federal funds become more restrictive, DU must sharpen its pencils to control operating costs and tap private and non-profit sources for research funding. Otherwise, the requirements of R1 membership may become more of an anchor than a sail on operations.

Here’s a more detailed breakdown of the University of Colorado’s federal funding over and above the aforementioned CU system funding:

The CU System received about $441.5 million from the National Institute of Health (NIH), with $360 million going to CU Anschutz. The CU System received $106 million from the National Science Foundation (NSF) in the 2024 fiscal year. Indirect Cost Reimbursement: $160.27 million (the administration is looking at a 15% cap on taxpayer coverage of “indirect costs” – DU falls well below this target). The University of Colorado also receives indirect federal funding from student tuition and fees, state funding, and auxiliary funds. The University of Colorado-Boulder received more than $111 million in federal funding in 2024. The University of Colorado Anschutz Medical Campus received nearly $350 million in NIH grants last fiscal year. In total fiscal year 2024, Colorado’s schools received $1.27 billion in federal funding.

The surprising takeaway to many is the deep financial involvement of the federal government in the financing of state university operations and higher education.