American universities that have threatened to cut federal funding under the Donald Trump administration are tapping short-term borrowing to keep cash.
Cornell will increase the size of its taxable commercial paper program to about $1 billion, according to Moody’s rating. The school plans to replace the existing $1 billion tax-free program with commercial paper. Brown and USC are exploring similar strategies.
Commercial paper is a short-term financing tool widely used by companies, governments and colleges to fund infrastructure and other projects. Institutions often use notes as bridge financing before replacing them with long-term debt.
“If I were a treasurer, I would keep my cash,” Wells Fargo & Co.
Trump has gradually reviewed colleagues accused of unfortunate allegations of anti-Semitism on campus, threatening to withdraw billions of dollars in federal funds. The government has frozen funds for Columbia and Princeton, while Harvard’s potential losses hit $9 billion in grants and contracts unless it meets the list of federally required.
By mining commercial paper or selling long-term debt, universities can keep cash storage to help you get through uncertainty.
“Potential research and healthcare funding reduces the risk of margin compression due to potential sector-wide potential scope, Moody’s analysts said in a note evaluating Cornell University. The school’s AA1 rating is the second highest for the company.
Cornell is one of many schools that have implemented a recruitment freeze due to cuts related to federal funding. A Cornell spokesman declined to comment.
Business tables are not uncommon, and many complex Muni borrowers take advantage of these plans. Dallasburg International Airport, for example, uses scalable commercial paper to fund its $8.6 billion capital plan.
Bedner said schools are seeking to retain their liquidity, with some institutions turning to commercial paper to reduce the demand for term capital funds. Colleges are also rushing to sell traditional debt to fund campus projects because of fear that they may lose access to a tax-free market, part of the Republican push for tax cuts.
If a university is planning to fund projects with cash, it may now want to save it and use commercial documents, said Lisa Washburn, managing director of municipal market analysis. “Cash is the king in times of uncertainty.”
Brown sold $200 million in duty-free commercial paper in February for projects, including the new lab it is building.
According to its bond filings, USC has just sold $600 million in Muni debt and is also expected to establish a $250 million taxable commercial paper program in fiscal 2025. The document says the plan will be used for general corporate purposes as needed.
A USC spokesperson did not immediately comment.
Washburn said more and more schools may follow suit. She expects institutions will utilize taxable bond markets or commercial paper due to funding flexibility. Princeton said it is considering selling $320 million in taxable debt later this month.
“It’s a strategic and very savvy decision because of the extreme uncertainty that happened,” she said. “The money is always somewhat qualified.”
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