Harvard’s AAA Credit Rating Reaffirmed by S&P Amid Leadership Crisis and Donor Turmoil

Harvard will maintain its AAA credit rating from S&P, the credit rating agency announced in a report on Thursday, easing concerns that the University could see its rating downgraded amid the ongoing leadership crisis and a growing list of major donors cutting ties with the school.

Some believed that Harvard’s AAA rating, which signifies the highest credit quality and lowest risk of default in the industry, was in jeopardy after months of campus turmoil.

While the University’s credit rating will remain unchanged, S&P — one of three major U.S. credit rating institutions — did raise concerns about the “heightened attention and scrutiny” on Harvard since its initial slow response to Hamas’ Oct. 7 attack on Israel.

Harvard’s response to Oct. 7 and allegations that it did not adequately address campus antisemitism led some of the University’s largest donors to publicly suspend their relationships with the institution. The controversy also contributed to former President Claudine Gay’s resignation after just one semester in the role.

“We characterize Harvard’s financial risk profile as very strong, highlighted by robust financial resources ratios and strong operating margins coupled with a history of strong fundraising,” S&P wrote in its Thursday report.

Harvard, which traditionally receives top-tiers grades throughout all categories, was viewed as having an elevated “governance” risk due to “practices relating to discrimination and antisemitism,” and a loss of stability since former President Lawrence S. Bacow retired in June 2023.

“However, over the medium term, these developments could lead to an impact on student demand, fundraising, and other financial support that the university receives,” the report read.

A Harvard spokesperson declined to comment on the report from S&P.

The report pledged to “track these developments,” but asserted that Harvard remains in strong financial health and predicted that the University’s outlook and financial performance will remain positive in the short and long term.

“Things have got to get a lot worse than they are now before you turn Harvard away from your door,” said Thomas D. Parker ’64, a senior associate at the Institute for Higher Education Policy.

Akiko M. Mitsui, director of U.S. education and nonprofits at Fitch, said that she would personally find it “surprising” if any downgrade occurred in Harvard’s credit rating from S&P Moody’s. Fitch does not rate Harvard’s credit quality.

Despite concerns surrounding fundraising and the recent filing detailing a planned $1.65 billion debt financing, Mitsui said the University is “far beyond the threshold of what differentiates a AAA from a AA+.”

Three main factors go into a corporation’s credit rating: revenue defensibility, operations, and balance sheet assessment, according to Mitsui. The debt to assets ratio remains a key statistic within the balance sheet to calculate a University’s leverage position.

Harvard boasts a nine to one assets to debt ratio, far above the four to one industry average ratio.

The high ratio reflects the significant cash and investments Harvard has when compared with outstanding debt, suggesting that the University is a safe investment that faces little risk of being downgraded.

Some of Harvard’s peer institutions like Dartmouth College and the University of Chicago have experienced downgrades from their AAA credit ratings to AA in the past 15 years. Caltech was downgraded by Moody’s and S&P in 2015 after an eroding balance sheet following a series of losses.

Cornell University, which holds an assets to debt ratio of three to one, has consistently received a AA credit rating.

Mitsui said she expects that even if Harvard’s assets to debt dropped to a lower number — through debt increasing or weakening revenue defensibility metrics — the University would have the capacity to maintain its AAA rating.

“At the end of the day, we’re rating bonds and the ability of the University to repay their bonds,” she added.

—Staff writer Sidney K. Lee can be reached at sidney.lee@thecrimson.com. Follow her on Twitter @sidneyklee.

—Staff writer Thomas J. Mete can be reached at thomas.mete@thecrimson.com. Follow him on Twitter @thomasjmete.