In Years Since 2008 Recession, Harvard Paid Down Debt, Built Reserves


Harvard has reduced its debt load by roughly $1 billion and increased its reserves in preparation for a potential future recession, University Chief Financial Officer and Vice President for Finance Thomas J. Hollister said in an interview Wednesday.

Hollister said that the reduction in debt is part of an effort to soften the blow of a potential future recession. During the 2008 recession, Harvard did not lose its AAA rating — the highest possible credit rating — but the financial collapse prompted the school to put a more significant focus on planning going forward.

“The number of changes in financial planning, readiness, discipline, and focus is dramatically different,” Hollister said. “In that respect, the crisis was not wasted.”

Harvard’s total bonds and notes payable have decreased from $6.28 billion in 2010 to $5.30 billion in 2018, according to the University’s financial statements from each year. This category is the largest component of the University’s debts, which also include other liabilities, such as retirement obligations.


Hollister also said most Harvard schools have been able to use budgetary surpluses in recent years to build up “rainy day funds and reserves” for future downturns. Both the Faculty of Arts and Sciences and Harvard Medical School have seen financial troubles in recent years, with the Medical School running a deficit in nine of the last 10 fiscal years.

When the 2008 financial crisis struck, Harvard’s endowment took a substantial hit, falling from $37 billion to $26 billion, a negative 27.3 percent return. The endowment, currently valued at more than $39 billion, did not fully recover from this loss until 2017.

Former University President Drew G. Faust said in a May 2017 interview that the crisis was a tumultuous time to be overseeing the University’s finances.

“Just in a matter of hours you watched the markets crash, and you felt this urgent emergency was going on before your eyes, and you didn't know if by the end of the next day the endowment would have fallen another 10 percent or 15 — when was it going to stop? Was there going to be no endowment left at all?” Faust said.

The University also put off its capital campaign for several years and cut staff across the University in order to keep its fiscal house in order. Some cuts, such as nixing hot breakfast in the upperclassmen houses, have not been restored since.

In the event of a future recession, Hollister said Harvard’s schools have plans in place to make sure operations will not be dramatically constrained.

“From a planning standpoint. . .I give all the credit to the schools and units. They go through scenario planning of what would we do in 18 months if we have a recession, and how do we act or ready ourselves in case that were to occur,” he said. “So, I would like to think that the University systematically across the board is doing all the right kinds of thinking and in the event of the inevitable downturn.”

University President Lawrence S. Bacow said in a September 2018 interview that he had “challenged” all the schools to conduct this scenario planning in anticipation of an eventual recession.

“What are we going to do when we have a recession — not if – I guarantee you there will be a recession, I don’t know when it’s coming, but it’s important to think about it in advance,” Bacow said.

Still, Hollister said a future recession could have negative effects despite the University's planning.

“What I can't say is that it won't be painful,” he said. “What I can say is that we hopefully won't be unnecessarily surprised.”

Correction: April 18, 2019

A previous version of this article incorrectly stated that Tom Hollister said the University may have to make cuts during a future recession. In fact, he did not mention cuts during the interview.

—Staff writer Luke W. Vrotsos can be reached at

—Staff writer Cindy H. Zhang can be reached at