Your University Broke Foreign Funding Laws. Now Your Financial Aid Might Disappear

You're a sophomore at Harvard. You receive a Pell Grant covering part of your tuition. Your parents took out federal loans to cover the rest. You work a campus job through federal work-study to pay for books and living expenses.

Your education is possible because of Title IV federal student aid programs—the grants, loans, and work-study funding that help millions of American students afford college.

Now imagine getting this email:

"Due to Section 117 compliance violations, Harvard University has lost eligibility for Title IV federal student aid programs. Your Pell Grant has been terminated. Your federal loans will not disburse next semester. Your work-study position is ending. Alternative financial arrangements must be made immediately."

This scenario isn't hypothetical. It's the potential consequence of Harvard's current federal investigation into foreign funding disclosure violations.

And it's not just Harvard. The University of Pennsylvania, UC Berkeley, and the University of Michigan also face investigations that could trigger the same catastrophic penalty: loss of Title IV eligibility.

The universities broke federal law by failing to accurately and timely report foreign funding. If penalties reach their maximum severity, students—who did nothing wrong—would lose access to the federal financial aid that makes their education possible.

Universities violated disclosure requirements. Students would pay the price.

What Title IV Actually Means

Before examining what students could lose, it's important to understand what Title IV of the Higher Education Act actually provides.

Title IV federal student aid includes:

Pell Grants: Need-based grants that don't require repayment. Maximum award for 2025-26 is $7,395. About 6.5 million students receive Pell Grants annually, representing billions in federal grants that make college accessible for low-income students.

Federal Direct Loans: Subsidized and unsubsidized loans for undergraduate and graduate students. Students borrowed over $80 billion in federal loans in the most recent academic year. These loans often have more favorable terms than private alternatives and provide flexible repayment options.

Federal PLUS Loans: Loans for parents of undergraduate students and for graduate students. PLUS loans allow families to borrow up to the full cost of attendance minus other aid received.

Federal Work-Study: Part-time employment for students with financial need. Work-study provides on-campus and community service jobs that help students earn money while gaining work experience.

Federal Supplemental Educational Opportunity Grants (FSEOG): Additional need-based grants for students with exceptional financial need.

For most college students, some combination of these programs makes higher education financially feasible. Without Title IV aid:

• Low-income students couldn't afford tuition
• Middle-class families couldn't bridge the gap between savings and costs
• Students couldn't access affordable financing
• Work-study jobs providing both income and experience would disappear

Title IV isn't supplemental funding for a few students. It's the foundation of college affordability for millions.

The Nuclear Option

Loss of Title IV eligibility is called the "nuclear option" for a reason: It would devastate a university.

The consequences would cascade immediately:

Current students lose aid: Students currently receiving federal aid would see it terminated. Pell Grants would stop. Federal loans wouldn't disburse. Work-study positions would end. Students would need to find alternative funding immediately or withdraw.

Prospective students can't enroll: High school seniors who planned to attend using federal aid couldn't afford to enroll. The incoming class would collapse.

Transfer stampede: Current students who can't afford to continue without federal aid would transfer to institutions with Title IV eligibility. Those who can't transfer would be forced to drop out.

Enrollment implosion: Universities depend heavily on tuition revenue. Losing most students—which would happen without federal aid—would create catastrophic budget shortfalls.

Faculty and staff cuts: Revenue collapse would force mass layoffs. Entire programs might close. Research would halt.

Debt crisis: Universities typically carry significant debt for facilities and operations. Revenue collapse would trigger debt obligations they couldn't meet.

Reputation destruction: Losing Title IV eligibility would signal that a university violated federal law so severely it can't be trusted with taxpayer funds. The reputational damage would outlast the loss of eligibility itself.

Competitive extinction: While one university can't access Title IV aid, competitors can. Students would flee. The institution would become uncompetitive in recruiting.

Endowment inadequacy: Even Harvard's $50+ billion endowment couldn't quickly replace the Title IV funding that makes the university affordable for most students. Creating alternative financial aid would take years and might not be feasible at the necessary scale.

This isn't a penalty designed to reform behavior. It's a penalty designed to be so catastrophic that universities will do anything to avoid it.

And that's precisely why it's never been used against a major university—until potentially now.

The Four at Risk

Four universities currently face federal investigations that could, in theory, lead to Title IV eligibility loss:

Harvard University

Students at risk: Harvard enrolls approximately 23,000 undergraduate and graduate students. About 55% receive need-based financial aid. Roughly 20% receive Pell Grants. Thousands depend on federal loans.

What they stand to lose: Low-income Harvard students receiving Pell Grants would lose up to $7,395 in annual grant funding. Middle-income students relying on federal loans would lose access to affordable financing. Work-study students would lose campus employment.

The irony: Harvard has a $50+ billion endowment—larger than the GDP of many countries. Yet it accepted $610 million from "countries of concern" and is under investigation for inaccurate foreign funding disclosures. Now students who had nothing to do with these decisions could lose federal aid.

What makes it worse: Harvard could theoretically replace federal aid with institutional grants—the endowment is sufficient. But doing so quickly enough to prevent student departures would be logistically and financially complex.

University of Pennsylvania

Students at risk: Penn enrolls about 28,000 students. Approximately 46% receive need-based aid. About 16% receive Pell Grants. Federal loans and work-study support thousands more.

What they stand to lose: Similar to Harvard—Pell Grants, federal loans, work-study funding. Penn students from families without significant wealth would be unable to continue without federal aid.

The financial context: Penn's endowment is substantial at $20+ billion, but smaller per student than Harvard's. Replacing Title IV funding would strain even Penn's resources.

Student impact: Many Penn students from middle-class backgrounds depend on federal loans to bridge the gap between family contributions and Penn's nearly $90,000 annual cost of attendance.

University of California, Berkeley

Students at risk: Berkeley enrolls over 45,000 students. As a public university, Berkeley serves more students from lower-income and middle-class families than Harvard or Penn. About 30% receive Pell Grants—one of the highest rates among elite universities. The majority rely on some form of federal aid.

What they stand to lose: Berkeley students depend heavily on Title IV programs. Pell Grants, federal loans, and work-study are not supplemental for most Berkeley students—they're essential for affordability.

The public university dimension: Berkeley is a public institution funded partly by California taxpayers. Loss of Title IV eligibility would devastate access for California residents who view Berkeley as their flagship public university.

Scale of impact: With over 45,000 students and high Pell Grant rates, Berkeley's student population would be hit harder by Title IV loss than smaller or wealthier private universities.

State implications: California provides additional state financial aid. But state aid assumes federal aid is available too. Loss of Title IV would create gaps state funding couldn't fill.

University of Michigan

Students at risk: Michigan enrolls about 50,000 students across three campuses. Approximately 27% receive Pell Grants. The majority receive some federal financial aid.

What they stand to lose: Michigan students from working-class and middle-class families depend heavily on federal loans and grants. Work-study provides employment for thousands.

Midwest context: Michigan serves students from across the Midwest, many from families where college attendance is only possible with substantial federal aid. Loss of Title IV would eliminate access for many Michigan residents.

Scale of impact: As one of the nation's largest universities, Michigan's student body would include more students affected by Title IV loss than smaller institutions.

These aren't abstract statistics. Each percentage represents thousands of students whose education depends on federal aid that could disappear due to their university's compliance failures.

The Students Who Would Suffer Most

Title IV loss wouldn't affect all students equally. The impact would be concentrated on students who can least afford it:

Low-income students: Those receiving Pell Grants—students from families earning under $50,000 annually—would lose grant funding that doesn't require repayment. For many, this alone would make continued enrollment impossible.

First-generation students: Students whose parents didn't attend college often come from lower-income backgrounds and depend heavily on federal aid. They also have less knowledge about navigating financial aid alternatives.

Middle-class students: Families earning $75,000-$150,000 typically can't afford $80,000+ annual costs without federal loans. Private loans would be more expensive and harder to obtain, making continued enrollment unaffordable for many middle-class students.

Students with siblings in college: Families supporting multiple college students simultaneously depend heavily on federal aid for each. Loss of Title IV for one child could create cascading financial pressure affecting the entire family.

Students from states with limited state aid: Some states provide substantial aid to residents attending in-state schools. Others provide minimal support. Students from states with limited state aid depend more heavily on federal programs.

Students at public universities: Public university students typically come from less wealthy families than private university students. They depend more heavily on grants and loans. Berkeley and Michigan students would likely face worse outcomes than Harvard or Penn students.

Working students: Work-study provides both income and valuable work experience. Students depending on work-study earnings for living expenses would lose both the job and the income.

Meanwhile, wealthy students whose families can afford full tuition without aid would be largely unaffected. They could continue their education regardless of Title IV eligibility.

The Title IV nuclear option would harm the students universities claim to serve through access and affordability—while leaving wealthy students untouched.

What Students Could Do

If a university lost Title IV eligibility, current students would face several options—all of them bad:

Transfer: Students could transfer to institutions with Title IV eligibility. But transferring involves:

• Finding schools with available spots
• Re-applying and being accepted
• Potentially losing credits that don't transfer
• Leaving established social networks and relationships
• Disrupting academic progress toward degree completion
• Additional application fees and administrative burden

Pay out of pocket: Students or families could pay costs without federal aid. But this is only feasible for:

• Wealthy families who don't need federal aid anyway
• Families willing to take on significant private debt at higher interest rates
• Students who can work full-time while attending (usually impossible at elite universities)

Take private loans: Private student loans could replace federal loans, but with:

• Higher interest rates
• Less flexible repayment terms
• Fewer protections for borrowers
• More difficult qualification requirements
• Parents often needing to co-sign

Take a leave of absence: Students could take time off, hoping Title IV eligibility would be restored. But leaves create:

• Loss of academic momentum
• Delayed degree completion
• Risk of never returning
• Interruption of career planning
• Potential loss of institutional scholarships requiring continuous enrollment

Drop out: Some students might be forced to drop out entirely if they can't afford alternatives.

None of these options would be the student's fault. They would result from their university's failure to comply with federal disclosure requirements.

The Timeline That Matters

The Title IV nuclear option doesn't happen instantly. There would be a process:

Investigation: The Department of Education investigates alleged Section 117 violations. Harvard, Penn, Berkeley, and Michigan are currently at this stage.

Findings: Investigations conclude with findings about what violations occurred and how severe they were.

Penalties proposed: The Department proposes penalties, which could range from fines to enhanced monitoring to Title IV suspension.

University response: Universities can respond to proposed penalties, provide additional information, or propose remediation plans.

Final decision: The Department issues final decisions on penalties.

Implementation timeline: If Title IV eligibility were revoked, there would typically be some implementation timeline—potentially 30-90 days notice before actual suspension.

Appeals: Universities could appeal decisions through administrative and potentially judicial processes.

This process takes months or years. Students wouldn't wake up tomorrow to find their federal aid terminated.

But the uncertainty itself creates problems:

Enrollment decisions: High school seniors deciding where to attend must consider whether their chosen university might lose Title IV eligibility while they're enrolled.

Transfer considerations: Current students must weigh whether to transfer preemptively rather than wait for investigations to conclude.

Financial planning: Families can't plan effectively when they don't know if federal aid will be available next year.

Reputation effects: Even the possibility of Title IV loss damages university reputation and recruiting.

The investigation process creates months or years of uncertainty that affects students regardless of ultimate outcomes.

The Institutional Aid Question

Harvard, Penn, Berkeley, and Michigan could theoretically replace lost federal aid with institutional aid funded by endowments or operating budgets.

Harvard: With a $50+ billion endowment, Harvard could replace federal aid for its students. But doing so would require:

• Rapid policy changes
• Administrative systems to process new aid
• Board approval for major new spending
• Precedent-setting decision that Harvard would fully fund all students
• Potentially billions in new annual spending

Penn: With a $20+ billion endowment, Penn could theoretically replace federal aid, but with greater financial strain than Harvard.

Berkeley: As a public university with a much smaller endowment relative to student body size, Berkeley would struggle to replace Title IV funding for 45,000+ students.

Michigan: Similar to Berkeley—serving 50,000 students with an endowment that couldn't easily replace massive federal aid flows.

Even if institutions could replace federal aid financially, doing so creates new problems:

Precedent: Once a university commits to fully funding all students without federal aid, can it ever change that policy? The precedent could be permanent.

Equity: Would replacement aid match federal aid dollar-for-dollar? Or would students receive less under institutional programs?

Speed: Creating replacement aid programs takes time. Could it happen fast enough to prevent student departures?

Sustainability: Federal aid is funded by taxpayers. Institutional aid comes from endowments with competing demands. Is replacing Title IV aid sustainable long-term?

The wealthiest universities might be able to replace federal aid. But "might be able to" isn't reassuring to students whose education depends on it.

The Public vs. Private Divide

The Title IV threat affects public and private universities very differently:

Private universities (Harvard, Penn):

• Large endowments relative to student body size
• Wealthy alumni bases
• Ability to raise tuition on remaining students
• Flexibility in financial aid policies
• Less political accountability for access

Public universities(Berkeley, Michigan):

• Smaller endowments per student
• Mission of serving state residents affordably
• Political accountability to state legislatures
• Less flexibility to dramatically increase financial aid
• Larger student bodies meaning greater total Title IV dependence

If Harvard and Penn lost Title IV eligibility, they could plausibly survive by replacing federal aid with institutional funds—though not without major disruption.

If Berkeley or Michigan lost Title IV eligibility, they would face existential crisis. Replacing federal aid for 45,000-50,000 students would be financially impossible at the necessary scale. The universities would collapse.

This means public university students bear disproportionate risk from their institutions' compliance failures. Students at private wealthy universities might be protected by institutional resources. Students at public universities would not be.

The Political Dimension

Title IV eligibility is ultimately a political decision as much as a legal one.

Using the nuclear option against Harvard, Penn, Berkeley, or Michigan would create immediate political fallout:

Congressional intervention: Members of Congress representing districts with affected students would immediately pressure the Department of Education to reverse the decision.

State political pressure: California and Michigan governors and legislators would mobilize to protect their flagship public universities.

Legal challenges: Universities would sue, arguing that Title IV revocation is disproportionate, violates due process, or exceeds Department of Education authority.

Media firestorm: National media would cover tens of thousands of students losing federal aid due to their universities' compliance failures—creating enormous public pressure.

Alumni mobilization: Universities' powerful alumni networks would activate, contacting elected officials and creating political pressure.

Student activism: Affected students would organize, protest, and demand political intervention to restore their aid.

This political reality is why the Title IV nuclear option has never been used against a major university. The political costs of using it are enormous.

But the Trump administration has shown willingness to take politically controversial education policy actions. Whether they'd actually pull the Title IV trigger remains to be seen.

The investigations themselves create political pressure even without Title IV revocation. Universities face reputational damage and recruiting challenges just from being under investigation.

What Students Can Actually Do

Students affected by foreign funding investigations have limited but real options:

Stay informed: Follow investigation developments through university communications, Department of Education announcements, and media coverage.

Demand transparency: Push universities to publicly disclose investigation details, potential penalties, and contingency plans if Title IV eligibility were threatened.

Create pressure: Student government, campus media, and organized student groups can pressure administrations to prioritize protecting student aid access.

Communicate with officials: Contact senators and representatives expressing concern about potential aid loss due to university compliance failures.

Plan contingencies: Identify transfer options if Title IV eligibility appears threatened. Research private loan options as backup.

Document everything: Keep records of all financial aid, enrollment status, and university communications about investigations.

Organize collectively: Individual students have limited power. Organized student pressure can influence university and political responses.

Connect with media: Student voices describing potential aid loss carry weight in media coverage and political debates.

The reality is students have limited ability to influence outcomes. They didn't cause the compliance failures. They can't fix them. But they can make their voices heard in demanding that universities and policymakers protect student aid access.

The Injustice of It All

The Title IV threat reveals a fundamental injustice in how Section 117 enforcement works:

Universities make the decisions: Administrations decide whether to accurately and timely report foreign funding. They decide whether to accept controversial foreign money. They decide compliance priorities.

Students bear the consequences: When universities violate disclosure requirements, students—who had no say in these decisions—risk losing federal aid.

Wealthy students are protected: Students from families wealthy enough to not need federal aid would be unaffected by Title IV loss.

Vulnerable students are harmed: Low-income students, first-generation students, and middle-class students depending on federal aid would bear the full impact.

Universities face limited pain: Even if Title IV eligibility were revoked, universities would survive—diminished but intact. They could rebuild over time.

Students face permanent harm: Students forced to drop out or transfer due to aid loss might never complete degrees. The harm would be permanent.

The penalty structure incentivizes university compliance by threatening students. It's effective—universities desperately want to avoid Title IV loss specifically because of what it would do to students. But it's also profoundly unjust that students risk punishment for university failures.

The Likely Outcome

What will actually happen with Harvard, Penn, Berkeley, and Michigan?

Most likely scenario: Investigations conclude with findings of violations. Universities receive fines, enhanced monitoring requirements, and mandates to improve compliance systems. Title IV eligibility is not revoked. Students are not directly affected.

Less likely but possible: Violations are found to be so severe and persistent that Title IV eligibility is temporarily suspended—perhaps for new enrollments only, with current students grandfathered in. This would damage recruiting but spare current students.

Least likely but not impossible: Title IV eligibility is fully revoked. Students lose federal aid. The nuclear option is actually used. Political and legal battles ensue. Eventually eligibility is restored but not before causing major harm.

The Department of Education has strong incentive to find a middle path: Penalties severe enough to ensure compliance and deter other universities, but short of the nuclear option that would harm tens of thousands of innocent students.

But uncertainty remains. These investigations are unprecedented in scope at these institutions. The Trump administration's enforcement approach is more aggressive than previous administrations. And the violation evidence is substantial—$2 billion in late reporting plus whatever the investigations reveal about specific institutional failures.

Students can't assume their aid is safe just because Title IV revocation seems unlikely. They should monitor developments, plan contingencies, and make their voices heard demanding protection of their aid access.

The Reform That's Needed

The Title IV nuclear option creates perverse incentives and unjust outcomes. Reform is needed:

Graduated penalties: Create penalty structures that harm universities directly without threatening student aid—fines proportional to endowments, restrictions on accepting future foreign funding, mandated transparency measures.

Student protection: Explicitly protect current students' Title IV eligibility even if their institution violates Section 117. Only apply Title IV restrictions to future enrollments if penalties require enrollment-related sanctions.

Direct accountability: Hold individual administrators personally accountable for compliance failures rather than threatening institutions and their students.

Enhanced transparency: Require real-time public disclosure of foreign funding so violations are caught immediately rather than through post-facto investigations.

Proactive monitoring: Move from reactive investigations to proactive compliance monitoring with automatic penalties for late reporting.

These reforms would maintain strong incentives for compliance while protecting students from bearing the consequences of university failures they didn't cause.

Until such reforms occur, students at universities under investigation face the unacceptable reality: Their education depends on federal aid. Their university violated disclosure requirements. And they might lose their aid because of violations they had no part in.

The Bottom Line

Four universities—Harvard, Penn, Berkeley, Michigan—face federal investigations for violating foreign funding disclosure requirements.

The maximum penalty for Section 117 violations is loss of Title IV federal student aid eligibility.

If that penalty were imposed, thousands of students would lose Pell Grants, federal loans, and work-study funding.

Low-income students, first-generation students, and middle-class students would bear the full impact.

Wealthy students would be largely unaffected.

Universities made the decisions that led to investigations.

Students would pay the price.

The investigations will take months or years to resolve. The outcomes remain uncertain. But the potential consequences are clear: Title IV loss would devastate access for students who depend on federal aid to afford their education.

Students didn't violate disclosure requirements.

Students didn't hide $2 billion in late reporting.

Students didn't accept hundreds of millions from countries of concern without proper transparency.

But students would lose their financial aid if their universities' violations result in maximum penalties.

That's not justice. That's not proportionality. That's not how accountability should work.

But that's how Section 117 enforcement works under current law.

Your university broke foreign funding laws.

Now your financial aid might disappear.

The Department of Education investigations into Harvard, Penn, Berkeley, and Michigan are ongoing. None of the universities face imminent Title IV eligibility loss. Students currently enrolled continue to receive federal aid. The investigations' outcomes and any resulting penalties have not been announced.