Can the Trump-Musk regime claw back funds already dispersed to universities?
An underappreciated risk to institutions of higher education
The ongoing attacks on higher education by the current administration are bad, really bad. So bad, I feel like I should be writing daily briefs and expressions of outrage. Instead, I share essays like this one by historians Jessica Riskin and Priya Satia and this one by a group of political scientists at Columbia that say what I dearly wish our chancellors and presidents were saying.
They aren’t saying much of anything, which is disappointing. I don’t see their silence as mere cowardice. I think they are overwhelmed by the tactical situation. After all, the jobs of a US senator and university president are not all that different. Like all of us, presidents and chancellors are only beginning to understand the damage to institutions and to people when grants, contracts, and other promised distributions of federal funds are canceled. Then, there is the chaos created by responding to threats of enforcement actions related to vague claims of antisemitism. Finally, there are threats barely recognized, much less understood.
Here is an example: the risk that the federal government will claw back funds already disbursed. In Rolling Stone and on his blog Notes on the Crises, Nathan Tankus raises the alarm and asks a fundamental question:
This story is about the truly electrifying and terrifying question: can the Trump administration arbitrarily take money from anyone for any reason using control of the payments system? If it can’t, what exactly are the current limits to what the Trump administration can do and how easy is it to break those limits?
As reported by Wired Magazine and other publications, Elon Musk and his small group have, to some unknown extent, taken direct control of the federal government’s computing systems in the Treasury and other departments. That is, in addition to issuing illegal orders and taking actions that run counter to the general welfare of the United States, the current regime has bypassed systems of control and oversight of the fiscal operations of the US government.
As detailed by Tankus, Musk used this power on February 11, 2025 to debit the “New York City’s ‘central treasury account’ for 80.5 million dollars.” This was funding dispersed to New York City through FEMA that had already been spent. This clawback of funds happened after Elon Musk tweeted accusations that NYC had used FEMA funds to pay for housing for illegal immigrants. Such alleged use of the funds was, according to the tweet, “in gross insubordination to the President’s executive order.” Musk went on to say, “A clawback demand will be made today to recoup those funds.”
The nature of the financial operations is complex, but Tankus’s analysis shows that this was not so much a demand as a decision “to reinterpret payment statutes in order to weaponize the Federal Government’s legal authority over the ACH system.” That system is the Automated Clearing House, which manages the electronic transfer of funds for the government. This “clawback process” runs counter to the regulations governing fiscal operations and to the way we understand electronic payments. Given what happened to New York City, it could be used against any state or local government, any contractors or non-government entity, or any individual who has received funds from the US government.
If the government believes funds have been used illegally or fraudulently, then it has recourse through the legal system to recover the funds. That is not what happened with New York City. Musk apparently has the power to claw back funds already paid, so what would stop him from using this power to punish any university the regime wants to target. They have singled out Columbia University by canceling already allocated funding. Next, it could claw back funding for programs and initiatives dispersed in previous years. There does not appear to be a way for a university, or for that matter a state or city government, to stop or appeal such an action.
The problem may not seem as dramatic as the abduction of Mahmoud Khalil. Mass arrests, a real and terrifying possibility, require mobilizing resources and planning logistics. There are well-understood ways to resist such actions. But if Musk, Trump, or someone acting under their authority can simply take money from any bank account it chooses, the regime’s power to coerce or destroy any actor they target is vastly expanded. Clawing back funds already dispersed would be a matter of keystrokes. It is not at all clear how or if a university or a state government could interrupt or stop such an action.
If you care to understand and keep up with the specifics of the “Trump-Musk Treasury Payments Crisis of 2025,” I strongly recommend subscribing to Notes on the Crises.
Tracking all that is happening is nearly impossible. That is, of course, intentional. The risk of clawbacks seems important enough to attend to, even though it is not clear whether it will be used against universities. This is why it feels important to raise awareness and encourage university and state officials to consider what actions they can take to protect their fiscal operations against this threat.
We may not have enough power to stop what’s happening. But we need to understand the full scope of what we are facing, both to resist the regime when we can and prepare to rebuild when it is time.
I often make the point on AI Log that new technology is adopted within a social context. The context right now is a full-blown crisis for higher education. This rightly overshadows questions about the educational value of AI. I will continue to write about AI, but I will also add my voice to the many voices raising alarm, organizing resistance, and trying to understand what is happening.
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