Dive Brief:
- Princeton University leaders plan to tighten the institution’s budget as it faces declining investment returns in its endowment and federal policy changes, including a heightened endowment tax.
- “We will have to look for areas where we can consolidate or cut, both to offset rising costs (including salaries and benefits) and to support the investments required for teaching and research excellence,” Princeton President Christopher Eisgruber said in a public message Monday.
- Officials with the New Jersey Ivy League institution last year asked units universitywide to cut their budgets by 5% to 7%. Long-term trends “likely to require more targeted, and in some cases deeper, reductions over a multiyear period,” Eisgruber said.
Dive Insight:
Eisgruber told the Princeton community to expect budget cuts, left unspecified, beginning in the coming months and continuing over the coming years.
Provost Jen Rexford and Executive Vice President Katie Callow-Wright will lead the budget process, Eisgruber said. They are expected to provide information and seek feedback through public forums, the university’s governance process and community memos.
The university did not immediately respond to a request for more details about the reductions.
The forthcoming budget reductions will come after a decade of growth at Princeton. The era started with a 2016 strategic plan that led to expanded enrollment and programs, as well as an updated physical campus.
Just in recent years, Princeton opened more than a dozen new facilities, including a new art museum. The physical buildout accompanies a student body expansion, with fall headcount rising by nearly 12% to 9,137 students between 2016 and 2024, according to federal data.
“The pace of construction on campus over the past five years has been among the fastest in the University’s history, culminating in a joyous ribbon-cutting phase that has spanned the last two academic years,” Eisgruber said.
Much of that growth was fueled by Princeton’s endowment, which was the fifth largest among the country’s colleges, according to the latest data from the National Association of College and University Business Officers and asset management firm Commonfund.
At the end of fiscal 2025, the university’s endowment was valued at $35.7 billion, with a payout for the year of $1.8 billion. That represents a spending rate of a little over 5%, according to the university.
Eisgruber pointed out that the endowment’s contribution to Princeton’s operations has grown substantially over the years. In 1985, it accounted for some 15% of the university’s operating revenue. By 2016, endowment funds had grown to 55% of operating revenue. Over the next decade, that increased yet further to 65%.
“Endowment dependence is mostly an enviable blessing, not a burden,” Eisgruber said. “It dramatically reduces our reliance on tuition and fees, thereby making both undergraduate and graduate education more affordable.”
But all that cash comes from returns on the endowment’s investments. Eisgruber spent much of his public letter outlining how those returns have been slowing and are expected to slow further, which he attributed to changes in market fundamentals rather than Princeton’s investment choices.
The slowing growth has led Princeton leaders to budget for lower expected endowment returns — specifically 8%, down from 10.2%. That change could translate to an endowment worth $11.3 billion less in 10 years, with an annual payout that’s $500 million less.
“I want to be clear about this: Princeton continues to enjoy formidable financial and other strengths,” Eisgruber said. “We will, however, need to pursue our mission more efficiently, including through thoughtful decisions about when to eliminate or reduce existing programs.”
In addition to the investment challenges, Princeton also faces a higher tax on endowment income as Republicans’ big spending and tax bill takes effect this summer.
In fiscal 2024, Princeton’s endowment value per full-time equivalent student came to $3.8 million, higher than Harvard and Yale universities, which had the first and third largest endowments in the country, respectively. That would put Princeton in the new law’s highest tax bracket for endowment income, with an 8% rate.
The conservative American Enterprise Institute estimated Princeton’s fiscal 2026 tax bill at $217.4 million, and that could grow by nearly a third to $286.8 million by 2030.
