Princeton president says school will make cuts given ‘political threats’ to finances and endowment projections

Princeton University’s president, in a message to campus, said the school will take the unusual move of consolidation and cuts, given federal policy changes and “political threats” to its financial model, as well as lowered expectations about future endowment returns.

“Changed political and economic circumstances require that we transition from a period of exceptional growth to one defined by steadfast focus on core priorities,” Christopher Eisgruber wrote Monday in his annual message to campus. “That shift is necessary for multiple reasons, including because it will help Princeton to stand strong for its defining principles and against rising threats to academic freedom.”

The Ivy League university, he wrote, “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.”

» READ MORE: Penn says its finances are stronger than anticipated. More budget cuts are still coming.

Eisgruber’s announcement came days after the University of Pennsylvania announced it would institute another round of budget cuts in response to actions by President Donald Trump’s administration that threaten future funding and revenues, and because of rising legal and insurance expenses. The Trump administration has placed new caps on loans that graduate students can take out, temporarily paused student visa interviews, and sought to cut research funding to universities. Some colleges, including Penn and Princeton, also will see their endowment taxes rise.

Penn’s schools and centers were directed to cut 4% from certain expenses in the next fiscal year and keep in place financial cutbacks instituted last year, including a staff hiring freeze and freezes on midyear adjustments in staff salaries. Schools and centers also were asked last year to cut 5% of certain expenses, and the new 4% reduction would be on top of that.

The new Penn cuts come even though university officials said finances look better than they anticipated a year ago.

At Princeton, university officials also asked units across the school to make 5% to 7% cuts to their budgets over the last year, given an increase in the endowment tax that Princeton faces and federal threats to research funding. Eisgruber noted that the proceeds from its $36.4 billion endowment and sponsored research grants make up 83% of Princeton’s revenue.

The university’s endowment tax is scheduled to rise from 1.4% to 8% in 2026-27. (Penn’s tax on its $24.8 billion endowment is rising from 1.4% to 4%.)

Now, “more targeted, and in some cases deeper, reductions over a multiyear period” are likely required, Eisgruber wrote.

Last year, things were different.

In his 2025 message, Eisgruber noted that the school was “in the midst of an 18-month period in which the University will open more than a dozen substantial new facilities and spaces that enhance the University’s mission.”

Those include a new health center, a commons with a library, an art museum, student housing, and buildings that house an environmental institute and science and engineering programs.

“Princeton will continue to build, but more slowly in the years to come,” Eisgruber said in this week’s message. “Princeton will continue to evolve, but in the future it will more often have to do so through efficiency and substitution rather than addition. That will be a major change for most Princetonians, in comparison to not only the past five years but the last three decades.”

Princeton’s long-term endowment return assumptions have been lowered to 8% from 10.2% three years ago, Eisgruber wrote.

The university’s endowment returns in the three years following 2021 were “the second worst in more than four decades, better only than the returns in the years surrounding the Global Financial Crisis in 2008-09,” Eisgruber wrote. Two of those years saw negative returns.

Princeton spends about 5% of its endowment each year to support operations.

“An 8 percent return rate will require us to get the payout rate down below 5 percent even to cover payout plus inflation,” Eisgruber wrote.