By Matthew Hersh
Long-term political and economic prospects could quell Princeton’s developmental future, with Princeton University President Christopher L. Eisgruber warning that more “targeted” and “deeper” reductions will be necessary over a multiyear period, reductions that he noted will “affect everyone on campus.”
Eisgruber’s economic assessment of the University’s short- and long-term goals was outlined in a February 2 “State of the University” letter to students, where he emphasized a shift toward consolidation and away from expansion, budget limitations and obstacles, navigating political threats, and preserving a commitment to free speech.
“The University’s reliance on its endowment has grown dramatically over time. Endowment payout provided about 15 percent of the University’s operating revenue in 1985. In 2016, when the Board published the University’s strategic framework, the endowment supplied 55 percent of Princeton’s operating revenue. Ten years later, that number stands at 65 percent,” said Eisgruber, noting that the endowment, which was roughly $36.4 billion as of June 2025 according to University investment arm, PRINCO, is subject to the same declining long-term return expectations.
“Princeton needs to transition from growth to focus because long-term rates of return are steadily declining across university endowments. This decline has been hard to see because returns have been volatile. In other words, returns have not been a steady 8 percent or 10 percent; instead, they have been all over the map,” Eisgruber wrote.
The University is also moving away from the rapid physical development and growth seen over the last decade, as outlined in its campus plan, released in 2017. Eisgruber characterized this as a transition toward a period of strategic consolidation, focusing on maintaining current excellence rather than further expansion.
“Princeton will continue to build, but more slowly in the years to come. I expect that observation will disappoint some readers, but it may come as a relief to others who had to wend their way around multiple construction projects on the central campus over the past five years,” he wrote.
Eisgruber pointed to several areas where external pressures continue to threaten the University’s financial and academic model, including a new endowment tax enacted through the federal One Big Beautiful Bill Act, which imposes an 8 percent tax on large endowments. Princeton may currently be exempt due to its high number of students receiving full financial aid, but the threat remains, Eisgruber noted.
Other affected areas include research and policy, with Eisgruber warning of threats to federal research funding, immigration status for community members, and diversity and inclusion programs.
“We face political threats to our financial model along with the economic ones that I have discussed thus far,” Eisgruber wrote. “Over the past year, we asked units across the University to make 5 to 7 percent cuts to their budgets so that we could maximize support for key priorities amidst uncertainty about federal funding, endowment taxes, and other federal policies.”
The letter emphasized that free speech and academic freedom are essential to the University. Eisgruber shared data showing an increase in student confidence regarding “civil and respectful dialogue,” with 70 percent of undergraduates agreeing that the community engages respectfully on difficult topics in 2025.
“Free speech and academic freedom are complementary principles; both are essential to the life of a great university. It is academic freedom, however, that ultimately guarantees faculty members here and elsewhere the freedom to seek knowledge even when doing so may anger officials, disrupt industries, upset orthodoxies, or inflame controversies,” Eisgruber stated.
“Research universities depend upon the capacity to pursue uncomfortable truths and publish controversial ideas. American universities have become world leaders in no small part because they have insisted on academic freedom and because our governments have, for the most part, respected it. If universities cede that right, they compromise not only their own missions but also the vital contributions they make to our country’s health, culture, prosperity, and security,” he wrote.
For the full text of Eisgruber’s “State of the University” letter, visit princeton.edu.