By Matthew Hersh
Princeton University intends to reduce employee benefits and slow wage compensation for non-union employees following its announcement that the University’s long-term political and economic prospects could result in “targeted” and “deeper” reductions over a multiyear period.
Princeton University President Christopher L. Eisgruber announced last month in a “State of the University” letter to students that the financial impact would “affect everyone on campus.”
In Eisgruber’s economic assessment of the University’s short- and long-term goals, 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 benefits and wage reductions were first reported in The Daily Princetonian.
The move, while not unexpected, comes at a time of long-term fiscal uncertainty for the University and other colleges and universities around the country.
“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 in his State of the University address.
In a February 18 memo to employees provided by the University to Town Topics, University Provost Jennifer Rexford and Executive Vice President Katie Callow-Wright noted the change in pay increases. “As shared with staff, faculty, and academic professionals last week, pay increases will be smaller than usual next year for most faculty and staff; senior faculty and cabinet officers will receive no ordinary pay increases. In town halls with administrators and faculty, we also previewed forthcoming changes to the University’s benefits offerings. Both of these steps have been made necessary by dramatically rising costs of medical and prescription benefits here and nationwide,” they wrote.
Slowed endowment growth affects the University’s long-term endowment return assumption to 8 percent, down from 10.2 percent, representing a projected $11 billion difference over a decade.
“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,” Eisgruber wrote in February, 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.
University benefits reductions and cost considerations have included a reduction in long-term disability, with higher-wage employees required to purchase an optional buy-up plan to maintain any gaps in coverage; a 9 percent increase in healthcare rates; adjustments to high-deductible plans; faculty and non-union staff raise reductions; and a drop in student worker pay to reflect reductions in estimated work hours, despite an increase in hourly pay.
“The University continues to operate from a position of financial strength,” Rexford and Callow-Wright said in their February 18 memo. While they noted that the University would continue making ongoing investments to advance strategic priorities and to preserve the University’s core mission, cost-cutting measures would be a reality in the years to come.
“We will nonetheless be in cost-cutting mode for the foreseeable future, to ensure that Princeton can continue to attract and support the most talented faculty and students from all backgrounds, to deliver research and teaching of unsurpassed quality, and to remain steadfast in our commitment to academic freedom,” they said.
The University has launched a multiyear effort to “review and restructure operations, services, and programs to reduce costs, increase efficiency, and support critical areas of the budget that must grow faster,” Rexford and Callow-Wright wrote, adding that “overall headcount at the University will decline as we reallocate resources to protect our highest priority areas.”
Significant reductions are also being made to the Capital Plan as well, Rexford and Callow-Wright said, echoing Eisgruber’s announcement last month that the University would move 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.
Rexford and Callow-Wright pointed to academic and administrative leadership as among those reviewing and restructuring operations and programs in line with budget forecasts. They noted that advisory groups of staff and faculty are providing feedback on potential changes to benefits plans.
Updated March 8.