Princeton U. Lays Off Staff, Freezes Salaries, As President Says More Cuts Are Coming

PRINCETON, NJ - Princeton University has frozen senior faculty salaries and cut departmental budgets campus-wide, President Christopher Eisgruber told the Princeton Municipal Council this week — and he warned it is just the beginning.

His remarks came days after the Daily Princetonian reported that the entire staff of the university's Keller Center for Innovation in Engineering Education had been laid off, the first mass termination of academic unit employees at Princeton in recent years.

The restructuring of the Keller Center resulted in nine layoffs. In a March 5 email to Keller Center-affiliated faculty, School of Engineering and Applied Science Dean Andrew Houck described the decision as a "very difficult" one taken to ensure the center's "long-term financial stability and strategic growth." The layoffs are effective two months after the announcement, The Prince reported.

The Keller Center layoffs are among the most visible signs yet of a financial squeeze Eisgruber has been warning about for months.

Tenured and senior faculty are receiving no raises this year. Staff raises are capped at 1 percent. Departments across campus have already absorbed budget cuts of 5 to 7 percent.

"We are going to have to make choices in different kinds of ways than we have made in the past," Eisgruber told council members on Monday. "We are going to experience that over the longer term, and we are experiencing it in the shorter term."

Rising healthcare costs have compounded the pressure, eating into compensation pools at a time when the university can no longer draw on surplus endowment returns to offset them.

"There might have been a time when Princeton would be able to draw on that difference between the 8 percent it needs to stay in stasis and higher returns to address that problem," Eisgruber told the council. "We cannot do that right now."

In his annual State of the University letter published Feb. 2, Eisgruber laid out the financial logic in stark terms. Princeton's endowment now funds roughly 65 percent of its operating budget — up from 55 percent in 2016 and just 15 percent in 1985. The university spends approximately 5 percent of the endowment each year, and needs average annual returns of at least 8% to sustain that model indefinitely.

For more than three decades, Princeton enjoyed returns well above that threshold. That margin is now gone. The university has cut its long-term return assumption from 10.2 percent to 8 percent, a change Eisgruber described as reflecting a structural, decades-long decline across university endowments nationwide.

"The difference between a 10.2 percent and an 8 percent return rate is very consequential," Eisgruber wrote. "Over a ten-year period, that reduction would amount to a cut of more than $11 billion — a reduction that exceeds the University's last two capital campaigns combined."

Despite the cuts, Eisgruber was emphatic that the university's core commitments will be preserved. Graduate stipends and undergraduate financial aid will continue to grow. The university's 4 percent annual voluntary contribution increase to the Municipality of Princeton, part of a five-year agreement running through 2028, will be honored.

"We are going to remain a very strong university financially," he said. "We are going to continue to be able to maintain our commitment to affordability and access. We are going to continue to be able to sustain excellence at the world-class level that Princeton University always aspires to achieve."

In his letter, Eisgruber described the path ahead as one of "efficiency and substitution rather than addition" — a fundamental shift from the mode of operation that has characterized Princeton for a generation.

Planning for the next phase of cuts will be led by Provost Jen Rexford and Executive Vice President Katie Callow-Wright, who will communicate further changes through town halls and written memos in the coming months.

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