Dive Brief:
- The University of Pennsylvania is asking its schools and centers to reduce “certain expenditures” by 4% for the coming fiscal year as it adapts to federal policy changes, including higher endowment taxes and new student loan restrictions set to take effect this year.
- In a public message Thursday, senior university leaders pointed to budget measures taken throughout the year and said, “Penn is in a better financial position today than we anticipated a year ago — and without having taken the more stringent measures announced by some of our peer institutions.”
- But along with federal policy changes, legal, insurance and benefit expenses have increased faster than revenues, “adding to ongoing budget pressures,” the officials said.
Dive Insight:
Last March, Penn undertook a slew of budget-tightening measures as President Donald Trump’s administration upended research spending and many aspects of the federal government’s relationship with higher education.
Facing the National Institutes of Health’s effort to drastically cut funding for research overhead — which has since been struck down in court — the Ivy League institution froze staff hiring, limited faculty hires to those deemed “essential” by schools and cut noncompensation expenses by 5%.
With the passage of Republicans’ big tax and spending bill last year, the university is bracing for more financial disruption.
Penn’s endowment was valued at $24.8 billion as of last June. The institution’s latest enrollment figures, from fall 2024, put its student body at just over 29,100 students. Using those figures, Penn has roughly $850,000 of endowment dollars per student, which would place it in a 4% tax bracket for its endowment income under the new law. That’s up from the 1.4% rate Penn currently pays.
Projections from conservative think tank American Enterprise Institute put Penn’s tax bill at $58.5 million for fiscal 2026. The researchers estimate that will rise to $84.6 million by 2030.
The new law will also end the Grad PLUS loan program while capping lifetime federal student loan borrowing at $100,000 for graduate students and $200,000 for professional students. That could also have an impact on Penn, which had nearly 14,000 graduate and professional students in fall 2024.
For now, the university’s finances are strong. It reported an operating surplus of $856.7 million and total net assets of $33.9 billion for fiscal 2025. But as it braces for the costs of policy changes, Penn is tailoring its budget planning for more austerity. A university spokesperson declined to share more detail on the spending areas affected by the 4% cut for the next fiscal year.
“Penn has navigated many moments of uncertainty throughout its history, and we remain energized by and optimistic about the mission that we continue to advance together,” Penn Provost John Jackson Jr. and Executive Vice President Mark Dingfield said in a Thursday statement.
Trump’s first year back in office brought other fiscal challenges as well. The administration investigated Penn over the university’s past policies of allowing transgender women to play on sports teams aligning with their gender identity and soon hit the institution with a freeze of $175 million in research funding.
Penn went on to cut a deal with the administration to restore the funding in return for the university giving records, titles or other recognitions to cisgender women who lost to transgender women, among other concessions.
The administration also directly offered Penn priority in research funding through its higher education compact, which would have required colleges to make vast policy changes favored by the Trump administration to receive the funding privileges. But Penn rejected the compact, as did most other major research institutions approached by the government.
