The University has announced that it is considering selling approximately $320 million of taxable bonds. The sale, first reported on by Bloomberg on Tuesday afternoon, follows the Trump administration’s freezing of several dozen Princeton research grants. The notice itself does not mention the funding cuts but states that the bonds will serve the University’s “general corporate purposes.”
The bonds, index-eligible with a maturity of five years, are a way for the University to raise short-term funds. The major credit-rating agencies rate University bonds AAA, the highest level of creditworthiness.
In the past five years, the Trustees of Princeton University have issued taxable bonds twice: once in 2020 with a $500 million sale, then again in 2022 with a $300 million sale. As a note, the former accompanied the COVID outbreaks in 2020, and the notice addresses the future of the University’s financial performance with respect to the pandemic.
The University also intermittently issues New Jersey Educational Facilities Authority (NJEFA) Revenue bonds, which are tax-exempt.
While Princeton has a $34 billion endowment, University President Christopher Eisgruber ’83 has said he is reluctant to dip into it “to pay for unexpected needs or special projects.”
According to Eisgruber, endowments are “nothing like a savings account” that can be drawn from easily due to factors including donor restrictions on funds’ use and the liquidity of investments.
In his State of the University Letter, Eisgruber wrote that “the gifts that create endowed funds almost always stipulate that they must be drawn down every year to support scholarships, professorships, or some other designated purpose.”
Eisgruber compared the endowment to “a retirement annuity that must provide income every year for the remainder of the owner’s life.” He explained that, like the yearly payouts of an annuity, the endowment pays out more than 5 percent of its value each year, to support University operations. The expenses include financial aid, faculty and staff salaries, and maintenance for all campus infrastructure.
In the same letter, Eisgruber also advocated against an expanded endowment tax given proposals circulated in Congress. The suspension of research grants to Princeton marks the federal government’s most aggressive challenge to the University, although the exact amount paused is unclear.
In the 2024 Fiscal Year, the University received $455 million in federal grants and contracts.
Coco Gong is a head Features editor for the ‘Prince.’
Please send any corrections to corrections[at]dailyprincetonian.com.
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