Yale College trims workforce by 7.5%: What you need to know about the US endowment tax impact

Yale College to trim staff by 7.5% as endowment tax pressures mount

In a significant move reflecting the financial strain on elite American universities, Yale College is set to reduce its staffing by approximately 7.5 percent, amounting to around 20 positions. The development was confirmed by Dean Pericles Lewis in an interview with Yale Daily News, which first reported the story. The decision comes amid growing fiscal pressures linked to the Trump administration’s hike in the federal tax on university endowment investment income.According to Yale officials, the staffing reduction is part of a broader cost-cutting effort aimed at balancing the College’s operating budget in the wake of changes to federal tax policy. While the University’s endowment remains among the largest in the world, the new tax regime is expected to significantly curb how much Yale can spend from it annually.Endowment Tax Hike Triggers Budget RecalibrationAt the heart of the issue is the increased federal tax on endowment investment returns. As per information available on the Office of the Provost’s website and cited by the Yale Daily News, the revised tax structure will reduce the University’s ability to draw from its roughly $44 billion endowment by 12.5 percent. University administrators have projected that the higher rate could cost Yale nearly $300 million.Dean Lewis told the Yale Daily News that the Yale College budget will see a corresponding 7.5 percent reduction. With the College’s operating budget currently at approximately $80 million for the academic year — separate from the $275 million annual financial aid budget overseen by his office — administrators have had to make difficult decisions.“The only way” to meet the mandated budget cut, Lewis said in the interview, was to reduce staff numbers.Vacancies Left Unfilled, Turnover Drives ReductionThe staffing contraction does not appear to stem from widespread layoffs. Instead, most of the shrinkage has resulted from natural attrition and unfilled vacancies. “The staff will be about 20 people smaller than it would have been. Most of that is people who have left,” Lewis told the Yale Daily News.He explained that junior staff often leave to pursue graduate studies, while senior staff may move to other roles within the University or seek opportunities elsewhere. Rather than replacing all departing personnel, the College has opted to leave several positions vacant.This measured approach aligns with earlier signals from the University that it would attempt to meet financial targets primarily through attrition, retirement incentives and the elimination of open posts.Hiring Pause and Retirement IncentivesThe staff reduction follows a series of cost-containment measures introduced last year. In anticipation of the increased 8 percent tax on endowment investment returns — scheduled to take effect in July — University administrators implemented a 90-day hiring pause, reduced non-salary expenditures by 5 percent, delayed construction projects and lowered annual salary increases for faculty and staff.Days before the hiring freeze expired in September, Lewis had told the Yale Daily News that staffing at Yale College was already “maybe 3 or 4 percent smaller,” by his rough estimate.In October, administrators rolled out a one-time retirement incentive programme targeted at certain managerial and professional staff. The deadline for opting into the programme was December 31, 2025. However, Lewis indicated that he could not specify how much of the 7.5 percent staffing decrease could be directly attributed to either the hiring freeze or the retirement incentive.University-Wide Impact Varies Across UnitsSenior administrators have underscored that the financial impact of the endowment tax will not be uniform across the University. In a joint statement to the Yale Daily News, Provost Scott Strobel and Vice President for Finance Stephen Murphy said that deans and unit heads had prepared multi-year budget plans tailored to their respective schools and departments.“These plans include budget reductions necessitated by the tax on Yale’s endowment income,” they wrote, noting that the extent of cuts would depend on each unit’s reliance on endowment support and its strategic priorities.A December communication signed by Strobel, Murphy and Senior Vice President for Operations Geoffrey Chatas warned that layoffs “may be necessary” if other cost-saving strategies fall short. The administrators pointed out that nearly two-thirds of the University’s expenses are tied to compensation and benefits, making personnel costs a central factor in any financial adjustment.University President Maurie McInnis also acknowledged in a December interview with the Yale Daily News that while the institution hoped to rely largely on attrition and retirement incentives, some units might eventually have to consider layoffs.Balancing Academic Priorities with Financial RealitiesFor Yale College, officials have emphasised that financial aid programming remains protected. The College’s operating budget cuts do not directly affect the separate financial aid allocation, which continues to exceed $275 million annually.Still, the reduction in staffing underscores the broader tension facing higher education institutions in the United States. Even universities with multi-billion-dollar endowments are not immune to federal policy shifts, especially when compensation and benefits form the bulk of operational spending.As reported by the Yale Daily News, administrators have pledged to maintain transparency through written updates, town halls and community meetings. For now, Yale College appears intent on managing the transition primarily through attrition rather than sweeping layoffs — but the coming months will reveal how sustainable that strategy proves in an era of tighter fiscal constraints.