Welcome to the Franklin’s Forum newsletter. The newsletter contains two sections. First, in The Key, we will explore and analyze one key issue affecting Penn, why it matters, and what it means for the university’s future. Next, in The Almanac, we’ll highlight recent developments in higher education and at Penn — giving you what matters most, without the noise.
The Key
Penn’s financial footing is being tested. At this week’s Penn Board of Trustees meeting, Executive Vice President Mark Dingfield warned of “considerable uncertainty regarding our core operating revenues” in fiscal years (FY) 2026 and 2027. The endowment, income, research, and tuition are all exposed to shifting federal policy.
Since President Donald Trump (W ‘68) assumed office this January, the financial environment for higher education has shifted drastically. In the first three parts of “Inside Penn: Two Years That Defined Our Campus,” we traced Penn’s upheaval from the fall of 2023 through fall of 2024, including rising antisemitism, leadership turnover, new protest rules, and the Penn administration’s quest to chart a new path for university policies and culture.
In this final installment, we examine how federal scrutiny of funding and compliance has impacted Penn’s environment since January.
Less funding, more pressure
When President Donald Trump (W’ 68) began his second term, the government moved quickly to reset its relationship with higher education. It began with a crackdown on diversity, equity, and inclusion (DEI) that we covered last week.
This was only the beginning of Penn’s challenges. In February, the National Institute of Health (NIH) imposed a nationwide 15% cap on indirect research cost reimbursement. Indirect costs (or Facilities and Administrative costs) cover the institutional overhead of scientific research. This traditionally includes some research support staff, lab space and equipment, general facilities costs (heating, electricity, etc.), and maintenance, but universities often use these funds flexibly to support university operations at their discretion.
Some institutions had previously been able to negotiate special, higher rates (Penn’s was 62.5%), so the across-the-board 15% cap put about $240 million in Penn’s annual funding at risk by replacing individual agreements with a single standard rate for all institutions. Alongside 12 other schools, Penn sued the NIH, alleging the new cap was “flagrantly unlawful.” The university warned of dire consequences for scientific research and the American public were the cuts to remain. (A court has since blocked the policy, but new legislation could revive a lower cap.)
Penn departments responded by limiting graduate school admissions and even rescinding some acceptances for the 2025-2026 school year. President Jameson sought to reassure the community that Penn was “acting to protect our missions, our operations, our people, and our values.”
To brace for further shocks, including proposed endowment taxes, Penn instituted precautionary measures: scrutinizing capital projects, freezing non-essential staff hiring and mid-year salary changes, limiting new faculty hiring, trimming non-compensation expenses by 5%, and reviewing restricted funding to “maximize support of current operations.”
$175 million frozen at Penn
In February, the White House had issued an executive order barring anyone born as male from competing in women’s sports, and the NCAA quickly updated its rules accordingly. However, transgender swimmer Lia Thomas (C ‘22) had competed for Penn’s women’s team for the 2021-2022 season under the previous NCAA rules. While Penn had avoided antisemitism-related federal funding freezes, the government froze $175 million in Penn’s federal funding over suspected violations of Title IX of the Education Amendments of 1972.
In April, the Department of Education found Penn in violation of Title IX after the university moved to dismiss a lawsuit by three of Thomas’s former teammates. The department proposed a resolution requiring Penn to issue a statement to the community about policy updates, remove Thomas’s women’s athletic records, and publish a formal apology to the women of the swim and dive team at the time.
On July 1st, Penn accepted the agreement, and its funding was restored. Reactions were mixed. The federal government praised Penn’s cooperation, hailing it as “a model for institutions that want to do right by their victims” and even suggested that Penn may “potentially receive funding previously allocated to peer institutions such as Harvard University.”
Some faculty groups criticized the school’s settlement, saying they were “furious” or “heartbroken.” Jameson and the board decided to prevent disruption of university operations and comply with federal requirements.
Funding restored, uncertainty remains
Even after resolving the Title XI dispute, financial pressures mounted. Congress passed the One Big Beautiful Bill Act, introducing an endowment tax expected to cost Penn over $350 million over the next five years. The university braced for further strain, including proposed caps on indirect research cost recovery by the Department of Defense and the National Science Foundation, lingering threats of similar limits from the NIH, a shrinking pool of federal research funds, and lower grant acceptance rates driven by new federal priorities. Penn also faced a federal investigation into alleged tuition price-fixing and a separate lawsuit challenging its Early Decision admissions practices.
To buffer against these risks, Penn secured three lines of credit totalling $500 million in June and a $300 million loan in August. The university hoped that more cash on hand could mean more stability. At this week’s Board of Trustees Budget and Finance Committee meeting, Executive Vice President Mark Dingfield reported that Penn’s debt for FY 2025 increased by $463 million, largely from these defensive moves.
This uncertainty is far from over. As we discussed a few weeks ago, President Jameson recently launched Penn Forward, in part to navigate the “rapidly shifting funding environment.” In the year ahead, the university must sustain its operations and protect its academic mission while confronting unpredictable financial headwinds. These tests will shape the university’s strength and independence for years to come, and Franklin’s Forum will guide alumni through these challenges so you can stay informed and engaged.
The Almanac
Non-tenure track faculty frustrated with their positions at Penn
Penn lecturers (non-tenure-track faculty) told The DP this week that many are worried about difficulty receiving healthcare benefits, limited governance representation, year-to-year employment uncertainty, and insufficient career advancement opportunities.
The Association of American University Professors (AAUP) claims lecturers now hold a majority of teaching positions at Penn, and a Penn Faculty Senate report released this summer highlighted lecturers’ lower pay and underrepresentation in the Senate.
Lecturer Rafael Khachaturian said the lack of lecturer representation “hurts students,” as their needs go unmet when their instructors lack governance input.
So what? Penn enrollment grew ~18% in the last 15 years, but Tenure-Stream faculty grew just 11% while non-tenure and support staff (including lecturers) increased 23%. This points to growth in administrative staff (flagged at this week’s Board of Trustees meeting, which we will cover next week) and increased reliance on lecturers for teaching. The potential effects cut both ways: reliance on lectures can dilute teaching quality (students may take fewer classes from seasoned professors), but it also offers Penn flexibility to experiment with curricular changes or shifting student interests.
Changes to H-1B visa requirements threaten further financial challenges for Penn
This year, Penn employed 227 H-1B staff, including in its health system, more than any other Ivy. Based on the 111 new visas issued for Penn this year, the school could face over $10 million in new annual fees. The number of new H-1B visas at Penn has stayed steady in recent years, but these new costs may soon influence hiring decisions.
So what? With finances under strain, Penn faces added pressure. There is already a difficult and expensive system for obtaining H-1B visas, and these new rules could shift hiring at Penn towards U.S. citizens and permanent residents. Visa barriers could also limit international Penn graduates’ U.S. job prospects, deterring foreign enrollment and reducing revenue for Penn long-term. The beginnings of this trend are hinted at in a 5% drop in international Wharton MBA enrollment for the class of 2027 compared to the last two years. These challenges will likely impact Penn Forward’s agenda.
Wharton Executive MBA students criticize potential AI usage, academic rigor, and value of their education
The EMBA program, recently rated the best in the country and generating over $50 million yearly in revenue from its ~200 person cohorts, impacts Penn’s finances and reputation. Yet a student told Poets & Quants, “if I had it to do over again, I would have gone elsewhere.” Many students also suspect AI was used in grading without being disclosed.
So what? Penn policy urges the entire community to be transparent about any use of AI. Over the past few years, Penn has adopted tools and guidance to encourage the responsible use of AI, with many professors changing class structure and grading procedures to account for AI usage. Student concerns highlight the need for clear university rules on AI to protect academic standards and trust.
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