Swarthmore College adopts unusual three-month budget given federal funding uncertainty

Swarthmore College‘s board of managers has taken the unusual step of adopting a three-month budget for the next fiscal year given the uncertainty of federal policies, including a potential endowment tax increase that could cost the college an additional $18 million to $28 million.

The college also is concerned about the loss of international students under President Donald Trump‘s administration, which this week — after Swarthmore made its budget decision — attempted to ban Harvard University from enrolling international students and warned other schools they could be next. And the Trump administration has terminated several federally funded research grants, Swarthmore president Valerie Smith wrote in a letter to the campus community this week.

“In light of these financial uncertainties, and to avoid overcorrecting before we have a clearer picture of the conditions shaping the college’s finances, the board decided to move forward with an interim operating budget to carry us through the first three months of the new fiscal year,” Smith said.

» READ MORE: Penn, Bryn Mawr, Swarthmore warn increases in the endowment tax could harm financial aid, other programs

The college will look to adopt a more permanent spending plan in the fall, once the federal budget is set. The three-month budget starts when the new fiscal year begins July 1.

It’s the latest move by a local college to deal with fallout from new federal administration policies targeting higher education. Since Trump took office, some colleges have removed references to diversity efforts from their websites to comply with an executive order. Some campuses, including the University of Pennsylvania, have instituted hiring freezes or slowed hiring and reduced graduate student admissions.

» READ MORE: Penn faculty criticize university plan to reduce graduate admissions by a third in response to NIH funding cuts

Swarthmore, a highly selective private college with one of the biggest endowments in the region at $2.7 billion, has not frozen hiring, though promotions have been paused, Smith said. It also is delaying annual pay increases for faculty, staff, and student workers until the fall.

“This is not a pay freeze,” she said, “and I have made clear to the board my intent to prioritize pay increases when the full budget is addressed in the fall.”

Swarthmore is particularly concerned about a proposal that would raise the excise tax on endowment earnings, currently set at 1.4%, to 14%. At Swarthmore, endowment earnings fund more than half of the operating budget, which stands at about $220 million for 2024-25.

“For Swarthmore specifically, the proposed legislation would raise the tax Swarthmore pays from approximately $2 million a year to $20 million, or perhaps even $30 million annually,” Smith said.

The tax was enacted by Congress in 2017 during Trump’s first term as president, and proposals have been circulating to expand it to more colleges and increase the levy.

Locally, in addition to Swarthmore, only the University of Pennsylvania, Bryn Mawr College, and Princeton University — which has the largest endowment of the four at $34.1 billion — pay the tax. They meet the current threshold of having at least 500 tuition-paying students and an endowment that is larger than $500,000 per student. (Public colleges are exempt.)

Swarthmore also is worried about a potential loss of additional research funding and several million dollars in federal financial aid. College spokesperson Alisa Giardinelli said Smith was referring to potential reductions in federal Pell grants targeted toward lower-income students and work-study program funding.

Since the Trump administration began terminating some federal research grants at colleges, Swarthmore has lost three, totaling $865,794, and one faculty fellowship for $60,000, Giardinelli said.

Smith said the federal government’s threats to student visas could prevent some first-year international students from arriving on campus by the start of the fall semester. International students represent around 15% of Swarthmore‘s 1,730 students.

» READ MORE: Trump administration drops effort to revoke student visas, attorneys say, restoring study permission in Philly and elsewhere

The Trump administration earlier this year revoked permission to study in the United States for more than 1,800 international students. In some cases, the administration cited participation in pro-Palestinian protests, but in many others, the reasons for the revocation were unclear. Last month, the Trump administration reversed course on the revocations, allowing students to remain.

This week, the Trump administration announced it had revoked Harvard’s permission to enroll international students, a move the university has already begun to fight, filing a complaint and successfully getting a temporary restraining order Friday from a U.S. judge. Under the federal order, no new students would have been able to enroll and those already there would have had to transfer or lose their legal status, the Department of Homeland Security said in a news release.

Harvard, the department said, had allowed “anti-American, pro-terrorist agitators to harass and physically assault individuals, including many Jewish students.” More than a quarter of Harvard’s students are international.

And the department put other schools on notice they could be next.

“Let this serve as a warning to all universities and academic institutions across the country,” said Homeland Security Secretary Kristi Noem in a news release.

Harvard president Alan M. Garber in a statement called the move “unlawful and unwarranted.”

“It imperils the futures of thousands of students and scholars across Harvard and serves as a warning to countless others at colleges and universities throughout the country who have come to America to pursue their education and fulfill their dreams,” he said.