2026 Annual Financial Update
Dear members of the Northwestern community,
Around this time last year, our annual financial message to the University community foreshadowed the uncertainty that lay ahead and promised to provide updates as events dictated. As we all know, 2025 turned out to be more turbulent — and more painful — than we could have imagined for Northwestern and our peers in higher education.
As we provide this year’s update, we recognize the strain the past year placed on our faculty, staff and students, and we express our deep appreciation to a community that has maintained the highest standards of excellence. We continue to educate the next generation of leaders and thinkers, produce outstanding research, advance critical academic initiatives, and earn recognition for our collective and individual accomplishments.
As you will read in more detail below, we are making faculty and staff raises our top institutional priority this year, and we are revisiting the change we made last summer to the enhanced employee tuition benefit. We understand how important these measures are to supporting you and our community.
Moving forward through FY 2026 and toward FY 2027, colleges and universities will continue to navigate unknowns. As we do so, our leadership team remains committed to providing updates to the University community as quickly and accurately as we are able via community messages, updates to our Responding to Federal Policies website and other appropriate outreach.
Financial performance
During Fiscal Year 2025 (FY 2025), the University saw modest revenue growth and encountered rising costs due to benefits expenses, litigation, new labor contracts and rapidly unfolding federal actions, including Executive Orders and agency policy changes. Despite mid-year cost-reduction measures that addressed financial pressures, including the elimination of 425 staff positions, FY 2025 ended with a negative operating result of $147.9 million, which included the impact of the University’s resolution agreement with the federal government and other legal settlements.
The University was additionally constrained when the majority of federal research funding was frozen in April until the agreement with the federal government was reached in November. To protect the research enterprise during the freeze, Northwestern leadership, with approval from the Board of Trustees, provided internal funding so projects subject to stop-work orders and the federal funding freeze could continue. When the freeze ended, the accrued cost of the internal support had reached approximately $350 million. About $330 million of those funds have now been restored by the federal government.
Endowment and opportunities
Despite the year’s financial challenges, FY 2025 included developments that highlight the opportunities that lie ahead.
Northwestern’s overall net assets increased 4% to $16.2 billion, driven by strong investment performance. Payout from the endowment, which largely is restricted for specific uses and not available for general expenses, continued as a stable funding source for the operating budget, supporting 22% of operating revenue.
Additionally, the number of major gift commitments of $100,000 or more reached the highest level in Northwestern’s history, marking a strong year of philanthropic support. In fact, FY 2025 was the second-highest fundraising year in total new gifts and commitments. Financial aid also increased by $20 million to $638.3 million, with most undergraduate students whose families make under $150,000 per year attending tuition-free.
Finally, investment in our physical campus continued, including the construction of the Kellogg School of Management’s Ann McIlrath Drake Executive Center; funding for advanced research equipment; the renovation of the Jacobs Center to create a social sciences and global affairs hub; the addition of Cohen Lawn near Lake Michigan; the creation of Luna’s Pub and Grill in Norris University Center; and construction for new and enhanced athletics facilities.
People and priorities
FY 2025 was a year of very difficult decisions that led to real impacts on our community — particularly faculty and staff. We often say that the people are what make Northwestern one of the world’s great institutions of higher education, and we are committed to backing up those words.
As we now engage in the process of financial planning for FY 2027, our top priority is increasing faculty and staff salaries with the start of the fiscal year in September. Once we have finalized our pool of funding for salary increases, we will focus on our strategy for targeted hiring to reinforce our institutional goals.
We also have received significant feedback about the change in the enhanced employee tuition benefit that was included in our summer cost-cutting measures. After additional internal dialogue, we have decided to reinstate the previous benefit for any employees hired before Jan. 1, 2026. That benefit provides a discount of 90% off tuition for undergraduate or graduate courses taken at Northwestern for employees making less than $100,000 during the calendar year and who have three years of service at the University. There is no limit on the annual discount. This change is effective immediately, and all tuition applications will be processed accordingly.
Confidence in our future
Once more, we commend our community of faculty, staff and students for your resilience. Despite the deep challenges of the past year, you have persevered, demonstrating each day an unrelenting commitment to Northwestern’s mission.
In the year ahead, the University will welcome a new provost and a new president. We encourage you to stay engaged in opportunities to shape Northwestern’s future such as the Presidential Search Committee listening sessions and support the transition to new leadership and new perspectives.
With the resolution of the federal research funding freeze, we look forward to strengthening the University’s financial position and partnering with your schools and units to ensure that together we continue to build upon the University’s important work and remind the world what makes Northwestern special.