Princeton University is predicting a drop of 25% in the value of its endowment for the latest fiscal year, and administrators are making some tough decisions to deal with shortfall.

According to The Wall Street Journal (subscription required), the university will cut expenses by capping raises for its highest-paid employees at $2,000 and reducing administrative budgets by 5%. Princeton will also look more carefully at any new hiring decision and defer capital projects to save more than $300 million over 10 years.

To its credit, Princeton is managing to combine the plunge in the endowment with a cost of attendance increase of just 2.9% -- its smallest increase in 43 years. Granted the school tips the scales at $45,695 per year, but a slow in the rate of increase is a start.

Hopefully other colleges grappling with declining state aid or tanking endowments will recognize that now is not the time for big hikes in student costs. They need to find a way to do something that hasn't been done in academia in a long time: Cut costs!

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