Princeton Theological Seminary (PTS) is considering a substantial reduction of its student body — by 30 to 40 percent — for a period of eight to ten years. Citing projected lower market returns in coming years, the 205-year-old institution is studying ways to cut costs, according to a letter from PTS President Craig Barnes to the Seminary community dated February 20, 2017.

“As you may know, our endowment provides nearly 70 percent of the annual income for our operating budget,” the letter reads. “This means that changes in market conditions can have a direct and significant impact upon our annual budget. Our investment advisors are projecting lower market returns in the coming years that could compromise our long-term financial health if we do not make significant changes now in the amount we spend each year from the endowment’s income (called the ‘endowment draw’).”

The letter goes on to say that the board of trustees has a goal of reducing the rate of the endowment draw from 4.89 percent to no more than 3.6 percent over the next several years. That is equivalent to $13 million each year from the current operating budget of $50 million. “That is a particularly challenging goal since we are already spending one percent of the draw paying for construction debt,” continues Mr. Barnes, who has been president of PTS since October 2013.

In 2014, the Seminary opened a new, lavish library, replacing the Speer Library that stood in its place. The three-story, 92,000-square-foot building is double the size of its predecessor.

A task force and campus master planning group have been studying ways to evaluate school facilities. At their January meeting, the board endorsed studying a proposal that would implement a comprehensive master plan for one campus in Princeton, build apartments on the main campus for married and single students (they are currently on separate campuses), renovate Hodge and Brown halls to include private bathrooms, replace or renovate the Mackay campus center, and renovate Alexander Hall as an “intellectual commons” with office space for the entire faculty and some administrative departments.

The proposal also suggests that the Seminary “monetize the CRW (Charlotte Rachel Wilson) and Witherspoon apartments, while retaining the Tennent-Roberts campus, in order to finance other campus improvements and reduce the endowment draw.”

Reducing the size of the student body would also have implications for the PTS workforce, but the letter says that downsizing would be accomplished through normal attrition and reconfiguring jobs, so “extensive layoffs are not part of this plan.”

Mr. Barnes concluded the letter by saying the PTS community would have several opportunities to provide feedback and submit comments. “I want to emphasize that this proposal needs a lot of work before we are certain of its viability, and we welcome your feedback in the process.”

Beth DeMauro, PTS director of communications and marketing, said in an email Monday, “The Seminary is in the early stages of long-range planning for its campus and facilities and is exploring various possibilities for enriching our residential model of student formation. As our plans become more concrete we will engage neighbors and community partners at the appropriate time.

“Princeton Seminary has been part of the Princeton community for over 200 years and remains committed to being a good neighbor for generations to come. The goal of our planning processes is to be faithful to our mission, ensuring the Seminary’s continued ability to shape current and future generations of servant leaders who will become pastors, chaplains, teachers, missionaries, professionals in the nonprofit or government sectors, and innovators of new forms of ministry in Princeton and across the globe.”