The University’s expenses outpaced revenue in FY2025 by $22 million, following several years of a narrowing gap between revenue and expenses since FY2022, which experts in higher education said GW could have weathered for five to 10 years before the spending hurt its financial stability. Experts said the University’s financial position remains stable, and officials could have held off on implementing immediate cuts to combat its $24 million budget deficit as of July but were likely compelled to proceed in response to Trump’s policies, which have already begun impacting the University’s finances.
Chief Financial Officer Bruno Fernandes in July said the University has been working to address the structural deficit dating back to at least FY2022, but recent “macro-headwinds” caused officials to accelerate the process, like uncertain international student enrollment due to travel bans and visa processing policies.
“The difference is that we probably would have taken three years to start to address this,” Fernandes said in a July interview. “Unfortunately, we just don’t have that time, and so that’s why we’re accelerating some of these measures.”
University spokesperson Shannon McClendon said many factors contribute to the University’s structural deficit, including market pressures, students’ rising need for financial aid, inflation and economic uncertainty. She said officials’ work to address GW’s FY2026 budget deficit is “well underway” and progressing, with GW ahead of projections on spending reductions and revenue in line with expectations — though final figures are not yet available due to late enrollments and an increase in financial aid appeals.
McClendon said officials will provide an update on FY2026’s budget and efforts to reduce the University’s structural deficit before the end of the semester, though she didn’t specify whether officials would share what the current deficit stands at.
“In response, the university continues taking strategic, prudent measures to navigate both external challenges and GW’s specific financial issues to build financial resilience while remaining as transparent as possible,” McClendon said in an email.
Officials first announced in late April their plan to slash the University’s expense budget by 3 percent for FY2026 to combat “difficult and immediate budget challenges” and higher education headwinds. Officials said in the announcement that the cuts would address a structural deficit after GW’s expenses surpassed revenue in recent years, which created a “significant and unsustainable gap” that compounded annually.
In July, officials announced additional measures to combat its structural deficit — including a hiring freeze, limits to non-essential discretionary spending, voluntary temporary reductions to leaders’ salaries and a review of procurement contracts and capital expenditures, in addition to likely laying off staff and faculty. GW laid off 43 staff members on Sept. 30, with cuts spanning at least five schools and divisions and terminated the hiring freeze on Oct. 13 to revert to a position review process.
Joseph Cordes, co-chair of the Faculty Senate’s Fiscal Planning and Budgeting Committee, said the Board of Trustees wants the University to end each fiscal year with a small surplus so they have resources to reinvest in the University’s growth. He said officials want to go beyond breaking even every year in the event that officials spend more in the fiscal year than what they had budgeted for, causing them to run a deficit.
The University ended FY2022 with a $24 million surplus, which decreased to a $12 million surplus in FY2023. GW’s surplus rose in FY2024 to $18 million before reducing to a $22 million budget deficit in FY2025, per GW’s financial highlights website.
Cordes said Trump’s administration ultimately triggered the current changes the University is undergoing to combat its structural deficit because officials didn’t expect him to win re-election, which could have slowed officials’ response. He added the University is in a “solid” financial position to respond to the challenges it faces and recover from its deficit.
“The good news here is that I think the University is on top of the challenges and is taking steps now to figure out how to address them, but it will take time,” Cordes said.
Fernandes said in January 2024 officials aim to achieve a 2 percent “safe zone” between revenue and expenses each fiscal year, though they recorded a 1 percent difference between revenue and expenses in FY2023.
“If anything happens that is unforeseen, and then I like to say sometimes the wind blows in the wrong direction or something like that occurs, it doesn’t leave a lot of room for dealing with those things,” Fernandes said at the time.
GW’s operating margin was 2 percent in FY2022 before dropping to 1 percent in FY2023 and 1.4 percent in FY2024. The University ended FY2025 with a negative 1.6 percent margin.
Officials said in April the Board and University leadership set a goal to achieve an operating margin of 1 percent in FY2026 and 3 percent or higher operating margin within five years.
Cordes said all universities are experiencing what they call “headwinds,” including a demographic cliff and a drop in demand for graduate education that continue to persist. He said Trump’s policies led to a significant drop in enrollment for graduate and international students, who typically pay the full cost of tuition, including Trump’s travel bans, visa policies affecting international student enrollment and the termination and overhaul of graduate student loan programs.
“The prudent thing to do is not to have to do it at the end in a panic but to kind of do it in a deliberative way where you’re planning with the units, working with them,” Cordes said.
Robert Kelchen, a professor of higher education at the University of Tennessee, Knoxville, said the speed in which officials respond to a structural deficit depends on how long they think the deficit will last, adding that officials had the ability to wait and see if the deficit would go away before they implemented measures.
“With everything that’s happened in 2025 with threats to enrollment in revenue, that may have tipped the University to decide that this deficit is not going to go away on its own in a way that it may have in the past,” Kelchen said.
Kelchen said the budget reduction efforts officials implemented will help officials ensure the deficit doesn’t get deeper while also trying to close the deficit to break even. He said the University’s current financial standing gives it the possibility of running a deficit for five to 10 years before seeing “enormous” negative effects on its finances.
GW’s revenue growth averaged 6.1 percent while expenses grew at a rate of 6.8 percent from FY2022 to FY2024, officials said in July, adding that the gap’s cumulative effect is “unsustainable,” and the measures announced in April “will not be sufficient” to balance the budget.
“University leadership is also thinking about the next generation, and they would rather try to take some actions now to preserve the financial strength going forward, especially just given all of the uncertainties about federal funding and student enrollment going forward,” Kelchen said.
Howard Bunsis, an accounting professor at Eastern Michigan University, said universities coined the term “structural deficit” — as it’s not an accounting or financial term — to make it seem as though the University will suffer unless budget cuts are made, when in fact a university’s real financial status is reflected through financial statements and bond ratings.
Bunsis said while GW’s bond ratings “are not great,” the University is not in deep financial trouble. He said the University’s bond rating from Moody’s Investors Service and S&P Global Ratings isn’t the highest rating, but it’s far from the lowest rating.
Moody’s and S&P in reports released in May and August, respectively, affirmed GW’s strong credit rating but revised their outlook from stable to negative, citing the Medical Faculty Associates’ compounding losses as a key financial strain threatening its overall credit standing. S&P in their report said the University’s profits may not improve until FY2027 after accounting for its deficit.
Bunsis said the reports indicate that GW doesn’t have problems with its academic growth but rather from the MFA’s underperformance and dependence on its real estate portfolio.
“The problems that GW is having is because they think they’re a real estate company and they think — well I guess they are in some extent — they’re a hospital,” Bunsis said. “The academic side, the side that they claim needs to be cut, cut, cut, cut, cut is doing fine.”
Zoomel Ghauri and Juwon Kim contributed reporting.
