USC Imposes Hiring Limits, Budget Cuts as Questions Loom Over Federal Funding

The private university in Los Angeles received $1.35 billion in federal funding last year, including student aid and research grants.

The University of Southern California in Los Angeles on March 11, 2020. Frederic J. Brown/AFP via Getty Images

Facing federal funding uncertainty, the University of Southern California (USC) has restricted hiring and reduced budgets to increase its “financial resilience,” the private institution announced on March 24.

The Los Angeles university published a notice to staff outlining the planned steps to address an expected shortfall as the Trump administration slashes spending on government grants and other financial assistance. President Donald Trump also signed an executive order on March 20 to begin dismantling the U.S. Department of Education, moving its student loan processing responsibility to the Small Business Administration.

Last year, the university received about $1.35 billion in federal funding, including $650 million in student financial aid and $569 million for federally funded research, the school reported.

“Like other major research institutions, USC relies on significant amounts of federal funding to carry out our mission,” President Carol Folt and other senior staff wrote in an emailed notice to staff on Monday.

USC’s health system also gets Medicare, Medicaid, and Medi-Cal payments, which make up a “significant portion” of its revenue. Those funds are also uncertain, according to the school.

“Taking bold action now will help us meet the challenges facing us while protecting and advancing our important academic and research missions for generations to come,” officials wrote in the notice.

The average full-time student will pay nearly $100,000 for tuition, fees, housing, food, books and supplies, and transportation during the 2025

–26 school year, according to the financial aid department.

The university launched a financial planning and resilience initiative in 2024. At the time, USC said it had high student demand, increasing revenue from research and philanthropy, positive returns from its endowment, and strong bond ratings.

Even with more than a billion dollars in federal funding infusions, the school reported a deficit of $158 million for operating expenses for the fiscal year, which ran from July 1, 2023, to June 30, 2024.

The university had started cutting costs for its central administrative staff and the health system, including keeping administrative budgets flat except for merit increases. In 2024, USC asked all of its schools and administrative units to cut spending, according to the university.

The campus of the University of Southern California in Los Angeles on March 21, 2024. USC officials are taking several steps to reduce spending in light of expected federal funding cuts. Mario Tama/Getty Images

The university, however, spent $2.5 billion to cover COVID-related and legal expenses last year, USC reported.

Recent developments under the new Trump administration require the university to take more steps to increase its financial resilience “in the face of exceptional financial uncertainty,” USC wrote in Monday’s announcement.

USC immediately implemented several measures on Monday, including making permanent budget reductions for schools and administrative units.

The university also said contracts exceeding $50,000 need to be approved by the university’s senior vice president for finance and chief financial officer.

Capital spending will be reassessed to determine which projects can be paused or deferred, and discretionary expenses such as non-essential travel, conferences, and entertainment will be limited.

A hiring freeze was put in place for all staff positions, with very few exceptions, and faculty hiring was restricted for all schools. Another measure affecting employees was the cancellation of merit increases for last year, with some exceptions related to promotions, equity, or legal considerations.

The university is also canceling the extended winter break that allowed employees to take nearly two weeks off during the Christmas and New Year holidays.

“As things continue to evolve at the federal and local level, we will regularly assess how we are progressing and whether further actions or adjustments are needed,” USC senior officials announced on Monday.

USC’s decision to cut staff and spending followed a similar decision by the University of California system just days prior.

The University of California’s systemwide hiring freeze and budget cuts are expected to have a “particularly profound impact” on the university, according to its president, Michael Drake.