The school that produced Milton Friedman and 34 other Nobel Prize-winning economists is struggling to manage its pocketbook.
The University of Chicago ran budget deficits for 14 years straight, spending big on new labs, dorms and technology to raise its profile and enrollment. Now it’s facing a financial reckoning.
Over the summer, university leaders said they needed to cut $100 million in expenses. They decided to slow tenure-track hiring, scale back new construction and pause admissions to nearly 20 Ph.D. programs for a year. They’ve been aggressively fundraising and soft launched a new capital campaign.
By the time freshmen arrived in September with their minifridges and extra-long sheets, disgruntled faculty and graduate students had printed up flyers. Families—many paying $71,000 a year—were handed a paper that read “UChicago: Spending Your Tuition On Its Mistakes.”
The university is an acute example of the financial woes plaguing higher education. Even before President Trump’s federal funding cuts, many schools were already stretched by years of competitive spending. Their budget struggles are in many cases more than a decade in the making, and it’s not just far-flung state universities or D-list private colleges suffering.
As schools scramble to make cutbacks, they face broader questions about what kind of university they can be in this new era of financial constraint.
“Our president kept saying we’ll get ‘sharper,’” said Gabe Winant, an associate history professor at UChicago. “How does something get sharper? You file away at it.”
In the years leading up to the pandemic, low interest rates fueled borrowing binges across higher education to build snazzy academic buildings and dorms. UChicago and other schools also pushed into private equity and other alternative assets, hoping for big returns but tying up money in long-term investments even as cash grew tight.
Back-to-back years of blockbuster market performance haven’t solved the problem. Moody’sInvestors Service now rates the general outlook for higher-education bonds “negative,” while Fitch Ratings deems the sector “deteriorating.” Across the country, administrators are working to right the financial ship.
New York University recently issued more than a billion dollars in bonds, swelling its debt load even as its fundraising capabilities—in S&P Global’s view—remain “modest relative to its size.” The University of Southern California is running deficits as it manages an increase in student aid and other costs. The school has paused some hiring and merit-pay raises and tightened spending on travel and other areas.
Swarthmore, a selective college in Pennsylvania, is in danger of losing its AAA rating from S&P as debt mounts and expenses rise due to inflation and increased salary costs. A school spokeswoman noted that Moody’s, which also rated Swarthmore AAA, gave the school a stable outlook and both ratings firms cited its overall strong financial performance.
John Boyer, who served as dean of UChicago’s undergraduate college from 1992 to 2023 and wrote a history of the university, said the spending spree was aimed at positioning the institution for the future.
“I’m convinced 30 years from now people will see those investments as very wise and forward-thinking,” Boyer said.
‘Nobody plans to run deficits forever’
The University of Chicago’s hard-grinding reputation earned it the unofficial slogan “Where fun comes to die.” About 20 years ago, the school started trying to become a more inviting place.
It was the mid-2000s, the housing market was booming, and the incoming president, mathematician Robert Zimmer, was a master fundraiser deeply invested in UChicago’s profile on a global stage. Zimmer, who died in 2023, would lead the school until 2021.
UChicago built new dormitories, dining areas, a new library and an arts center that takes up a whole city block. The school also worked to burnish its reputation in harder sciences, building a molecular engineering program from scratch and a 10-story state-of-the-art biomedical research center.
It worked: The undergraduate student body grew from 3,500 students in the 1990s to its current size of about 7,500. The acceptance rate plummeted from around 70% to an exclusive less than 5% in the same time frame. The vast majority who are admitted say yes, giving the university among the highest so-called yield rates in the country, at 88%.
The current financial duress hasn’t directly affected undergrads, student leaders said, though the future of graduate programs and the university’s principles does color campus conversations.
University of Chicago operating budget
Expenses
Revenue
$3.4 billion
Expenses exceeded revenue
3.0
2.6
2.2
1.8
1.4
Revenue exceeded expenses
1.0
2010
’12
’14
’16
’18
’20
’22
’24
Note: Deficit amount for 2025 not yet available
Source: the school's annual financial statements
Rosie Ettenheim/WSJ
But all those new buildings were costly.
For much of the 2010s, the university issued hundreds of millions of dollars worth of bonds a year. It sometimes passed up the below-market interest rates reserved for nonprofit infrastructure projects in favor of often more-expensive borrowing that can be used to make debt payments or cover operating costs, according to bond filings.
Some of the borrowing financed projects that don’t qualify for the lower nonprofit rates, UChicago said, such as the business school’s Hong Kong campus and a renovation of the university’s Rockefeller Chapel.
The school also increased what it charged students, in step with other private colleges. UChicago’s tuition and fees have doubled over the past two decades, an increase of about 30% when adjusted for inflation.
Endowment returns, meanwhile, were underwhelming—at least compared with elite peers. For the 20 years ending in 2024, UChicago reported earning an annualized 8.2%, compared with a 9.2% average for a group of 10 Ivies and other top schools calculated by Markov Processes International, a financial-technology company.
In a Q&A posted this fall, the university said it took a conservative stance following the 2008 financial crisis that resulted in lower returns in boom times and higher ones in downturns. But in 2022, when endowments declined at almost all of the 10 schools tracked by Markov, UChicago still ranked near the bottom.
Like at those elite peers, private equity and other less-liquid assets created additional strain. Private-markets fund managers can request hundreds of millions of dollars of previously committed cash at any time, a tricky reality to navigate when cash is tight.
At UChicago, that cordoned-off cash has doubled over the past decade to $2.3 billion, according to the school’s 2024 financial statements. A spokesman said the university has strategies in place to make sure enough liquidity is available.
Other long-term shifts in higher education weighed on the budget.
Over the past half-century it became standard for doctoral programs at elite institutions to offer full scholarships and modest stipends. Before that, Ph.D.s were far less accessible to students who lacked an independent source of tuition and living expenses. Compensation costs for staff and tenured faculty grew, too.
By the time Zimmer stepped aside in 2021 following brain-tumor surgery, a changing economic environment was pushing the school’s mounting financial problems into the spotlight.
A tuition freeze during the pandemic had dented revenues. Inflation drove up labor costs and deepened the school’s annual deficit. Higher interest rates meant to tame inflation made debt harder to manage.
As the 2023-24 school year wrapped up, UChicago rolled borrowing going back 20 years into a billion-dollar bond issue, its biggest ever, bond filings show. The school has as much debt as Princeton or Yale—even though it had less than half those schools’ assets, according to all three schools’ 2024 financial statements.
In fall 2024, Zimmer’s successor, Paul Alivisatos, announced a four-year plan to eliminate a $288 million shortfall in the $3.3 billion university budget.
The university added the other $100 million in cuts this summer after the Trump administration said it would pull grants at UChicago and made moves to drastically cut reimbursement rates for scientific research at universities nationwide.
UChicago, which has prided itself on a campus culture that fosters a range of political perspectives, has avoided the kind of Trump scrutiny faced by universities like Harvard and Columbia. Even so, it lost about 65 federal grants. UChicago also stands to lose significant revenue if full-tuition-paying international students, who make up the bulk of some of its master’s degree programs, choose to study outside the U.S. amid the uncertain landscape here.
The cuts, combined with aggressive fundraising, have earned the school a stable outlook from Moody’s despite its outsize debt load. UChicago raised an annual average of about $760 million in 2022, 2023 and 2024, according to Moody’s. The school said it raised more than $1 billion this year.
UChicago is also in the quiet phase of a new capital campaign, a person familiar with the matter said. The last capital campaign raised more than $5 billion.
Its debt load will remain a burden for years to come. Principal payments on the school’s roughly $4.5 billion in outstanding bonds are expected to more than double by 2029.
University officials said the increase is manageable, adding that investments have grown faster than the debt over the past few years.
Provost Katherine Baicker said the school has made significant progress toward a balanced budget; it shaved its deficit down by more than the planned 25% in fiscal 2025, the first year of its four-year deficit reduction plan.
“Nobody plans to run deficits forever,” Baicker said, adding that the investments were aimed at increasing the university’s academic eminence.
Now, the school is focused on the financial stability and sustainability of its programs. “We’re making a really important effort with our faculty to prioritize the areas where we’re having the biggest impact,” Baicker said.
Winant, a leader in faculty organizing, said he and colleagues have bristled at the description of the deficit as always being part of the plan but also now an emergency.
“Both things cannot be true,” he said.
Defining the future
In the humanities division, the cutbacks mean the school is pausing Ph.D. admissions for a year in disciplines like comparative literature, Germanic studies and art history. The pullback has many faculty questioning whether the vitality of their disciplines will survive.
When Carolina López-Ruiz received an offer to teach religion and classics at UChicago in 2022, she didn’t hesitate. She had moved from Spain to earn her Ph.D. at the school before spending 17 years at Ohio State University. When she returned to her alma mater, it seemed to be thriving.
A few years later, the extent of its debt and budget issues became a talking point among faculty and graduate students, with some professors writing op-eds in local and university press to sound the alarm. A rally this month organized by the graduate student union and faculty groups drew well over 100 people despite drizzling rain. Signs proclaimed “Down With the Board of Butchers” and dubbed the school “DOGE University,” a reference to Trump’s cost-cutting Department of Government Efficiency.
For López-Ruiz, reality set in this summer when, instead of having time to catch up on her research of ancient Mediterranean cultures, she found herself sitting in weeks of meetings.
The dean of the arts and humanities division, Deborah Nelson, commissioned groups to study the future of graduate programs and languages, divisional organization and undergraduate teaching. López-Ruiz, who chairs the classics department, landed on a committee looking at what to do with the more than 50 languages offered.
Emotions ran high, she said, and faculty focused on proposals to define the division’s future before administrators made decisions for them. They tried to keep the big picture in mind: “We have all this treasure of language instruction,” López-Ruiz said. “If we don’t preserve it, who is going to?”
The committee concluded no languages should be cut, suggesting instead ways to boost enrollment.
But as the committees met, Nelson, the humanities dean, announced that eight departments would halt Ph.D. admissions for a year. A faculty committee insisted other departments, like English and linguistics, be included too out of solidarity. Leadership acquiesced, putting a near-total pause on humanities Ph.D. applications this fall.
Some humanities faculty worry the pause will have a lasting impact. Will prospective students write off UChicago? What about the doctoral students starting this fall, who won’t have any colleagues joining them for collaboration and class discussions? At what point does a Ph.D. program become too small to function?
The university has said it plans to shrink the number of doctoral students it funds by 30% by 2030. “It’s not sufficient to just keep doing what you were doing before, because the field evolves and the world evolves,” Baicker, the provost, said of the humanities changes.
At the heart of the debate is whether such programs should be judged based on graduates’ future employment prospects, or by the creation of knowledge.
“I don’t think the goal of doctoral education should be academic jobs for everyone,” said Clifford Ando, a classics professor.
All told, the changes are moving UChicago to what Ando sees as a place where graduate education is de-emphasized, the undergraduate college is expanding and more students are taught by cheaper, non-tenure-track faculty. A spokesman said the university is dedicated to the central role of tenure-track faculty but draws on a wide set of talent to complement course offerings.
Ando thinks all research universities need to come to terms with what they’re selling and whether it still makes sense.
“If we’ve changed our core values,” he said, “we haven’t fessed up to that.”
