Colleges Face a Financial Reckoning. The University of Chicago Is Exhibit A. (WSJ)

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10/31/2025 00:28

Subject: Colleges Face a Financial Reckoning. The University of Chicago Is Exhibit A. (WSJ)

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Anonymous

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’s Investors 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.

Read more here: https://www.msn.com/en-us/money/markets/colleges-face-a-financial-reckoning-the-university-of-chicago-is-exhibit-a/ar-AA1Pxfrq?ocid=BingNewsBrowse