The Crisis of the University Started Long Before Trump | Compact The Crisis of the University Started Long Before Trump | Compact
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In full disclosure, the author of the article is a University of Chicago professor.
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This was the eye-opening quote that grabbed my attention this morning:
“The University of Chicago has now borrowed $6.3 billion, more than 70 percent of the value of its endowment. The cost of servicing its debt is now 85 percent of the value of all undergraduate tuition. (This is not normal. No peer institution has a debt-to-asset ratio greater than 26 percent.)”
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Found this article that seems related from the Stanford Review:
“Yet these debates neglect the most important factor: the UChicago endowment’s weak returns, driven by poor investment decisions.
Possibly the most notorious example is the university’s foray into cryptocurrency. Four sources, as well as widespread campus rumors, allege that the university lost tens of millions investing in crypto around 2021. Given UChicago’s extraordinary 37.6% endowment gain that year, far beyond what conventional investments would have yielded, it’s likely they took significant risks. But if those gambles paid off in the short term, they quickly unraveled.
UChicago’s endowment remains lower today than in 2021.”
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Wasn’t Milton Friedman, leader of the Chicago School of Economics, on favpculty at the University of Chicago?
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That certainly paints a dire picture of what is happening at Chicago.
But the arguments as to the causes don’t make sense to me as stated. Basically, the author made a case that Chicago is in a uniquely bad financial position, but then cites as causes, “the Bayh-Dole Act of 1980 and the stunning change, which commenced largely in the same era, in which America began to conceive of education as a private, personal good, to be measured solely in terms of increase in lifetime earnings.”
But those causes apply to all other US research universities, not just Chicago. So while there may be more universal ill effects of those causes, how can they be the causes of Chicago’s demonstrably unique financial circumstances?
I think at most, the argument would have to be that Chicago reacted uniquely poorly to those changing conditions. And maybe that is true, and that could be a pretty interesting article. But I am not sure this article really got there.
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I never understood the interest in cryptocurrency. This is something that only has value because someone says it does, and more of them can be reproduced at will basically by anyone who understands the math. According to a quick Google search, there are thousands of cryptocurrencies in existence, and millions have been created.
I don’t get it, and never did get it.
I do not think that Milton Friedman would have approved.
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There are an unlimited number of different types of cryptocurrencies that can be created. There are tools online where anyone can create a crypto currencies in a few minutes. Most of these new currencies are worthless, but some of them have fluctuating prices because the creator gets people to buy them.
For example, there is a viral video about a 12 year old who livestreams creating a meme coin, seems really excited/surprised when people are reacting to his livestream and buying his new coin, and he’s making tens of thousands of $. Then a few minutes later, his voice and tone completely changes, and he says “thanks for the 20 bandos”, gives viewers the finger, and closes the video… cashing out his win/scam. The coin immediately crashes after he cashes out, becoming worthless. He apparently did (does) this same scam on a regular basis.
However, the most popular cryptocurrency has a limited supply. There are 21 million Bitcoins in existence. ~20 million of them have been mined. After the remaining ~1 million are mined, there will be no further Bitcoins. One review found that the majority of large hedge funds and large college endowments include Bitcoin in their balance sheets. For example, the article at Harvard’s Endowment Goes Big on Bitcoin and Gold in Second Quarter of 2025 | News | The Harvard Crimson mentions Harvard’s endowment investing over $100 million in Bitcoin earlier this year. It’s not just U Chicago.
I expect the interest primarily relates to Bitcoin having a higher annualized rate of gain since inception than any other publicly traded investment in history and continuing to go up (doubled in price over past year and hit record high a few days ago) in a way that not as well correlated with market as other alternative investments. Its high rate of increase probably has more to do with investor psychology and people investing because they believe it will go up (speculative bubble) than economic fundamentals, but that doesn’t mean that it’s not going to make money over the short term.
I think as a medium of exchange, some crypto currencies have found a viable market. But I have never been interested in speculative investment on currencies, so adding the word “crypto” didn’t change my level of interest.
There are people who want untraceable forms of currency. Whether they want it for benign reasons (don’t want a spouse seeing cash withdrawals, credit card charges, Venmo payments) or for nefarious reasons (crypto is now fueling illegal arms sales, human trafficking, child pornography), they want something with a veil of privacy. The Dark Web is filled with vendors selling pretty much anything (industrial quantities of fentanyl, for example) and Bitcoin or similar is how you pay for it.
Any type of asset is vulnerable to speculative investment- Tulip bulbs being a notable example from history.
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Today’s Financial Times discusses the University of Chicago’s dire financial situation. Subscribe to read
It says “UChicago’s budget deficit jumped tenfold between 2021 and 2024, sparking concerns over its financial health”. It was on my son’s list but we are removing it now.
Can’t read the link as it is paywalled.
I doubt the University of Chicago is going anywhere.
I’m wondering how much of this starts to feed on itself. My D19 is currently applying to grad schools, and the program cutbacks at Chicago are making her second-guess about applying there even though the program she’d apply to is still there and a friend of hers currently in grad school there loves it.
TBD whether or not she ends up applying, but she’s likely not the only one thinking like this.
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The only quibble I have with the article is that it touts Chicago’s impressive 80% yield rate as if it were evidence of something. All it evidences is the school’s massive overreliance on ED. Without that the yield would probably be sub-20%.
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UChicago’s yield was over 60% in 2016, the last year that UChicago had only EA and RD. It was higher than Princeton’s if I remember correctly.
Since then, yield has only risen for all such selective colleges. If UChicago had kept only EA and RD, it would likely be in the low 70s today.
My belief is that UChicago didn’t institute ED to improve yield, but to attract richer families.
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There have been warning bells about this for a while and the news thankfully was out this summer before even ED0 apps were due.
The student newspaper has been reporting too:
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I agree.
Dont full pay families help offset the cost for lower income students? There is a lot of pushback on full pay families getting an “advantage” in the ED admissions process and yet without them, the cost to other students would be much higher.
The reality is that ED helps attract full pay students and it gives colleges flexibility to accept to a wider range of students.
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Of potentiali nterest, the article reports an admission yield of closer to 90%:
“The vast majority who are admitted say yes, giving the university among the highest so-called yield rates in the country, at 88%.”
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