University’s Investment Losses Spark Outrage, Resulting in Drastic Program Cuts

After raising tuition by more than 40% and expanding enrollment by a fifth (19.1%) since 2016—bringing in hundreds of millions more from students—the University of Chicago announced $100 million in emergency budget cuts as the campus reopened this fall, suspending 19 PhD programs and freezing faculty numbers.

The crisis at the elite university—home to 101 Nobel laureates whose departments often set the agenda for disciplines from economics to law—is a bitter byproduct of America’s ever-spiraling costs for students: Its top universities are often drowning in debt and making what critics say are reckless endowment bets while students mortgage their futures to fund institutions that somehow need more money than ever.

Why Students Are Paying More as Departments Get Cut

While administrators heaped blame on Trump administration policies—pointing to fewer international students, shrinking research grants, and potential Medicaid cuts to its hospital—the bigger story lies in years of dismal investment returns and borrowing that leveraged much of the university’s income. Financial statements reviewed by Investopedia reveal its endowment gains were half the national average the last couple of years, even as the market soared, following massive losses earlier in the decade. After betting on typically illiquid private equity assets, hedge funds, and even crypto—while piling on debt for expansion—the university itself is now stuck with more than $6 billion in liabilities, which rises to $8.75 billion once you count the UChicago’s medical center and marine biology lab.

Just servicing the university’s debt devours the equivalent of 85% of annual undergraduate tuition revenue, leaving students paying up to $71,325 this year to wonder whether they’re funding their education or the university’s financial mistakes.

“The university’s finances are in terrible shape,” Clifford Ando, a classics professor at the university, told Investopedia. While administrators point fingers at Washington, Ando sees a homegrown disaster: “The university simply refuses to discuss those aspects of the situation that result from actions by the university’s trustees—meaning both its overall indebtedness and its problematic investment strategies.”

Did You Say Crypto?

The University of Chicago—whose economists have spent decades warning about speculative bubbles—quietly added digital assets to its endowment portfolio starting in 2021. When asked about a Stanford Review article that claimed the university had “lost tens of millions” on crypto investments, a university statement to Investopedia insisted, “The University of Chicago has not lost money on cryptocurrency investments.”

The university’s own audited financial statements have raised such questions. Cryptocurrency holdings first appeared in its audited filings in 2021, described as “investments in cryptocurrency reported at fair market value.” The allocation, estimated at around $64.5 million in 2021, was disclosed in a year when bitcoin fluctuated between about $30,000 and $60,000—a volatile asset by any measure. By the following year, the start of the so-called “crypto winter,” the statements referred to cryptocurrency holdings that had dropped in value to about $45.5 million. Yet, in the 2023 financial statements, references to them disappeared, including a typically pro forma restatement of 2022’s figures that had mentioned them the previous year—suggesting the university either sold or wrote down its position.

Endowments Turn to Alternative Investments

Though a comparatively small part of UChicago’s endowment, critics say the crypto bet exemplifies a broader pattern of chasing trends at the worst possible moment. The university doubled down on private equity allocations over the past decade, reaching $2.9 billion by 2023, nearly a quarter of its portfolio, just as that sector faced liquidity crunches and declining returns—problems that haven’t gone away. While unfunded commitments are typical in private-equity investing, UChicago’s have nearly doubled—from about $1.24 billion in 2017 to $2.32 billion in 2024—leaving it on the hook for capital calls that won’t pause in a market downturn and could force asset sales or costly short-term borrowing in a cash crunch. It also increased its massive hedge fund exposure to $2.3 billion while reducing its bond investments to under 8% of assets, removing the ballast that could have softened losses. Meanwhile, it has borrowed extensively for expansion projects, particularly for its hospital system, including its major acquisition of AdventHealth facilities in 2022.

“The University’s investment goal is to supply a steady source of income to help support University programs over the long term, to safeguard the future of the University,” its statement to Investopedia reads. “University investments are diversified to offer the potential for gains while mitigating investment risks.”

Nevertheless, the results are clear: an endowment that often significantly trails its peers while piling on debt whose repayment hinges on UChicago’s hospital growth delivering as promised. The irony is excruciating for a university that helped create modern portfolio theory and the efficient market hypothesis.

More importantly, UChicago is not alone in turning to riskier alternative investments in recent decades. For much of the 20th century, university endowments held most of their funds in bonds. By the 1970s, they had dropped to about a third of their holdings, a figure that was down to about 10% in the last decade, while investments in private equity, hedge funds, and other alternatives took their place. As a National Association of College and University Business Officers historical report put it a few years ago, alternative assets had gone from “fringe to foundational” in universities’ holdings.

The Student Cost

For students, the university’s financial turmoil could reshape their education. “Among the people I talk to, the mood varies between fearful and resigned,” Ando said. “It is fearful among people who suspect their disciplines and departments are the target of cuts.”

Faculty hiring will be frozen at “replacement levels,” focused “primarily at the assistant professor level”—meaning senior expertise could gradually drain away. After undergraduate enrollment has already doubled in recent decades, the university plans another expansion, from 7,400 to 9,000 students, while keeping faculty headcount flat. That will likely accelerate the drop-off in the faculty-student ratio, even as UChicago president Paul Alivisatos has insisted the university will be “augmenting direct faculty teaching engagement in the College” despite the cuts. There’s reason to think otherwise: One dean reportedly suggested filling gaps by sending students to cheaper local schools—or even to use ChatGPT—for courses the university no longer wishes to fund.

The Bottom Line

The University of Chicago’s financial problems aren’t just one institution’s failure, but reflect a broader trend among American colleges, critics say, more focused on often risky endowment strategies and billion-dollar borrowing than on delivering affordable, high-quality education to students with spiraling debt. The result: suspended PhD programs, flat faculty hiring, and warnings that students may need to fight for the quality of their own degrees. “The university will listen to students,” Ando said. “They need to press the university to live up to its ideals, for themselves and for future generations.”