The University's debt has risen by almost $500 million over the past decade, largely to finance infrastructure improvements on campus, according to Beppie Huidekoper, executive vice president for finance and administration. The accumulation of debt is part of a broader trend in higher education, and Brown plans to borrow more in the coming years, Huidekoper said.
In 2000, the University's debt stood at $115 million. This figure has since increased about six-fold — to $609 million.
Administrators in 2000 saw a need to repair infrastructure flaws they viewed as liabilities. The University decided to fund these projects largely through debt, Huidekoper said.
Universities and other non-profits began accumulating large amounts of debt about 40 years ago, when the government began to incentivize borrowing as a means to fund institutional growth. For example, the federal government began to pay debt services on certain university-held loans in the 1970s to promote research expansion, Huidekoper said.
"The longer-term trend is that borrowing has increased, but most of the borrowing increased in the past 15 years," said John Nelson, managing director for higher education and nonprofits at Moody's Corporation.
The period from 1994 to 2008 was a "golden era" for higher education, he said. "Everything was moving in the same direction and people became very optimistic about the future."
"Interest rates were very low, demand for higher ed was rising during that period and the stock market did very well," he added.
Though universities borrowed heavily during this time-span, "if you just dial the clock back a decade or 15 years before that, they went through a long period of austerity," he said. In the 1980s and early 1990s, universities tended to defer maintenance and capital projects. It was only in the mid-90s that "things turned around and the sector boomed."
Since the financial crisis struck in 2008, universities have been cutting costs and borrowing less, Nelson said. But their longer-term strategies still involve borrowing.
Though universities are looking "more business-like" in the way they manage funds, they do not usually aim to make a profit, he added. "The goal is to become more efficient so you can expand the university over time and either make your product better or enroll more students," he said. "It comes off to some stakeholders that they're being more corporate, but really what they're doing is following tried and true steps to make themselves more efficient and market themselves better."
But William Simmons, professor of anthropology, said he is not sure dependence on borrowed money is a positive change for universities.
He said this dependence is part of a broader trend toward "multiversities" — a phrase coined in the 1960s to describe a shift toward increased reliance on external funding and "larger and more complex" universities.
Universities are "becoming less and less insular and more outer directed," he said. "In the long run, that is probably not a good thing."
"Universities have always defined themselves as spaces that were protected from societal, religious and financial influences so what they did could be trusted," he said. "That kind of thing still exists, but it exists in competition with many other things in a political and economic sense."
But Huidekoper said the approach Brown has taken with its finances doesn't indicate a shift in priorities.
"I don't think we're corporatizing," she said. "I think if we were borrowing to invest and make a profit, that would be a different story."
The vast majority of universities have borrowed within their means, despite a handful of exceptions, Nelson said.
"From a long-term perspective, universities are not really overly leveraged," he said. "As the debt is going up, the endowment is going up, the revenue is going up and the private donations are going up."
Though Nelson said he sees universities borrowing less since 2008, Brown will likely continue to borrow money in the future to fund projects like residence hall renovations, due to its inability to fund such large projects through the normal operating budget, Huidekoper said.
"I think we will be borrowing more in the next five years," she said. "Currently short-term debt is very attractive because interest rates are low. Now is about as good a time as ever to borrow."
