In late 2023 the University of Chicago shared with faculty and staff a plan to reduce a budget deficit that was about to reach $288 million in FY24. Two years later, those ongoing measures have succeeded in shrinking the deficit substantially. In the following discussion, four University officers address questions about those efforts, the University’s endowment, the effects of changes in federal research funding, and more.—L. D.

How did the University’s budget deficit come about?

Baicker: For much of the past two decades, the University advanced a set of strategic investments in its long-term eminence, including significant investments in faculty, financial aid for students, facilities, security, and our neighborhood. The scale of those efforts meant that the University chose to operate with a deficit. Those investments have paid off and they strengthened the University, but the deficits were never meant to continue indefinitely. We determined that now is the right time to close the structural deficit, while continuing to invest in the critical work of research and education.

The University just announced that it reduced its deficit by $128 million in FY25, lowering the deficit from $288 million to $160 million in one year. How was that accomplished?

Samstein: The $128 million reduction in the deficit outpaced our plan for the year, which is a very positive development. Of course we still have a lot of work to do, but it’s a great start.

The improvement we saw in FY25 is the result of work across the University to moderate spending growth and to grow revenues at a faster pace than expenses. It also reflects high demand from students at every level. And, critically for the University’s long-term vitality, donors have provided record-setting philanthropic support for UChicago’s academic mission.

We are currently implementing the deficit reduction steps that President Paul Alivisatos, AB’81, and Provost Baicker outlined in August, which will accrue to the University’s benefit in FY26 and beyond. Thanks to the work of so many people across the University, we took out a huge share of the deficit in FY25, and we’re on a sound path to continue that despite ongoing external headwinds.

What is the University’s strategy to eliminate the remainder of its deficit? Should we expect to see another significant deficit reduction this coming year?

Baicker: This year’s reduction was very encouraging, and we’re taking many steps to continue addressing the deficit. At the same time, the national outlook for higher education and federal support for research is still challenging, and there is a lot of uncertainty about how that will evolve over the next few years. That’s one reason that we don’t necessarily expect as large a reduction in the deficit this coming year.

In terms of our strategy, the University’s academic mission always comes first. We want to steward our resources to make the greatest possible impact on scholarship and education. We’re also making sure that we optimize the use of our faculty members’ time, ensuring that they can devote their efforts to scholarship and education, since faculty time is one of the University’s greatest resources.

Our immediate tasks are to continue applying spending discipline, augmenting sources of revenue, and investing in the remarkable faculty and students at the University of Chicago. We’re also working with the deans and faculty to develop additional strategies that are tailored to the goals of individual schools and divisions, keeping them at the forefront of their fields. It’s crucial that we continue to invest in both our core areas of excellence and in emerging areas at the same time that we shrink the deficit.

We’ve heard some academic units have paused doctoral admissions. What are the reasons for that?

Baicker: Doctoral education is central to the University of Chicago’s mission, and this past summer we asked all units to develop strategic plans for their PhD programs. Some academic divisions have paused admissions for the 2026–27 academic year while they stand up committees that will make recommendations to evaluate and strengthen their doctoral programs. The landscape for many programs is evolving significantly in the face of rapidly changing job markets and the rising cost of doctoral education. Overall, the University plans to reduce the amount of unrestricted funding dedicated to PhD students by 30 percent.

It’s important to bear in mind that the University has greatly increased its support for doctoral students over the past decade: The minimum doctoral stipend as of October 1, 2025, is $46,350 (up from $23,000 a decade ago), plus University-paid health insurance. The University will continue to provide support for all PhD students in their programs.

The main reason we’ve asked schools and divisions to evaluate their doctoral programs is to make sure these programs are serving our students well and doing so in a sustainable way. This is a critical moment to examine UChicago’s storied doctoral programs and to ensure that we are continuing to prepare the next generation of scholars and researchers for meaningful careers. Working with both the deans and faculty leadership, we have convened a faculty committee to further examine opportunities to advance doctoral programs across the University.

There have also been rumors of a shrinking faculty and negative impact on faculty-student ratios. What is the University’s current approach to faculty hiring?

Baicker: No, the faculty is not shrinking. The size of the faculty grew by about 20 percent over the past decade as the University hired aggressively. Our intention is to hold steady at this faculty size overall for the near term, focusing on hiring in strategic areas and hiring assistant professors.

The College has maintained an average class size of 18 students for the past 15 years; between 75 and 85 percent of classes have 20 or fewer students. Leveraging our enhanced faculty size and reducing administrative burden for faculty will help ensure that class sizes and student-faculty ratios remain at levels that support a transformative educational experience.

In the face of cuts to federal research funding across higher education, how is the University of Chicago responding?

Samstein: There’s no question that the uncertain outlook for federal research funding is causing concern at UChicago and at all research universities. So far UChicago’s grant support has been relatively stable, with revenue from government grants and contracts slightly down in FY25, but uncertainty about research funding in the coming years is one reason that we need to calibrate our spending and revenue growth carefully.

Baicker: And, with this uncertainty around federal grants, it’s even more important that we develop additional avenues for research support, including a broad portfolio of private foundation support and partnerships.

How does the University use its endowment to support its mission?

Ward: The endowment is a permanent resource that is intended to support the University’s activities over the long term, thanks to generous philanthropy over more than a century. By supplying a steady source of income to the operating budget, the endowed funds support a broad range of programs and initiatives at the University and UChicago Medicine.

Over the past decade, the University has supported several critical strategic investments using the endowment, including greatly increased financial aid for undergraduate students and expanded support for faculty and graduate students.

How much of the endowment is restricted?

Samstein: The vast majority of the University’s endowment is legally restricted and must be used for designated purposes. That’s why it’s so important that we continue to focus fundraising for the endowment on enduring University priorities, such as faculty chairs, scholarships, and core infrastructure.

How much of the endowment supports the operating budget each year?

Samstein: The University targets a 5.5 percent core endowment payout in recent years, with additional limited draws to support specific strategic investments. Another way to look at our measure of support from the endowment is the percentage of our operating budget derived from the endowment. In FY25 this figure was 15 percent of operating revenues for the University. This figure is much lower than most other “Ivy Plus” universities, largely because our endowment per student or per faculty member is lower relative to those peer universities.

How does the investment strategy compare to those of peer institutions? Are there differences related to the fact that UChicago’s return on investments was slightly below the peer average in recent years?

Ward: In the decade or so after the financial crisis of 2008–09, the University took a relatively conservative investment position. That sort of approach typically results in earnings that are lower than they would otherwise be during a booming stock market, and higher than they would otherwise be during a market downturn. UChicago thus had lower returns than some peers with less conservative portfolios during the strong markets of 2010–21. At the same time, UChicago has deployed the endowment more aggressively than some peers to support academic priorities, which has helped us to consistently compete well with universities that have endowments that are multiple times the size of ours.

What is the investment strategy going forward?

Ward: The University’s investment strategy is continuously evaluated and updated, and we are gradually shifting the portfolio based on evolving market opportunities. The endowment has taken steps toward a more growth-oriented portfolio, balancing risk and liquidity while maintaining broad diversification.

How does the University make and spend its money?

Samstein: Here [below] is an overall snapshot of where the University’s revenue comes from and its annual expenses. One of UChicago’s strengths is that we have a relatively diverse set of revenue sources, which can provide resiliency to risks. The greatest portion of spending is on the people who make this such a distinctive place of education and research.

What kind of support from alumni and friends is meaningful to the University at this challenging time for higher education?

Afsahi: Alumni and friends can advance the University’s mission in powerful ways during this critical period, including through philanthropy and advocacy. Philanthropic investment in UChicago provides the flexible resources needed to maintain academic excellence and support groundbreaking research.

Equally important is advocacy—sharing stories of UChicago’s field-defining research, its commitment to free inquiry and rigorous debate, and the distinctive education it provides. The voices of alumni and friends help demonstrate the University’s leadership and reinforce the vital role this institution plays in advancing knowledge and addressing society’s most pressing challenges.