The Philadelphia Inquirer reports on a low-interest loan that the University of Pennsylvania approved to Amy Gutmann as she was leaving the university's presidency. (She's now President Biden's U.S. ambassador to Germany after having set Biden up as a professor at Penn):
The university's trustee compensation committee in late 2020 quietly authorized a $3.7 million, 0.38% interest home loan to Gutmann, according to tax records and financial disclosure forms. The loan was to help with her "presidential transition," said Scott Bok, chairman of Penn's board of trustees.
Specifically, Gutmann, 73, had lived in the president's house on campus during her tenure, and she wanted to purchase a home to stay in Philadelphia.
This sort of deal is apparently somewhat frequent for outgoing university presidents: "Columbia gave its recently departed president, Lee Bollinger, a $6 million home loan, tax records show. The former president of the University of Southern California, C.L. Max Nikias, also got one for $3 million."
The Inquirer doesn't mention it, but, as usual, there is a tax angle. During the Trump administration the government enacted an excise tax equal to the corporate tax rate on non-profit employees earning more than $1 million a year. A below-market-rate loan doesn't count as "income" under the rule, so the university avoids paying the excise tax.
The New York Times reported matter-of-factly in February 2022 that Bollinger and his wife had paid $11.7 million for a three bedroom, four and a half bathroom apartment in the Beresford at 211 Central Park West. The Times kept the word "Bollinger" out of the headline, which was simply "A Limestone Mansion on the Upper East Side Sells for $56 Million" and aggregated the top-priced New York City real estate deals of the month. (I put in a query to Columbia about Bollinger's mortgage rate and haven't yet heard back.) Columbia gives out the Pulitzer Prizes, so most news organizations treat it with kid gloves, with the exception of the Wall Street Journal, which investigated Columbia for leaving students mired in debt and noted that one financially struggling student was floated a job walking Bollinger's yellow Labradors.
Anyway, an entertaining Congressional hearing would be to call the Penn and Columbia former presidents and trustees in for a session on whether Congress should amend the excise tax provision to have it apply to these sorts of loans. In general I am for lower taxes, and raising taxes on government-subsidized institutions like these colleges just creates more costs for the government (and parents, and alumni donors) to pay for in tuition and research overhead. It's good to attract high-quality people to these jobs by paying them competitive wages. But alumni donors asked to give money to support this sort of thing, while paying market rates for their own mortgages obtained through arms-length transactions, may make their own decisions on how much to pitch in. And the next time the university lobbyists show up pleading institutional poverty to ask for more research funding or student loan subsidies, the members of Congress might want to ask a question or two about these sorts of loans.