Penn gave ex-president Amy Gutmann a $3.7 million home loan as she prepared to depart the university

As president of the University of Pennsylvania, Amy Gutmann was one of the highest-paid administrators in the nation, receiving in her final year a nearly $23 million payout, largely made up of deferred compensation accrued over her 18-year tenure.

But that’s not all.

» READ MORE: Former Penn president Amy Gutmann earned nearly $23 million in 2021, but most of it was accrued over her 18 years as president

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. She left the presidency in February 2022 to serve as U.S. ambassador to Germany.

“While I won’t be living there while I’m ambassador, we have a place to come back to,” Gutmann said in a 2022 Inquirer interview, noting that she is on unpaid leave from the faculty. “Philly is our home.”

» READ MORE: Confirmed as the next U.S. ambassador to Germany, Amy Gutmann reflects on nearly 18 years as Penn’s president

Penn would not confirm what she purchased with her home loan, but deed records show that in December 2020 — 14 months before Gutmann left the university and two months after the loan was approved — her husband, Michael W. Doyle, a Columbia University professor, closed on a $3.6 million, four-story townhouse in a luxury housing development in the Fitler Square neighborhood. The purchaser’s mailing address on the deed lists “1 College Hall,” which houses administrative offices for the university.

While loans like this are neither illegal nor uncommon, some academics question whether they are financially sound and politically palatable for higher education institutions given the nation’s $1.77 trillion in student loan debt. Faculty and graduate students are striking across the country for better wages and benefits.

At Penn, tuition and room and board will top $84,000 in 2023-24, as the university raised costs 4% this year.

“This is the kind of thing that really undermines the public trust in higher education, particularly the public trust of these elite institutions that have a lot of money,” said Joni E. Finney, retired director of the Institute for Research on Higher Education at Penn. “Amy Gutmann made enough income to purchase that home without Penn’s help.”

Bok did not disclose the terms of the loan, but said it was “consistent with university policy and applicable laws and regulations.”

Gutmann did not respond to requests for comment.

This home loan arrangement was not unique to Gutmann, nor to Penn.

The university, like some other elite colleges, for decades has provided generous loans to senior leaders, including deans, provosts and presidents. The loans were often for employee recruitment or retention purposes, helping the university attract the best leaders and enabling them to purchase property in Philadelphia’s expensive real estate market, Bok said.

The loans are legal. The U.S. Office of Government Ethics cleared Gutmann to serve as ambassador after she disclosed the loan.

Among Penn’s loan recipients, its largest has been to Gutmann, who also received two other loans from Penn earlier in her tenure, one marked “employee loan” for $700,000 in 2011 and another marked “retention/recruitment” for $1.25 million in 2014. Both were forgiven by the university over a number of years, Bok said.

However, the latest loan is not a form of compensation and is fully expected to be repaid, according to its terms, he said.

It appears she has not begun to pay back the loan. And the amount Gutmann owes to the university had slightly increased in the year since the loan was first extended, the most recent financial tax return shows.

In federal disclosure documents for the ambassador job, she said she will “refinance the loan with a different lender, pay market rate to the university for the remaining period of my government service, or pay off the loan” if the university extends her leave past the initial two years.

James Finkelstein, professor emeritus of public policy at George Mason University, who has been studying university president contracts and compensation since the 1990s, said Penn could have invested that money at a higher rate and made more income for the school. He noted that the interest rate she received was the second-lowest of its kind nationwide in more than a decade, and by comparison, the jumbo 30-year fixed rate for mortgages was 3.033% in October 2020 when she got the loan. Today’s rate is even higher, about 7.3%.

Giving the minimum interest rate set by the Internal Revenue Service at 0.38%, the loan would not be subject to taxation, he explained. It assumes that the money will be paid back in three to nine years, he said.

“Why does a university whose mission is educational need to loan this money?” Finkelstein asked. “These presidents are among the most highly paid university presidents in the country. Beyond their base pay, they receive bonuses and deferred compensation. Why is it at the end of their term, the trustees feel the need to reward them further by giving them these loans as they step down?”

Finney said faculty should be outraged.

“Especially as she was walking out the door, what kind of retention are they trying to achieve there?” she asked.

(A university tax record initially coded the $3.7 million as a “retention” loan, but in a later filing, after she was nominated to serve as ambassador, it was reclassified as a “special employee loan.”)

Others defended the arrangement, saying the job of presidents is extremely challenging, with their every move scrutinized and a responsibility for everything that happens at the institution virtually 24 hours a day.

“We’re asking these people to make a very unique kind of commitment,” said Brandon Cotton, president of the Washington- and Florida-based Cotton Law, which represents presidents, provosts and chancellors. “It should be rewarded. In [Gutmann’s] case, they found this method. In my opinion, it was a good method.”

Cotton said he has negotiated for presidents a number of loan agreements, which are often forgivable, and that happens when the leaders deliver outstanding performance.

Gutmann, by all measures, was credited with doing her job exceedingly well, giving Penn nearly two decades of sound and largely smooth leadership. She ran Philadelphia’s largest private employer, a $13.5 billion operation, with its 12 schools, six hospitals, and more than 23,000 full-time undergraduate and graduate students. As Penn’s longest-serving president, she raised more than $10 billion, oversaw construction of many new buildings, and led the school through a recession and pandemic.

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Penn’s endowment more than quintupled from $4.1 billion, when she left her post as provost of Princeton and joined Penn in 2004, to $20.5 billion in 2022. Under her leadership, Penn prioritized student aid, adopting an all-grants, no-loan financial policy early on in her presidency. And by the time she left, 80% of Penn undergraduates were leaving Penn debt free, she had said.

Still, some say her compensation was simply too much. After news broke of Gutmann’s nearly $23 million payout in her final year, Jonathan Zimmerman, a Penn education professor, wrote a blistering column, asking where the outrage was over this arrangement. Gutmann’s total figure for 2021, reported on the 990 tax form, included her annual compensation of a base salary of $1.56 million and a bonus of $1 million and the $20.2 million deferred compensation and supplemental retirement funds, which also includes investment gains the money made over 17 years.

It did not include the loan.

“I have enormous respect for Amy Gutmann,” Zimmerman said. “I think she was a very successful president. I think presidents have incredibly hard jobs, for which they should be well compensated. But there’s well compensated and then there’s obscene. And we as a culture in higher education and beyond have lost sight of that distinction.”

Finkelstein said: “It’s about the fiduciary responsibility of the university trustees and their judgment.”

A review of financial tax documents for nearby universities found about two dozen similar home loans extended to staff at Swarthmore, Haverford and Princeton. Others across the United States, from Stanford to Columbia University, have also made similar loans, in some cases to presidents who were leaving.

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.

At some schools, these deals have drawn controversy. New York University notably extended low-interest loans to a former president and top professors to purchase pricey summer homes, drawing scrutiny in a 2013 New York Times investigation.

The loans aren’t always for homes. Drexel University gave its president, John A. Fry, who has been in the role since 2010, a $720,000 loan for an insurance policy, according to the university’s most recent tax filing. Drexel said the policy was purchased on behalf of Fry as part of his overall compensation package.

Over the years, Penn has given its loans varying labels, including “retention,” “recruitment,” “employee loan,” “mortgage assistance” and “special employee” loan. The loans are routinely for primary residences, not vacation homes, the university said. They are to help the employees secure residences near the school.

Penn’s most recent 990 form showed that it also currently has loans extended to Pam Grossman, who recently stepped down as dean of the Graduate School of Education, and Antonia M. Villarruel, dean of the nursing school. Each was for $150,000.

Gutmann’s 5,100-square-foot house, according to a real estate listing from before this sale, was described as a “new world of luxury,” featuring an entrance off a private courtyard, custom doors and millwork, a built-in two-car garage, an elevator, and a fitness center.

Several years were left on the property’s city tax abatement, which reduces the couple’s annual tax bill on the residence to about $6,800. The home has since increased in value by about a half-million dollars, according to online real estate estimates.