Huidekoper maintains that faculty benefits and student loans do help to draw the best teachers and students to Harvard, and do support its mission. She points to other Ivy league schools with similar programs.

"Our peers are doing this," Huidekoper says.

Princeton University is one such school, administering a $150 million loan program, but with endowment income, rather than the operating budget.

Richard R. Spies, Princeton's vice president for finance and administration, says loans help his university achieve its "broader objectives" and are not made with profit in mind.

Spies says Princeton scrutinizes its loans to make sure they do not conflict the university's first and foremost priority of educating students.

"We're sensitive to the issue of compensation and making sure there's full disclosure so that any question that arises will be out in the open," Spies says.

He emphasizes the role of established procedure in administering loans, and says that all loans are submitted to a committee of Princeton's trustees each year.

As for the idea that universities should not be involved in the banking business, Spies says the issue is complicated.

"That's a fair question," he says. "I don't think the answer derives from first principles."

As a matter of course, Spies says a university is best to send its borrowers to professional banks, but sometimes that is not possible, as with foreign students.

Huidekoper goes further, defining Harvard more broadly than a mere school.

"It is a corporation," she says. "We are a corporation, literally."

Henry B. Hansmann, Harris professor of law at Yale Law School, who has criticized the universities of the Ivy League for short-changing their students in the push for endowment growth, says the banking function should not worry those who fear the corporate university.

"I suspect this sort of thing is unlikely to be terribly worrisome, as opposed to some other businesses which are pretty far removed from the university's mission," he says.