Borrowing from banks has become a common practice among Chinese higher education institutions (HEIs), and operating with a heavy debt load has become a characteristic of Chinese higher educational development. Substantial financial commitments acquired by HEIs during their rapid expansion since 1998 are now having serious consequences: numerous universities and colleges have found themselves with major debt problems. Some are even facing insolvency. This paper describes the background of Chinese HEIs' debt problems, assesses the present debt and repayment situation, and suggests a possible solution for the university debt crisis, using empirical evidence from one HEI in China.