[Praxeologue]

In order to maintain their tax-exempt status, college endowments aren’t allowed to employ leverage (otherwise they could employ infinite leverage to invest in taxable interest-bearing securities). To get around this, their parent institution borrows, under the fig-leaf of some capital project

There's the answer.

Borrowing to invest, by definition, increases risk. It is no free ride. There is nothing abusive about it. It is simply imprudent. Borrowing can cause foundations to commit waste and is outside the scope of their mandate. Therefore, it is appropriate to leave the foundation unleveraged and have the operating entity borrow, which is the practice.

[Vide]

Borrowing to invest by tax-exempt institutions is inherently abusive. Personally, I’d argue that their tax-exempt status is abusive even in the absence of leverage.