In my view, the only ethical way to do this is to explicitly say that a) employment in higher ed is not the goal/outcome, and b) stress as loudly as possible that any student who chooses to attend without funding ought not take out loans in excess of what they might be able to manage on an adjunct salary.

There was a time when American universities heroically admitted students to PhDs without funding. It was during the Vietnam war. Apparently Wisconsin’s history department admitted many – they were saving lives.
What philosophers face now is nothing like Vietnam.

Maybe I missed something in the question, but I didn’t understand whether “funding” means TA/teaching/research fellowship only, rather than tuition remission in addition. With tuition remission offered, but no fellowship, students could potentially survive by finding part-time teaching elsewhere (at least once they earn their MA). They could also apply for outside funding, with the advantage of being already accepted in a program. As some said happened to them, another student may drop out, leaving one fellowship for that year’s cohort available (sort of a delayed waitlist for those enrolling without fellowship).
If, however, lack of funding includes lack of tuition remission, and the question is whether students should be admitted with no support whatsoever, then it seems to me questionable to lure students into handing that much money over to a university (at least at the rates private U.S. institutions charge for tuition). The situation may be different for low-tuition public universities or non-U.S. universities with lower tuition rates.
[It’s a tangent, but another very questionable practice involves taking tuition money from students for MA programs at institutions that should really only offer the BA. (I realize this practice won’t easily stop as faculty at these schools probably have a higher estimation of themselves than this and welcome the added prestige and money of an MA program). It’s a shame when someone who might have paid tuition for an MA at an elite school that would have positioned them for PhD applications ends up instead paying for an MA at their relatively less impressive home BA institution instead.]

I don’t know enough about PhD programs, but I know about terminal masters programs because I went to one and have been interested in how they work. The one I went to — Northern Illinois — seems to try hard to get everyone who’s admitted funding, but it’s common to have anywhere from 2-7 admitted students unfunded by the department itself. I think 6 or 7 of the people in my 14 or 15 person cohort didn’t get funding directly from the department, but some of them ended up getting decent employment on campus either as TAs for other departments, working in the library, or janitorial work. The rest either had outside funding or independent savings. (There’s one person who I’m not sure what their situation was). I do think some unfunded students from my cohort and other cohorts did outright tell me that sometimes they felt as if they were seen as worse philosophers because they were unfunded, and that they lost out on, for example, the discussions that often happened in the TA offices. I’d have to look at the numbers again, but I do think that unfunded students have worse placement as compared to funded students, at least in the last 5-6 years. Of the unfunded students in my cohort some got one or two funded offers that they weren’t excited about, some decided to not apply at all, either 1 or 2 students didn’t get in anywhere on their first PhD admission cycle (but one got offers in their second cycle post-graduation), and one got into multiple places they were excited about. I do think that my cohort is fairly representative of the past 5-6 years of cohorts in this sense. I’d imagine things are quite different at Tufts, but from what I’ve seen UW Milwaukee and West. MI are similar. Not sure about GSU, Texas, Cal State Long Beach, or Simon Fraser. Hopefully an NIU dept. admin like Jason or Lenny or Carl can chime in to give more context or correct any mistakes I’ve made.

The question raised in the OP seems country-specific, and perhaps particularly salient in the North American context. Most departments in the UK must admit PhD students for whom it cannot provide funding. This (for once) isn’t because of institutional drive for income, but because admission and funding decisions are decoupled. My School (of Philosophy, Religion, and History of Science — so not just Philosophy) is able to fund only a couple of internal scholarships per year. Beyond that, there are some highly competitive university-wide scholarships, and governmental PhD funding is allocated to consortia of universities. In our case (University of Leeds), Philosophy PhD applicants compete against applicants to York and Sheffield in a panel consisting of Philosophy, Politics, Law, Theology, and Religious and Biblical Studies. (For the consortium funding, our School as a whole gets 5-6 nominations per year, and a few awards if we’re lucky.) Here’s the thing: having already been offered admission is a necessary condition for eligibility to be nominated by the School for these scholarship competitions. So, even keeping admission standards high, we have to admit many more students than “we” can fund. It’s very rare for an admitted student to enrol without funding though, and in most cases I advise the students against doing so. You could argue that the institutional design should be different. But holding that fixed, the “under what conditions” question has a fairly straightforward answer in systems like ours.

Write grants, fund lines.

My university strongly disincentivizes admitting students without funding. But whatever one thinks about the issue in general it seems to me that there are cases in which it makes sense.

1. People in the armed services who would be supported by the military to get a PhD and then assigned to teach at a military academy.
2. People with independent means who want to study philosophy for its own sake.
3. People with career goals outside academia.
4. People seeking dual degrees, e.g., through a law and philosophy program, who hope to practice or teach law.

There are lots of reasons someone might want to complete an unfunded PhD (where unfunded, I take it, means no tuition remission OR stipend, but I suppose it could mean ONLY tuition remission …)

Someone might be independently wealthy and interested in learning philosophy at a deeper level, but not have any worries about job prospects. They may have retired early and comfortably and are perhaps eager to learn some philosophy, for its own sake. They might simply want to “do it on the side”, more slowly, as they pursue their money-making endeavors elsewhere, and this seems like a fine thing to do. Someone may have tuition funding from another source (their job, the military, as mentioned). We have such students in our program, and there’s no “tiered” treatment of these students. We are happy to have them; they are all excellent (and since they typically take longer to complete the program, are long-time, valued members of the community). And of course, the university is delighted, not that we in the department care too much about that.

I think it would be odd to do this as a matter of course (e.g., admit 5 funded, 3 unfunded students every year). But if a qualified student approaches the program, or maybe there’s a box to check like “I would like to be considered for unfunded admission” on the application, I think it’s fine. Perhaps the faculty should include a note, like “We strongly advise against going into debt to complete the PhD. We believe that completing an unfunded PhD in philosophy would only be wise in a select set of personal circumstances” or something like that. That way the student is not under the impression that this is, in ordinary circumstances, a good investment.

I started out as an unfunded PhD student at the University of California, Santa Barbara. Had they not been willing to admit me without funding, I wouldn’t have been able to pursue my dream. So, I say ‘yes’ admit them without funding but make sure that you inform them adequately of their prospects. I was fortunate to have had a supportive family that both helped to cover much of the cost (though I also had to work nearly full-time my first year) and provided a safety net should things not have worked out.