The growing impact of finance on US universities was discussed at a Tuesday night virtual conference hosted by the Watson Institute. The event focused on a new book called “Bankers in the Ivory Tower: The Troubling Rise of Financiers in US Higher Education” by Charlie Eaton, assistant professor of sociology at the University of California, Merced.
The conference also featured Josh Pacewicz, associate professor of sociology at Brown, as speaker and Margaret Weir, professor of international and public affairs and political science at the Watson Institute, as moderator. It was sponsored by the Stone Inequality Initiative at the Watson Institute, which works to understand “how great wealth distorts (and) perhaps even threatens…the republic,” according to the Initiative. website.
In his speech, Eaton explained how major financial institutions have come to play an increasingly important role in higher education, from skyrocketing student debt to increasing financial control over university governance. These developments, Eaton said, have exacerbated preexisting racial and class inequalities by diminishing academic achievement in lower-level schools and burdening students with thousands of dollars in student debt.
“Only one in eight undergraduates in the United States had student debt in the 1970s,” he said. “Today, the majority of students leave school with the financial burden of student debt… There are great class and racial disparities in who borrows and who can afford to repay their debts.”
This growing trend of influence, also called financialization, according to Eaton, can best be understood by examining its impact on three levels of schools: elite private universities, such as Brown, public universities, and for-profit universities. , many of whom serve groups of students who are “predominantly working-class and disproportionately black.”
In Eaton’s model, elite universities with large endowments benefit from deregulation and tax cuts, allowing a small number of often already privileged students to reap the benefits of financialization. On the other hand, private financial institutions often take over for-profit universities to take advantage of public subsidies and student tuition fees, often leading to university governance that prioritizes profit over quality of education. ‘education. Mid-level public universities are then “squeezed” by pressure from both sides, Eaton explained.
One of the most important drivers of this financialization, Eaton said, has been the adoption of Amendments to the Higher Education Act 1992. These changes eliminated the means test for federal student loans, doubled the cap on undergraduate loans, eliminated the cap on loans to parents, and guaranteed partial repayment of student loans by the federal government in the event of default.
These provisions, Eaton said, created the perfect environment for the proliferation of student loans.
“Did this change in policy really lead to the explosion of student debt?” he said. “In a word, yes.”
Much of the content of the legislation, he said, was submitted in congressional hearings by financial giants including Citi, Bank of America, Sallie Mae, Wells Fargo and JP Morgan Chase.
In addition to skyrocketing student loan debt, Eaton said, private funding is also impacting university governance. In no type of institution is this clearer, he continued, than the private, for-profit university. “Private equity managers acquired 994 for-profit colleges between 1988 and 2015,” he said. “They did this to capture tuition revenue from expanded loan programs. It’s hard to overstate the importance of this private equity invasion in the explosion of enrollment in predatory, for-profit colleges in the United States. »
Eaton said an example of this process can be seen in the case of Providence Equity Partners, a private equity firm founded by Glenn Creamer ’84, Paul Salem ’85 and Jonathan Nelson ’77 P’07 P’09, for which the Nelson Fitness Center and Nelson Center for Entrepreneurship are named.
In 2006, in cooperation with Goldman Sachs, Leeds Equity and private equity firms KKR, PEP acquired Education Management Corporation, which ran a number of for-profit colleges in “the largest ever acquisition of a chain of for-profit colleges.
Shortly after the acquisition, Eaton said, EDMC’s chief financial officer was kicked out for refusing to prioritize economic growth over the quality of education.
“Ultimately,” he said, “EDMC went bankrupt because lawsuits and new consumer protection regulations thwarted its strategy of ‘diverting large sums of money into recruitment in the goal of maximizing profits.
Weir, the host of the event, said she thought the book emphasized the “triple or quadruple constraint faced by low-income people” in higher education.
After union busting contributed to a decline in well-paying jobs that didn’t require a degree, she said, low-income students were forced to endure price hikes, predatory loans and “diplomas useless” of for-profit colleges that “focused all of their resources on recruiting rather than education.
Eaton said that despite their increasing financialization, American universities also contain the seeds of change within them. The engagement of many university communities with the Occupy Wall Street movement, he said, has fueled pressures to make public universities more affordable in California. An effort by Columbia and NYU students during the same period even led to the Department of Education canceling the student debts of “more than 100,000 for-profit students.”
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“A brighter future is possible,” Eaton said, “if we mobilize a diverse and inclusive university to reinvent higher education funding.”