Skip to main content

Big debt for students, big perks for university elites

By Claire Potter, Special to CNN
updated 5:51 PM EDT, Fri June 21, 2013
NYU helps its executives and star faculty buy vacation homes.
NYU helps its executives and star faculty buy vacation homes.
STORY HIGHLIGHTS
  • A Times article revealed that NYU executives are given loans for buying vacation homes
  • Claire Potter: This practice is nearly unheard of in higher education, according to experts
  • She says instead of helping elite employees financially, universities should lower tuition
  • Potter: The NYU news should pry open the door to a world of mismanagement in universities

Editor's note: Claire Potter is a professor of history at the New School for Public Engagement. She blogs at Tenured Radical for the Chronicle of Higher Education.

(CNN) -- New York University's 2010 graduating class owed a total of more than $600 million in student loans. It's unlikely the university will forgive them. But NYU has forgiven portions of mortgages they have extended to President John Sexton, other university executives or star faculty -- money that has been used to buy properties in Manhattan or vacation homes in the Hamptons.

Does this shock you?

Or, how about this: Treasury Secretary Jack Lew, a former executive vice president at NYU, received an "exit bonus" of $685,000. Just to put this in perspective, Lew's NYU exit bonus alone would have provided free tuition for 34 undergraduates.

Claire Potter
Claire Potter

The revelations about lavish compensation packages at New York University (my alma mater) have raised a firestorm of criticism. Faculty critics have already publicized NYU's top executive salaries: Sexton takes home nearly $1.5 million, Vivien Lee, the vice dean of science gets $1.1 million, and Robert Grossman, the dean of the medical center, makes a whopping $3.5 million.

And, as Ariel Kaminer reported in The New York Times, sometimes the salaries don't stop when the job ends. Exit bonuses and forgivable mortgages on townhouses, condos and vacation homes not only allow these top dogs to meet the standard of living of the 1%, but also to sock away real estate profits and rental income for the future.

As it turns out, NYU also makes some of these payments off the official university books through a series of nonprofit foundations. In some cases, the university has written second mortgages -- also forgivable -- on property already purchased through the foundations.

Sure, other universities have found ways to woo high-level executives, faculty and coaches with big salaries, severance pay, cars and real estate.

For example, the University of Texas has maintained a Law Foundation similar to those at NYU. It provided mortgages and other forms of compensation, doled out over time, to encourage faculty to remain at the university. These practices, and the secrecy surrounding them, are under investigation by the Texas Attorney General's office.

But NYU is in the media spotlight because giving loans to university executives and stars to purchase vacation homes is nearly unheard of, according to some experts. Is the university setting precedent for a new kind of extravagant spending?

In January 2012, Vice President Joseph Biden carelessly -- and incorrectly -- remarked that high faculty salaries were driving escalating college tuition. This is a popular blame-game among politicians and university administrators alike. But according to the American Association of University Professors, in 2012 full-time faculty at all ranks across the nation received an average increase of 1.8%. In real dollars, this was the equivalent of lowering salaries by 1.2%. In comparison to a decade ago, AAUP salary data shows the rate of increase in faculty raises barely budged.

In faculty lounges, the phrase "corporate university" is used to describe the negative ways that higher education, including the conditions under which the majority of faculty is employed, has been shaped by the business practices that trustees steeped in the culture of Wall Street bring to the campus.

The corporate university eliminates full-time teaching jobs whenever possible. It relies on temporary academic laborers who have few or no benefits and median salaries of $2,700 per course, salary stagnation for the majority of academic and nonacademic employees, the reduction or elimination of union jobs, and the outsourcing of essential services to corporate providers who pay minimum wage or less.

These changes have been accompanied by the creation of massive endowments. NYU's endowment was reported at $2.755 billion in 2012. This is only the 24th largest private endowment in the United States.

I remember a time when administrators were called deans, provosts, treasurers and registrars -- now it seems everybody is a vice president. With these titles have come higher salaries, bonuses, company cars, low-interest mortgages and severance payments for voluntary departures. Boards of trustees approve these lavish practices even as they fight unionization, eliminate full-time faculty positions, refuse even cost-of-living raises for the majority of workers, increase tuition and ask students and their parents to take out tens of thousands of dollars in loans.

What kind of bookkeeping permits contemporary universities to call themselves nonprofits when they are creating significant profits that go toward benefiting the financial aspirations of a few elite employees?

The investigation into NYU should pry open the door to a world of accumulation and mismanagement in universities. Higher education is in need of ethical and fiscal reform, but it can't happen unless we start at the top.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

Editor's note: An earlier version of this essay misstated how much free tuition Jack Lew's exit bonus would have provided for undergraduates at NYU.

The opinions expressed in this commentary are solely those of Claire Potter.

ADVERTISEMENT
Part of complete coverage on
updated 4:06 PM EDT, Tue October 21, 2014
Timothy Stanley says Lewinsky is shamelessly playing the victim in her affair with Bill Clinton, humiliating Hillary Clinton again and aiding her critics
updated 9:02 PM EDT, Mon October 20, 2014
Imagine being rescued from modern slavery, only to be charged with a crime, writes John Sutter
updated 12:00 PM EDT, Tue October 21, 2014
Tidal flooding used to be a relatively rare occurrence along the East Coast. Not anymore, write Melanie Fitzpatrick and Erika Spanger-Siegfried.
updated 7:35 AM EDT, Tue October 21, 2014
Carol Costello says activists, writers, politicians have begun discussing their abortions. But will that new approach make a difference on an old battleground?
updated 9:12 AM EDT, Tue October 21, 2014
Sigrid Fry-Revere says the National Organ Transplant Act has caused more Americans to die waiting for an organ than died in both World Wars, Korea, Vietnam, Afghanistan and Iraq
updated 2:51 PM EDT, Tue October 21, 2014
Crystal Wright says racist remarks like those made by black Republican actress Stacey Dash do nothing to get blacks to join the GOP
updated 6:07 PM EDT, Tue October 21, 2014
Mel Robbins says by telling her story, Monica Lewinsky offers a lesson in confronting humiliating mistakes while keeping her head held high
updated 9:29 AM EDT, Mon October 20, 2014
Cornell Belcher says the story of the "tea party wave" in 2010 was bogus; it was an election determined by ebbing Democratic turnout
updated 4:12 PM EDT, Mon October 20, 2014
Les Abend says pilots want protocols, preparation and checklists for all contingencies; at the moment, controlling a deadly disease is out of their comfort zone
updated 11:36 PM EDT, Sun October 19, 2014
David Weinberger says an online controversy that snowballed from a misogynist attack by gamers into a culture war is a preview of the way news is handled in a world of hashtag-fueled scandal
updated 8:23 AM EDT, Mon October 20, 2014
Julian Zelizer says Paul Krugman makes some good points in his defense of President Obama but is premature in calling him one of the most successful presidents.
updated 10:21 PM EDT, Sun October 19, 2014
Conservatives can't bash and slash government and then suddenly act surprised if government isn't there when we need it, writes Sally Kohn
updated 8:28 AM EDT, Mon October 20, 2014
ISIS is looking to take over a good chunk of the Middle East -- if not the entire Muslim world, write Peter Bergen and Emily Schneider.
updated 9:00 AM EDT, Mon October 20, 2014
The world's response to Ebola is its own sort of tragedy, writes John Sutter
updated 4:33 PM EDT, Fri October 17, 2014
Hidden away in Russian orphanages are thousands of children with disabilities who aren't orphans, whose harmful treatment has long been hidden from public view, writes Andrea Mazzarino
updated 1:22 PM EDT, Sat October 18, 2014
When you hear "trick or treat" this year, think "nudge," writes John Bare
updated 12:42 AM EDT, Sat October 18, 2014
The more than 200 kidnapped Nigerian schoolgirls have become pawns in a larger drama, writes Richard Joseph.
updated 9:45 AM EDT, Fri October 17, 2014
Peggy Drexler said Amal Alamuddin was accused of buying into the patriarchy when she changed her name to Clooney. But that was her choice.
updated 4:43 PM EDT, Thu October 16, 2014
Ford Vox says the CDC's Thomas Frieden is a good man with a stellar resume who has shown he lacks the unique talents and vision needed to confront the Ebola crisis
updated 4:58 AM EDT, Sat October 18, 2014
How can such a numerically small force as ISIS take control of vast swathes of Syria and Iraq?
updated 9:42 AM EDT, Fri October 17, 2014
How big a threat do foreign fighters in Syria and Iraq pose to the West? It's a question that has been much on the mind of policymakers and commentators.
updated 8:21 AM EDT, Fri October 17, 2014
More than a quarter-million American women served honorably in the Iraq and Afghanistan wars. Now they are home, we have an obligation to help them transition back to civilian life.
updated 4:27 PM EDT, Thu October 16, 2014
Paul Begala says Rick Scott's deeply weird refusal to begin a debate because rival Charlie Crist had a fan under his podium spells disaster for the Florida governor--delighting Crist
updated 12:07 AM EDT, Thu October 16, 2014
The longer we wait to engage on Ebola, the more limited our options will become, says Marco Rubio.
updated 7:53 AM EDT, Wed October 15, 2014
Democratic candidates who run from President Obama in red states where he is unpopular are making a big mistake, says Donna Brazile
updated 12:29 AM EDT, Thu October 16, 2014
At some 7 billion people, the world can sometimes seem like a crowded place. But if the latest estimates are to be believed, then in less than a century it is going to feel even more so -- about 50% more crowded, says Evan Fraser
updated 12:53 PM EDT, Mon October 20, 2014
Paul Callan says the Ebola situation is pointing up the need for better leadership
updated 6:45 PM EDT, Wed October 15, 2014
Nurses are the unsung heroes of the Ebola outbreak. Yet, there are troubling signs we're failing them, says John Sutter
updated 1:00 PM EDT, Wed October 15, 2014
Dean Obeidallah says it's a mistake to give up a business name you've invested energy in, just because of a new terrorist group
updated 7:01 PM EDT, Wed October 15, 2014
Fear of Ebola is contagious, writes Mel Robbins; but it's time to put the disease in perspective
updated 1:44 PM EDT, Tue October 14, 2014
Oliver Kershaw says that if Big Tobacco is given monopoly of e-cigarette products, public health will suffer.
updated 9:35 AM EDT, Sat October 18, 2014
Stop thinking your job will make you happy.
updated 10:08 PM EDT, Tue October 14, 2014
Ruben Navarrette says it's time to deal with another scandal involving the Secret Service — one that leads directly into the White House.
updated 7:25 AM EDT, Tue October 14, 2014
Americans who choose to fight for militant groups or support them are young and likely to be active in jihadist social media, says Peter Bergen
updated 9:03 AM EDT, Mon October 13, 2014
Stephanie Coontz says 11 years ago only one state allowed same sex marriage. Soon, some 60% of Americans will live where gays can marry. How did attitudes change so quickly?
updated 4:04 PM EDT, Tue October 14, 2014
Legalizing assisted suicide seems acceptable when focusing on individuals. But such laws would put many at risk of immense harm, writes Marilyn Golden.
updated 9:07 AM EDT, Mon October 13, 2014
Julian Zelizer says the issues are huge, but both parties are wrestling with problems that alienate voters
updated 6:50 PM EDT, Mon October 13, 2014
Mel Robbins says the town's school chief was right to cancel the season, but that's just the beginning of what needs to be done
updated 11:43 AM EDT, Sat October 11, 2014
He didn't discover that the world was round, David Perry writes. So what did he do?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT