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 8:37 AM EDT, Tue October 28, 2014
Errol Louis says forced to choose between narrow political advantage and the public good, the governors showed they are willing to take the easy way out over Ebola.
updated 2:03 PM EDT, Mon October 27, 2014
Eric Liu says with our family and friends and neighbors, each one of us must decide what kind of civilization we expect in the United States. It's our responsibility to set tone and standards, with our laws and norms
updated 7:45 AM EDT, Mon October 27, 2014
Sally Kohn says the UNC report highlights how some colleges exploit student athletes while offering little in return
updated 3:04 PM EDT, Sun October 26, 2014
Terrorists don't represent Islam, but Muslims must step up efforts to counter some of the bigotry within the world of Islam, says Fareed Zakaria
updated 9:02 AM EDT, Fri October 24, 2014
Scott Yates says extending Daylight Saving Time could save energy, reduce heart attacks and get you more sleep
updated 8:32 PM EDT, Sun October 26, 2014
Reza Aslan says the interplay between beliefs and actions is a lot more complicated than critics of Islam portray
updated 7:19 AM EDT, Mon October 27, 2014
Julian Zelizer says control of the Senate will be decided by a few close contests
updated 8:12 AM EDT, Fri October 24, 2014
The response of some U.S. institutions that should know better to Ebola has been anything but inspiring, writes Idris Ayodeji Bello.
updated 5:01 PM EDT, Wed October 22, 2014
Paul Callan says the grand jury is the right process to use to decide if charges should be brought against the police officer
updated 12:19 PM EDT, Thu October 23, 2014
Theresa Brown says the Ebola crisis brought nurses into the national conversation on health care. They need to stay there.
updated 6:35 PM EDT, Tue October 21, 2014
Patrick Hornbeck says don't buy the hype: The arguments the Vatican used in its interim report would have virtually guaranteed that same-sex couples remained second class citizens
updated 12:30 PM EDT, Fri October 24, 2014
The Swedes will find sitting on the fence to be increasingly uncomfortable with Putin as next door neighbor, writes Gary Schmitt
updated 12:32 PM EDT, Fri October 24, 2014
The Ottawa shooting pre-empted Malala's appearances in Canada, but her message to young people needs to be spread, writes Frida Ghitis
updated 9:48 PM EDT, Sat October 25, 2014
Paul Begala says Iowa's U.S. Senate candidate, Joni Ernst, told NRA she has right to use gun to defend herself--even from the government. But shooting at officials is not what the Founders had in mind
updated 6:08 PM EDT, Thu October 23, 2014
John Sutter: Why are we so surprised the head of a major international corporation learned another language?
updated 5:54 PM EDT, Thu October 23, 2014
Jason Johnson says Ferguson isn't a downtrodden community rising up against the white oppressor, but it is looking for justice
updated 12:21 PM EDT, Fri October 24, 2014
Sally Kohn says a video of little girls dressed as princesses using the F-word very loudly to condemn sexism is provocative. But is it exploitative?
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 10:14 AM EDT, Thu October 23, 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
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT