In his new book, Bankers in the Ivory Tower: The Troubling Rise of Financiers in US Higher Education, Charlie Eaton analyzes the ways that financial professionals have become indispensable actors at every level of the United States higher education industry and every tier of institutional prestige. Social mobility is more difficult to achieve than ever, but college still promises not merely a wage premium but also the possibility of moving up the class ladder, where career opportunities as well as personal and professional relationships grow out of the college experience. Yet as the price of college rises, the number of students admitted to the most elite universities remains relatively static, and college debt levels for all students grow steadily.
A growing number of financiers with elite university degrees now serve as trustees and upper-level administrators, capitalizing on exclusive social networks to perpetuate their existence generationally, both within families and as a class. In one example, Eaton describes how young Yale alum Tom Steyer learned at a Yale football game that Yale endowment manager and fellow Yalie David Swensen had just begun looking to make private equity investments with the school’s endowment money. Steyer used this knowledge to secure a $300 million investment in his own hedge fund, raising a third of his initial capital and making Yale’s endowment one his first major clients. Coziness reigns.
Bankers in the Ivory Tower’s greatest strength, however, is in the overview beyond the top stratum, where most journalists tend to focus their attention. Understanding the influence of financiers means connecting the story of financialization to the historic expansion of student borrowing:
At the top, elite private university leaders could use their baseline endowment wealth and prestige to pocket student loan–financed revenue as gravy for their bounty of investment returns. […] At the bottom, investors bought and expanded low-status for-profit colleges to use federal student loan programs for enrolling millions of additional students from low-income households and communities of color. […] In the middle, less-selective colleges lost taxpayer funding to tax subsidies for elite endowments and federal student aid subsidies to for-profit colleges. Squeezed for resources, these schools also turned to student loan–financed tuition for revenue.
We can characterize the influence of finance on higher education as yet another upward transfer of wealth. Politically, a renewed appetite for taxing endowments among both Democrats and Republicans alike (albeit for different reasons) has its counterpart in the movement to forgive student debt. As Eaton points out, a particular cruelty of our regime of student indebtedness is that students from less privileged backgrounds tend to have the most student debt, while those who graduate from elite institutions or come from backgrounds of family wealth tend to have the least.
Financial elites have shepherded nonprofit university wealth into endowment funds, which they control in the ordinary pursuit of profit — that is to say, as capitalists. Meanwhile, the for-profit education sector runs almost entirely on student debt. The sector is rife with deceptive and illegal activity, all designed to capitalize on students’ faith in what the sociologist Tressie McMillan Cottom, following W. Norton Grubb and Marvin Lazerson, has called the “Education Gospel,” the ideological belief “in education as moral, personally edifying, collectively beneficial, and a worthwhile investment no matter the cost.”
Most of the students who begin studying at such institutions never complete their degrees. Yet their debt remains. They end up in a worse financial position than before they began school. Another Ivy League story is that of Jonathan Nelson, a financier with Brown connections. He grew his fortune by investing in for-profit colleges like the New England Institute of Art, where Kim Tran enrolled after attending high school in Wakefield, Rhode Island — 15 miles and an economic light year away from Nelson’s home. Tran was entrapped, and her frustrating educational journey left her “worse off than if she had never gone to college at all.” Recruiters used a combination of misleading statements and outright lies to cajole students into enrolling at NEIA. Tran left without a degree after three years, having incurred a student debt load far beyond her ability to repay.
This story isn’t exceptional but representative. For-profit schools are increasingly publicly traded or otherwise controlled by financial interests like venture capital and private equity and therefore driven by extreme profit-maximizing logics. This is how elite colleges and universities make direct investments in misery, a particularly grotesque example of the ways that higher education transfers wealth from poorer communities to advantaged ones. Tran has become an activist with the Debt Collective, an Occupy Wall Street successor group that has fought for over a decade to cancel student debt, which averages $36,510 per borrower.
Meanwhile, good intentions can go off track. Universities across the prestige spectrum often say that part of their mission is advancing social equity and social mobility, but their financial behavior produces the opposite. Eaton devotes much of a chapter to the University of California system, compromised by financiers who starve the state of needed revenue through complex tax-avoidance schemes, necessitating the kinds of budget cuts that lead public universities to seek other sources of revenue — including a growing reliance on bond debt — in the first place.
College enrollment has declined again this year, suggesting that prospective students are reevaluating the economic value of a college education. The trend is especially pronounced among Black and Latinx students, who were already attending college at lower rates than their white counterparts. It is not surprising that students might be thinking twice about college. While college graduates still earn more than non–college graduates on average, the college wage premium has stagnated, in part because the cost of attendance is still rising. This is particularly true for Black and Latinx college graduates, who earn less than white college graduates even as they carry higher average debt burdens. We increasingly understand the economic constraints now structurally experienced by more than a generation of young people burdened with tens of thousands of dollars of nondischargeable debt, and, despite the rumblings from both sides of the aisle, there are slim hopes for national political action to conclusively address the student debt crisis or lower the cost of college.
If indeed students are beginning to reconsider the benefits of higher education, it ought to give both university and political leaders pause. There are many pathways to a good life that don’t require a bachelor’s degree. But as Eaton illustrates, college is more than a mechanism for job distribution. Contained in our public higher education institutions is a vision of a humane and equitable society, one in which all those who seek knowledge can come to the institution and emerge more well rounded with broadened horizons and an expanded sense of the world. This is the work still being done at places like CUNY and SUNY, the University of California and California State University systems, the University of Rhode Island and Rhode Island College, and countless other public schools and systems throughout the country. If we allow these institutions to shrink, either by starving them or making it impossible for them to grow, we allow education to again become the gated preserve of the ruling class.
The lesson here is clear: the problem of bankers in the ivory tower is a political one, and therefore it requires a political solution. Endowment taxes, like one recently proposed in the Rhode Island state legislature, are a good place to start. So too are debt forgiveness and democratized admissions policies. Expanding workplace protections across the academy is another. Achieving such a program will take time, and it will inevitably happen in fits and starts. After all, the bankers didn’t take over higher education all at once either.
Dennis Hogan is a writer, academic, and organizer based in Providence, Rhode Island.