Skip to main content

Big debt for students, big perks for university elites

By Claire Potter, Special to CNN
June 21, 2013 -- Updated 2151 GMT (0551 HKT)
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
December 27, 2014 -- Updated 0127 GMT (0927 HKT)
The ability to manipulate media and technology has increasingly become a critical strategic resource, says Jeff Yang.
December 26, 2014 -- Updated 1617 GMT (0017 HKT)
Today's politicians should follow Ronald Reagan's advice and invest in science, research and development, Fareed Zakaria says.
December 26, 2014 -- Updated 1319 GMT (2119 HKT)
Artificial intelligence does not need to be malevolent to be catastrophically dangerous to humanity, writes Greg Scoblete.
December 26, 2014 -- Updated 1505 GMT (2305 HKT)
Historian Douglas Brinkley says a showing of Sony's film in Austin helped keep the city weird -- and spotlighted the heroes who stood up for free expression
December 26, 2014 -- Updated 1303 GMT (2103 HKT)
Tanya Odom that by calling only on women at his press conference, the President made clear why women and people of color should be more visible in boardrooms and conferences
December 27, 2014 -- Updated 2327 GMT (0727 HKT)
When oil spills happen, researchers are faced with the difficult choice of whether to use chemical dispersants, authors say
December 25, 2014 -- Updated 0633 GMT (1433 HKT)
Danny Cevallos says the legislature didn't have to get involved in regulating how people greet each other
December 23, 2014 -- Updated 2312 GMT (0712 HKT)
Marc Harrold suggests a way to move forward after the deaths of NYPD officers Wenjian Liu and Rafael Ramos.
December 24, 2014 -- Updated 1336 GMT (2136 HKT)
Simon Moya-Smith says Mah-hi-vist Goodblanket, who was killed by law enforcement officers, deserves justice.
December 24, 2014 -- Updated 1914 GMT (0314 HKT)
Val Lauder says that for 1,700 years, people have been debating when, and how, to celebrate Christmas
December 23, 2014 -- Updated 2027 GMT (0427 HKT)
Raphael Sperry says architects should change their ethics code to ban involvement in designing torture chambers
December 24, 2014 -- Updated 0335 GMT (1135 HKT)
Paul Callan says Sony is right to call for blocking the tweeting of private emails stolen by hackers
December 23, 2014 -- Updated 1257 GMT (2057 HKT)
As Christmas arrives, eyes turn naturally toward Bethlehem. But have we got our history of Christmas right? Jay Parini explores.
December 23, 2014 -- Updated 0429 GMT (1229 HKT)
The late Joe Cocker somehow found himself among the rock 'n' roll aristocracy who showed up in Woodstock to help administer a collective blessing upon a generation.
December 23, 2014 -- Updated 2115 GMT (0515 HKT)
History may not judge Obama kindly on Syria or even Iraq. But for a lame duck president, he seems to have quacking left to do, says Aaron Miller.
December 23, 2014 -- Updated 1811 GMT (0211 HKT)
Terrorism and WMD -- it's easy to understand why these consistently make the headlines. But small arms can be devastating too, says Rachel Stohl.
December 22, 2014 -- Updated 1808 GMT (0208 HKT)
Ever since "Bridge-gate" threatened to derail Chris Christie's chances for 2016, Jeb Bush has been hinting he might run. Julian Zelizer looks at why he could win.
December 20, 2014 -- Updated 1853 GMT (0253 HKT)
New York's decision to ban hydraulic fracturing was more about politics than good environmental policy, argues Jeremy Carl.
December 20, 2014 -- Updated 2019 GMT (0419 HKT)
On perhaps this year's most compelling drama, the credits have yet to roll. But we still need to learn some cyber lessons to protect America, suggest John McCain.
December 22, 2014 -- Updated 2239 GMT (0639 HKT)
Conservatives know easing the trade embargo with Cuba is good for America. They should just admit it, says Fareed Zakaria.
December 20, 2014 -- Updated 0112 GMT (0912 HKT)
We're a world away from Pakistan in geography, but not in sentiment, writes Donna Brazile.
December 19, 2014 -- Updated 1709 GMT (0109 HKT)
How about a world where we have murderers but no murders? The police still chase down criminals who commit murder, we have trials and justice is handed out...but no one dies.
December 18, 2014 -- Updated 2345 GMT (0745 HKT)
The U.S. must respond to North Korea's alleged hacking of Sony, says Christian Whiton. Failing to do so will only embolden it.
December 19, 2014 -- Updated 2134 GMT (0534 HKT)
President Obama has been flexing his executive muscles lately despite Democrat's losses, writes Gloria Borger
ADVERTISEMENT