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Call It a Ponzi Scheme

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Call It a Ponzi Scheme

Even during the Covid-19 crisis, colleges abuse their economic and reputational privileges. April 10, 2020
Covid-19
Education

As American unemployment mounted by the millions in March and April, the dance of the college diversity deans kept up its usual brisk pace. On April 1, Harvard University announced that its acting associate dean for inclusion and belonging was moving on to Denison University. But the Harvard associate deanship will not be vacant for long. On May 1, the current head of diversity, equity, and inclusion at New York University’s Abu Dhabi campus will step into the Harvard position, to direct the Equity, Diversity, and Inclusion team within the Dean of Students Office; the Office of BGLTQ Student Life; the Office of Diversity Education and Support; the College’s Title IX Office; the Women’s Center; and the Harvard Foundation for Intercultural and Race Relations.

Elsewhere, campus diversocrats enjoyed similarly enviable mobility while the rest of the country was shutting down. The vice president for inclusion and diversity at George Mason University will become chief diversity officer at the University of South Carolina at Columbia on June 15. The former occupant of the South Carolina position decamped to the Massachusetts Institute of Technology on March 15 to serve as its community and equity officer. On March 1, a former associate vice president for diversity, equity, and inclusion at the University of Iowa became associate vice president for inclusive excellence at Georgia Southern University. The first diversity, equity, and inclusion librarian at the University of Florida assumed her position in February.

Many college presidents are terrified that the coronavirus pandemic will devastate their schools’ finances and enrollment. Anyone who cares about a revival of serious learning can only hope that they are right.

Higher education today resembles a massive Ponzi scheme. Colleges desperately recruit ever more marginal students who stand little chance of graduating. Before their inevitable withdrawal, those students’ tuition dollars fuel the growth of the bureaucracy, which creates the need to get an even larger pool of likely dropouts through the door to fund the latest round of administrative expansion. Administrative positions at colleges and universities grew at ten times the rate of tenured faculty positions from 1993 to 2009, according to academic consulting firm ABC Insights. By the 2013 school year, there were slightly more campus administrators nationwide than faculty; spending on the bureaucracy was equal to spending on all educational functions, including faculty. Tuition rose to cover those bureaucratic expenses, regardless of whether families could afford to pay it. Tuition at private four-year colleges grew 250 percent from 1982 to 2012, while the median family income rose about 18 percent, adjusted for inflation, according to ABC Insights. Since the 2008 recession, tuition at four-year public colleges rose 35 percent.

The coming higher-ed crisis would, in an ideal world, take out the student-services bureaucracy—that dizzying edifice of associate vice chancellors for student engagement and assistant vice presidents for student development—starting with its most destructive component: the diversocrats. Their job is founded on a patently false proposition: that colleges are filled with racists and sexists who impede the advancement of females, blacks, and Hispanics. To the contrary, virtually every college today is trying to admit, hire, and promote as many females, blacks, and Hispanics as possible. Belonging to those identity categories confers a large advantage on the academic job market and in admissions. Nevertheless, the diversity bureaucracy spends its days devising new ways to promote the culture of victimhood, at the cost of millions of dollars in student loans and private tuition.

The frenzied desire to boost “diversity” creates the pretext for much of the bureaucratic bloat. Colleges admit so-called underrepresented minorities (URMs) with academic qualifications far below their white and Asian peers. Those alleged beneficiaries of racial preferences struggle academically—as anyone would, catapulted into a school for which he was inadequately prepared. Cue the retention specialists, the deans of belonging, and the ubiquitous “teaching and learning centers” dedicated to “inclusive” pedagogy, to try to keep the preference beneficiaries afloat. At the same time, the vice chancellors for equity, diversity, and inclusion encourage the struggling students to interpret their difficulties as the product of institutional racism. With luck, a protest breaks out over an imaginary hate crime, such as a professor’s reading of the N-word from a literary text, which the students leverage to demand a tripling of the diversity bureaucracy and more preferential hiring and admissions. The college president is only too happy to comply, in order to demonstrate his racial sensitivity, and the cycle begins all over again.

At highly selective colleges, academic mismatch applies to only a relatively small subset of the student body—albeit one with huge political clout. But outside that empyrean realm of the academic elites, the mismatch problem bleeds into the entire student population, many of whose members should not be in college at all. Half of American colleges and universities lose a quarter or more of their freshman class in the first year, according to University of Pennsylvania education professor Robert Zemsky. Many students head for the exit during the first six weeks of classes. Forty percent of college freshmen don’t even graduate. But no one holds the colleges responsible for admitting students who are patently unprepared for—and most likely only marginally interested in—college work. “The priority for many college presidents is getting freshmen in the door and tuition dollars in the bank,” wrote UC Berkeley professor David Kirp in the Chronicle of Higher Education in 2019. “Nobody gets fired because students are dropping out.”

Conservatively, half of American college students should not be in college at all; they are neither intellectually prepared for nor temperamentally inclined toward postsecondary book learning. Yet the dominant narrative in our culture today is that the only way to be successful and self-respecting is to have a college degree. This narrative reflects the experience of the nation’s elite degree holders, who are largely clueless about work that does not involve sitting at a desk and using a computer. That narrative pushes students away from practical training in a trade, while a relentless campaign from campus pitchmen pulls them into four-year colleges. Vice chancellors of enrollment, vice presidents for enrollment management, and executive directors of university marketing try to find potential recruits and persuade them to send in that first tuition payment, or at the very least a non-refundable deposit. The enrollment bureaucracy’s mantra is “optimizing yield”—getting as many warm bodies into your dorms and classrooms, if only briefly, for every thousand recruiting dollars you spend. A vast industry of enrollment consultants assists the in-house yield optimizers, promising to “reduce melt” (i.e., reduce no-shows), provide “multi-channel marketing,” and measure “product knowledge.” Their problem is right out of Econ 101: the nationwide supply of slots in each year’s freshman class outstrips demand—except in that thin upper crust of name-brand, status-conferring institutions. Thousands of obscure colleges fight for each applicant with techniques that resemble time-share marketing: offering priority in housing and in choosing a simpatico sleep-until-noon schedule of classes, say, to students who apply for early admission.

Left-wing professors who scorn “neoliberalism” (academic-speak for capitalism) blind themselves to the fact that their salaries depend on a ruthless economic battle for consumers. And anyone who still thinks of college as a place defined by a passion for knowledge and beauty is equally out of touch. The primary concerns of college leaders are developing new sources of revenue and competing for students, according to a 2019 Chronicle of Higher Education poll. Even before the coronavirus sent a spasm of fear throughout the enrollment bureaucracy, colleges were nervously eyeing their sinking enrollment yields. About 60 percent of the public and private institutions surveyed by the American Association of State Colleges and Universities and the Council of Independent Colleges missed their enrollment goals last year. Sixty-seven percent did not meet their net-revenue goals.

And now, the coronavirus threatens tuition dollars, government support, and alumni giving. Some high school seniors are reconsidering their plans to start college this fall—roughly 12 percent to 15 percent, depending on the poll. Some say they want to stay closer to home; some are concerned about their family’s finances. A third of seniors in one poll were considering less expensive institutions. A whole branch of enrollment consulting is devoted to rustling up foreign students, since they usually pay full tuition. That sector is especially at risk, including Chinese students who may have a harder time getting a student visa and who may fear difficulties in returning home.

Already-enrolled students have been sent packing and told to hook up their laptops for distance learning. Almost no college is considering a tuition rebate, which implies that online learning should be valued at the same rate as an on-campus class. Students and their parents may start to ask why they should pay astronomical fees for a campus experience if they can get the same instruction over the web.

After the 2008 recession, colleges made up for the drop in state support by raising fees. Tuition jumped nearly 30 percent nationwide from 2007-2008 to 2014-2015, while real median income fell roughly 6.5 percent, according to Paul Friga of ABC Consulting. Student debt is now at more than $1.6 trillion. The economic downturn caused by Covid-19 shutdowns will likely be much worse than the 2008 recession. For now, most college presidents in one recent poll said that they were not contemplating a tuition increase; there is little reason to believe that that intention will last.

Philanthropic donations will fall off. So insatiable has been colleges’ appetite for ever-more revenues that many have devised a ritual known as “college giving days” to hit up even enrolled students for more money, over and above their astronomical tuition contributions. Emory University’s director of alumni and constituent giving magnanimously cancelled the Emory Day of Giving planned for April 2 once Emory announced that it was shutting down for the year. But Emory did not stop fundraising from students entirely. Instead, the office of alumni and constituent giving created a crowdfunding campaign for students and parents to give to a student-hardship fund.

Emory’s endowment is $7.87 billion. Conceivably, this moment is precisely what an endowment is for. Conceivably, going to students with cup in hand is unseemly. But colleges have no shame when it comes to chasing dollars. In June 2017, college endowments contained $568 billion, according to economist Richard Vedder in Restoring the Promise. Princeton had nearly $3 million in endowment for every student; Harvard, $1.2 million per student. But 73 percent of presidents polled by the Association of American Colleges & Universities in late March said they were not planning to increase spending from their endowments during the Covid-19 crisis. Instead, some students are reaching out directly to alumni for support, apparently feeling abandoned by their schools; the Harvard Club of Louisiana asked its members to contribute to a student-organized fund to help undergraduates burdened by Harvard’s vacate-campus mandate.

The higher-education establishment is complaining about its $14.5 billion coronavirus bailout package. That taxpayer subsidy is “woefully inadequate,” the president of the American Council on Education said in a written statement; $50 billion was the bare minimum needed to keep the sector afloat, according to ACE and other college associations. The diversocrat hustle is a primary reason why colleges don’t deserve another dime from taxpayers. Another is the lack of evidence that the majority of students learn anything in college, besides a belief in their own victimhood.

For years, as tuitions climbed to ever-more obscene levels, observers predicted that the higher-ed bubble was surely about to burst. That never happened. Now, however, the long-overdue correction may be near. Twenty percent of private colleges are at risk of closing due to the current economic downturn, according to Robert Zemsky. Most won’t be missed. Raising college-entrance standards to require actual college preparedness would eliminate an even larger number of schools and the gluttonous bureaucracies within them. Alumni should stop giving, absent certain knowledge that their alma mater is focused exclusively on education’s core competency: passing on our cultural inheritance. They should redirect their support to institutions that help the working poor, such as trade schools and apprenticeships, as University of Pennsylvania law professor Amy Wax has advocated. Identity politics so far has not destroyed vocational education, though it is nipping around the edges.

The higher-education establishment will fight tooth and nail to preserve the status quo in the face of the coming economic dislocation. The president of the Association of American Colleges and Universities predicted blandly: “We are likely to see a new world order of higher education—more global, more online, more focus on return on investment, and overall more student-focused”—as if higher ed is not already defined by an anti-intellectual “student-centered” model. The only focus that should matter is on knowledge. Until we see deans of inclusion and belonging on the unemployment lines, we will know that colleges continue to abuse their economic and reputational privileges.

Photo by Maddie Meyer/Getty Images

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