Four ways banks have ruined higher education

Colleges and universities are padding their bottom lines -- and the American public is footing the bill

By Noah S. Bernstein

Published October 4, 2012 4:41PM (EDT)

This article originally appeared on AlterNet.

 Like many others, I’m a passionate alumnus of my post-secondary institutions. I care deeply about preserving the rich culture of learning and community-building that fundamentally shaped my life. Yet it is becoming increasingly clear that drastic changes are being made to American college and university life -- changes that are fundamentally altering the ecology of higher education in this country and undercutting the very mission of the college experience as we know it.

A growing culture of reform has turned the campus quad away from preparing students for citizenship -- that combination of “intelligence plus character” the Reverend Dr. Martin Luther King. Jr. once famously described. In its place, we now have campus environments that hold certain aspects of student life hostage to corporate interests, molding students into consumers at the same time the voices and opinions of the student body are increasingly silenced. As a result, higher education, often noted as the best insurance policy toward social mobility, is now no such thing (at least good insurance policies pay their claims).

Here’s a look at some disturbing changes taking place on campuses across the country.

1. Privatizing Student Life

Changes in campus dorms, quite possibly the epicenter of the student experience, represent a clear illustration of how this new world order is unfolding. Often unknown to students, campus dorms across the country are no longer run by the university, but by private companies that reap large profits from their management deals. These deals have become particularly prevalent at public universities, which have experienced massive funding loses in recent years and are increasingly turning to corporate backing to fill the void (the universities, of course, take a cut of the profits raised by the management companies).

Education Realty Trust is one such company. One of the largest developers of privatized collegiate housing, EdR operates in 23 states and since 2000, has developed more than 33 privatized housing communities on and off campus. The dorms it develops are more than cement structures for living; in many cases, it has transformed dormitory residences into extravagant resorts. Examples include the amenities-rich complex now being built at the University of Alabama, which features a movie theater, clubhouse and resort-style pools and fitness rooms, and the Players Club, a resort-style housing complex that was built for Florida State University. Similar projects are in progress at the University of Texas-Austin, University of Kentucky and the University of Connecticut-Storrs.

Perks like these come at a price, of course, so EdR seeks out schools with solid student populations that will foot the elevated costs (ideally, those with populations of greater than 10,000-15,000 students, as well as high tuition and graduation rates). As Amy Scott reported for NPR, at the University of Louisville privatized dorms cost about $600 more per student/per semester than traditional dorms.  And those extra fees come right out of students’ pockets.

As a result, colleges are intentionally burdening the entire student body with increased housing costs, and putting a particular burden on working families and low-income students—all in the name of profit. In addition to forcing many students to pile up excessive amounts of debt that will have ramifications long after they have graduated from college, such increased fees may also interfere with their studies and limit student engagement in the larger community (it’s hard to find time to engage in clubs and activities, or make it to the library, when you have to work two jobs just to keep a roof over your head).

When faced with this criticism, colleges and universities often argue that the combination of increased competition to attract the best students and severe budget cuts make private companies like EdR, and competitors such as American Campus Communities, a necessary tool in maintaining their competitive edge—and of course, bolstering profit in this new higher education marketplace. And sharing revenue with these privately held companies isn’t the only way colleges are looking to pad their bottom lines; in some cases, colleges and universities will use tax-exempt bond financing to fund these projects so that they can be excused from local property taxes--a simple tax evasion to preserve profit.

The inherent message and ramifications of this policy for students is clear: the need for revenue is real and we have no problem passing this burden on you.

The trouble isn’t limited to public universities alone. Some of the top liberal arts colleges in America, including Skidmore, Gettysburg and Kenyon, have adopted a different route to raising revenue: Rather than privatizing housing outright, these colleges have instead established tiered housing fees, which charge students more to live in certain types of student accommodations. At Kenyon, where tuition, room and board cost $54,760 per year, students can choose to live in new apartments rather than traditional residence halls, if they have the ability to fork over an extra $500 per semester. Inevitably, this policy results in a concentration of wealthier students in nicer facilities, while relegating modest-income students, who can’t afford to pay the fees, to lesser housing options.

The tiered housing policy is not only unjust, it also undermines the responsibility of higher education to equip leaders to explore diverse perspectives, understand the multiplicity of human cultural expression and experience social emotional learning—a process of learning and developing self-awareness, social mindfulness, relationships skills and responsible decision-making. With these policies in place, there is no doubt that colleges and universities are overlooking their obligation to breed global citizens that will benefit democratic engagement in civic life. And the price for that shift will eventually be paid by our society as a whole.

2. The Consumer Body

If reaching for efficiency through housing wasn’t enough, some colleges and universities are now transforming student ID cards into prepaid debit cards, thus profiting from student spending through unique checking account and debit card deals.

According to a recent report, "The Campus Debit Card Trap," by the U.S. Public Interest Research Group, nearly 900 colleges have partnerships with financial institutions that attach bank products to student IDs. The report finds that banks and financial institutions now influence and control federal financial student aid distribution to over 9 million students by connecting checking accounts and prepaid debit cards to these IDs.

For quite some time, federal student aid was disbursed via check with no cost to access the funds; now, due to these new financial deals, students pay fees to access their student aid, including fees for activation, ATM fees, overdrawing fees, per-swipe fees and in-activity fees. According to SEC filings, Higher One—one of the largest integrated financial aid disbursement services companies—made $142.5 million in revenue in 2011 through extracting fees from student aid disbursement cards.

To date, 32 of the 50 major public colleges in America have brokered deals with banks to issue ID cards that act as debit cards. For example, Huntington Bank paid $25 million to co-brand and link its checking accounts with Ohio State University student IDs. At the University of Minnesota, school officials agreed to allow TCF Financial to link ID cards as debit cards. In turn, the university will receive $1 million in revenue a year, as well as a $2 million signing bonus. And retail giants such as Walmart are also cashing in: Walmart is currently marketing its Student Money Card, backed by GE MoneyBank, on college campuses. In most cases, these cards also carry hefty student fees for activation, while offering minimal consumer protections.

This illuminates college and universities' intentional strategy of prioritizing new revenue streams at the cost of further burdening students of modest means—the price tag of college admission as well as full completion of one’s undergraduate study. More and more, students are not treated as future leaders, but as prized consumers of luxury products. It’s worth asking: are colleges today nothing more than tourist attractions designed to entice foreign students and wealthier families? It’s beginning to look a lot that way.

3. Diluting the Classroom

The next innovative product being marketed to students, and being funded and invested in heavily by colleges and universities as well as by Silicon Valley, are online learning systems. Without a doubt, these new systems will fundamentally change the brick-and-mortar model of higher education: elite institutions have already formed joint ventures such as Coursea, Edx, Udacity, and 2tor to develop online classrooms. Well financed (investment in education technology companies has quadrupled since 2007) and extremely data driven, these programs have now set the bar for other second-tier institutions to catch up.

By embracing online pedagogy, universities will have essentially altered notions of how we learn, what we study and who learns what, while also opening up a running debate about the cost of education and the value of the college degree. And yet, with no real quantifiable data that suggests that online learning is a genuine alternative to real classroom instruction, or that families who are footing the skyrocketing tuition bill actually welcome the idea, students and employers are genuinely worried about the quality of online learning and the future of their education.

Without a doubt, schools don’t have a monopoly on educating students, as online media plays a massive role in engagement with the 21st-century world. However, cheapening the model in hopes for efficiency and revenue, while expecting to enhance student performance seems like folly—a point currently being played out at community colleges across the country.

At Queensborough Community College, a branch of the City University of New York, some faculty are currently in a dogfight with school administrators who want to cut in-class writing courses from four hours a week to three. This tentative policy shift would prioritize cost cutting and curriculum restructuring at the expense of classroom-learning time. Similar to using online learning systems to improve educational outcomes for students, it seems unclear how pushing students away from professor-to-student engagement will help them perform at higher standards.

4. The Student Voice on Mute

With the magnitude of the continued changes taking place at colleges and universities, one would think that college newspapers, many with long histories of being independent voices on campus, would play an even larger role in informing and empowering student issues and activism on campus. But this fundamental presence is also being threatened.

Recently at the University of Georgia, student journalists at The Red and Black walked off the job after the nonprofit publishing company that owns the paper installed non-student staffers who held strong editorial and censorship power over student employees. Although the publishing company and The Red and Blackare independent of the university, interference in their reporting inspired students to walk away from a situation where the power structure was clearly encroaching on their individual freedoms.

The right and freedom to vote on college campuses is also becoming increasingly difficult to ensure. Voter ID bills across the country threaten to invalidate the student vote, while also disenfranchising people of color, disabled people, seniors and low-income families.

In Pennsylvania, new state laws threaten to invalidate 85% of student IDs for identification at the polls because they lack expiration stickers. In Tennessee, student identification cards will no longer be accepted at the polls this November. Interestingly, state-issued handgun permits are an acceptable form of identification.

Is it possible we’ve gotten our priorities slightly mixed up?

At What Cost?

College students know that the promise of higher education has been diluted. They see that college costs are soaring, and that tuition costs have risen faster than the rate of inflation. Recent data from the Department of Education estimates that if these tuition increases continue, the average cost of a public college will have more than doubled in 15 years.

Students also see that their indebtedness is at unprecedented levels. Student debt in this country is now at $1 trillion. One in six loan borrowers are in default and dangerously unprotected by the current bankruptcy laws. Students, particularly low-income students, also experience low degree completion rates: As reported by the Organization for Economic Co-operation and Development, only 46% of American college students complete college once they start. This ranks last among the 18 countries that the OECD evaluates.

Our institutions of higher learning cannot continue to offer their best deals only to the privileged few. What seems to characterize most higher education reform is a focus on the skills-gap; however, this undermines the continued need to broaden both access to post-secondary education and college retention across the entire population. Expanding access to higher education is pivotal, but it must also be complemented by strong pedagogical substance on campus that focuses on developing critical thinking skills—so that students are able to understand learning within the framework of social relationships, as well as active participation in democratic life.

What and how we learn is as important as the opportunity to learn itself. That is why changes in the composition of higher education will forever alter what it means to be a productive worker and earner in this country. Students need to be the voice for change and be supported by their institutions to value the experience of social living and critical thinking, rather than prioritizing their turn at an exclusive playground.

Policy makers, university administrators and parents must do their part to demand and preserve investments in well-rounded curricula that are not bound by the pursuit of a paycheck or institutional profit. Instead, we must be driven by the social contract of the human family that fosters engagement in civic life and the dignity of the human experience in a global world.

Noah S. Bernstein

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