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None of this is new. Rapacious practices and corporate monoculture have long been a part of campus life. Textbook prices have increased 1,000 percent over the past 50 years, an arrangement that has benefited institutions. In the early 2000s, credit-card companies teamed up with universities to aggressively market “college affinity cards” to students. Then there is the big business of campus dining, dominated by Compass Group, Sodexo, and Aramark.
But recently something has changed. Predatory intrusions into the lives and finances of students and academic staff members are now happening on a scale that would have been unthinkable just 20 years ago. In just the past few years, groups like Blackstone have focused on dormitories and off-campus housing, reaping enormous profits from soaring rents. Casinos and gambling companies, often under the aegis of private-equity firms like Apollo, have sought ways into the college market. Private equity has also found its way into college sports. Florida State is reportedly exploring options with JPMorgan to fund its athletics department through private equity or other sources. In September a trio of private-equity firms bought a controlling stake in Learfield, a huge sports-marketing company that represents more than 200 NCAA teams. And perhaps most concerning of all are the inroads Wall Street money has made into classrooms by way of ed-tech companies like Pearson, 2U, and Udemy.
In many of those cases, universities open doors directly to private investors. In others, they are little more than bystanders as firms move in. In either case, it is the university community that pays. Students are aggressively courted by advertisers hawking predatory arrangements. Faculty and academic staff members, meanwhile, face risks to their income and job security. While these developments are all part of long-simmering trends, a new phase of academic capitalism is dawning, and campus communities are swarmed by those with something to sell them. While increasing capitalization has long been the project of higher ed, this is a step too far.
Declining state funding, inflation, and the shock of Covid have all contributed to tumbling revenue. In some cases, poor decision-making is also to blame. As Dan Bauman reported earlier this year, West Virginia’s budget deficit followed a calamitous combination of falling state appropriations and flawed predictions about fund-raising and enrollment growth. But shrinking budgets and unsound planning are only part of the problem. Another factor is the encroachment of the financial industry, private-equity firms most significantly, ever-deeper into higher education. “Business,” Goldrick-Rab notes, “has identified an opportunity … at a moment when higher ed is weak.”
In Bankers in the Ivory Tower: The Troubling Rise of Financiers in U.S. Higher Education, the sociologist Charlie Eaton details how universities have been entangled with private equity over the past three decades. Before the financial revolution, universities, even elite institutions like Princeton, mainly relied on tuition. Endowments were modest and typically invested in fixed-income securities. As Eaton explains, the 1980s saw a “new class of high financiers” emerge, creating private-equity firms and hedge funds that sought to broaden the speculative purview. Eaton traces higher ed’s Moneyball moment to 1988, when Tom Steyer, a giant of the industry and a prominent figure in Democratic politics, began to lobby Yale to invest in his hedge fund, Farallon Capital. The $300-million investment that Steyer eventually secured, and the model it inaugurated, would expand the university’s endowment from just over $1 billion to over $30 billion across the next three decades. The “Yale model” was born — and quickly emulated by other rich institutions.
As Eaton explained to me in an email: “Private equity looks for rent-seeking opportunities. These can occur in higher education and elsewhere when there are increased public subsidies or potential monopolies to exploit. The private-equity invasion of university housing and online-degree program management fits with these strategies.”
We are witnessing an intensification of those entanglements. Private-equity firms have come to rival some of the most powerful financial institutions in the world. According to McKinsey & Company, the total private assets under management reached $11.7 trillion in 2022. Earlier this year Blackstone, the behemoth of the industry, announced that it had become the first private-equity firm to manage $1 trillion. Newly flush with cash, this industry turned its sights on higher ed, and the results have been alarming.
As James Rodriguez reports in Insider, residences developed by such companies have taken to resembling resorts to justify their premium pricing. In the West Campus neighborhood of Austin, Tex., a fleet of new construction contains spas, bowling alleys, tanning beds, and rooftop pool areas called “sky lounges.” And per Rodriguez, the year-over-year growth rate of rent for privately owned student housing was up 8.6 percent in the fall of 2023. A one-bedroom rental at Crest at Pearl, an upscale apartment building a few blocks from the University of Texas drag, comes with amenities like a swimming pool, a sun deck, “hardwood-style” floors, and granite countertops. The rent: $1,824 a month. The building, like five others in the neighborhood, is owned by Blackstone through its American Campus Communities portfolio.
Colleges are not just bystanders to such developments. As Rodriguez details, institutions often sell dorms to private-equity companies outright or engage the companies to manage and renovate the property. In other cases, institutions have profited from the housing boom through direct investment. As Catherine Liu wrote in Insider, the University of California system has come under fire for a $4-billion investment in Blackstone’s real-estate fund.
Another new area of corporate incursion is gambling. In recent years, gambling companies and casinos, many of which have come under the ownership of firms like Blackstone and Apollo, have attempted to tap into the college market — to “Caesarize” it, if you will. Following the Supreme Court’s 2018 striking down of prohibitions on sports gambling, Michigan State, the University of Colorado at Boulder, and Texas Christian University struck deals to allow the promotion of gambling on campus. An enormous backlash followed, and in March the American Gaming Association restricted college partnerships. Several states have their own bans.
Despite such regulations, brick-and-mortar casino companies — themselves also entangled with hedge funds and private equity — have found their own way to student dollars. Earlier this year, a new $35-million Bally’s mini-casino (with 750 slot machines) was approved in State College, Pa., the home of Penn State University. The largest shareholder of Bally’s is Standard General LP, a hedge fund that last year struck a half-billion-dollar deal with a Chicago-based private-equity firm to build a casino in the city.
This past spring, Las Vegas Sands was granted permission by the Legislature of Nassau County, N.Y., to build a casino just across the street from Hofstra University. The company signed a multibillion-dollar deal with a private-equity firm, Apollo Global Management, in 2022. (Hofstra is suing Nassau County over the development.)
But private equity is not satisfied with merely para-academic spaces. Via the ed-tech industry, it is directly intervening in, and profiting from, classroom content. As courses were forced online in 2020, private equity moved in and ed-tech investments spiked. The results are harrowing. Coursera has announced it is working to generate AI-powered course content and automated student feedback. Adtalem Global Education, the parent company of several for-profit colleges and medical schools, has created an AI tutor (“Julian”), capable of offering personalized instruction to students. As the company’s chief customer officer put it, “you cannot suppress or pause technology advances like AI; there’s too much society can benefit from to hold it back.”
The ed-tech investment frenzy has cooled, with Wiley, Zovio, Grand Canyon Education, and many others reporting weaker financials. Last year the private-equity firm Thoma Bravo shed Frontline Education, selling the ed-tech company for $3.7 billion. While this is perhaps somewhat heartening news for those of us who teach, such a slump is probably less of a permanent retreat than a temporary reloading.
Faculty and staff members are also affected by the private-equity sector. While university pension plans have become rare, those that remain are often subject to the industry’s volatility. The University of California system’s pension fund is heavily invested in Blackstone. As Matthew Cunningham-Cook writes, the resulting high-risk investment strategy has, in fact, enjoyed middling returns and would currently be worth 40 percent more if it had pursued a simpler strategy.
When I asked her how universities might stay profitable while remaining true to their values, Goldrick-Rab was circumspect: “It’s really not clear.”
It’s tempting to think that America’s colleges — like the rest of its underfunded institutions — are just doing what they need to do to get by. And in some cases — say, the sky lounges of Austin’s West Campus — students may be getting what they want. Private equity has expanded some large endowments, and thus scholarship funds, to be fair. But those trade-offs aren’t necessary, and other models are available.
I recently returned from a conference at the University of Southern Denmark, a public university of around 30,000 students. Danes and students from around the European Union and the European Economic Area can attend free of charge. Walking around the main campus, in Odense, I was struck by the absence of advertising. There were no fliers for credit cards, no chain restaurants, no ads for Chegg or other student-services companies. As I was told by a university spokesperson, companies are allowed to advertise to students only on selected boards along the main corridors and are prohibited from advertising to students online. And while the university maintains partnerships with local and international businesses, it has no dealings with private equity.
Naturally, the university is entirely state-funded, and many have argued that we could never institute such a model in the United States. Still, we must admit that the business model we have adopted for higher ed in America was not inevitable. Those of us seeking a better, more equitable university should begin by demanding that our system shield its constituents from exploitation. While the American academy has been made corporate through and through, it nevertheless holds unique social and educational obligations to those who work and study within it. To treat those individuals as just another revenue stream, one whose limits can be tested with ever-deepening rapacity, is shameful and something we should all oppose.