Thomas Frank

The Price of Admission

By Thomas Frank

A vignette from the campaign trail, circa March 2012: The Republican front-runner was taking questions at a town-hall meeting in Mahoning Valley, Ohio. A high school senior rose to explain that he was on his way to college, but that he worried about the cost. Although the student didn’t mention it—he scarcely needed to—tuition increases have been outpacing inflation for decades, and these days college graduates routinely begin their working lives deep in debt. What was Mitt Romney going to do about it?

In response, Romney gave one of his patented lessons in managerial smugness. The solution was to “recognize that college is expensive” but that competition “works.” No “government money” would be forthcoming under a Romney regime, the candidate went on, to the kind of applause that these days seems to follow any public declaration of tightfisted self-righteousness. And so it was up to the student-consumer himself to “shop around,” compare the goods offered up in the freewheeling marketplace of educational choice, and make the best decision he could.

Ordinarily, conservatives are willing to believe the absolute worst about the groves of academe. In their view, college is a gilded re-education camp, where innocent children of the entrepreneurial class are turned into brainwashed Maoist cadres, chanting slogans and grinding away the hours in a sexual frolic. The university’s scholarly departments, they believe, are filled with political extremists; its graduates are snobs; its concern with diversity is a form of censorship; its scientists tell lies in order to further the “global warming” power grab or prepare the ground for more stem-cell monkey business.

Academia’s pricing, however, is apparently A-OK. Nothing wrong here. Consumers shop around, they compare and contrast, and they get the best deal they can, reassured all the while by their awareness that competition works. Just don’t come whining to the government for help.

But what if competition doesn’t work? What if academia’s pricing, which has hung student debt like a millstone around the neck of an entire generation, is completely out of whack?

This is not the first time such questions have been posed. Twenty years ago, under the presidency of George H. W. Bush, the Department of Justice charged the Ivy League universities and MIT with conspiring to restrict financial-aid awards, and thus to fix prices. Officers of the various Ivy League schools, it seems, were then in the habit of meeting several times a year to discuss tuition increases, faculty salaries, and financial-aid packages with their supposed competitors. It was classic price-fixing behavior—Attorney General Dick Thornburgh called the schools a “collegiate cartel”—and the antitrust violation seemed obvious on its face. The Ivies settled immediately after the suit was filed in 1991, signing a consent decree that forbade them to collude over tuition, salary, or financial-aid awards. (The decree expired in 2001.)1

To judge from newspaper reports, the Ivy League antitrust suit was to some degree a reaction against out-of-control tuition costs, of the sort that still rankle us today. The 1980s were, after all, the first great period of galloping tuition inflation. Parents of college students were understandably outraged as the total price of a year at, say, Princeton outpaced the cost of a new car and began to approach the annual income of the typical American. (When the Justice Department launched its antitrust investigation, annual tuitions at Ivy League schools were in the neighborhood of $16,000; today they are around $41,000, and once you factor in room and board, the tab is closer to $54,000.)

Looking back from twenty years on, it’s clear that the antitrust suit did little to rein in tuition increases. Some believe it may have driven costs even higher. But the central facts are worth remembering: the most prestigious universities in America were acting like a cartel, consumers screamed in protest, and thanks to the quaint democratic dynamic that still sometimes prevailed in those days—even when Republicans were in power—government acted.

Today, of course, we know better. The situation may be exponentially worse, and we may have a Democrat who burbles constantly from the presidential throne about the wonders of an educated public, but we have seen the light: we have learned about Markets. As Mitt Romney says, we know that competition exists, and that it will always guarantee us the best possible deal.

Oh, government can help in some regards. It can shovel out the student loans that subsidize the booming education industry. It can enforce tough bankruptcy standards, which make it virtually impossible for students to escape their indebtedness and thereby encourage private companies to write even more loans. And, of course, government can take the blame when the whole structure comes toppling down in a cascade of defaults, involving not only the loans themselves but also the asset-backed securities into which those loans have been so cunningly packaged. All we will need on that occasion is another Rick Santelli to rail against the liberal-arts deadbeats—those government- funded loafers responsible for ruining millions of hardworking derivatives investors.2

But do something to control costs? Draft a bailout plan for students in debt? Resolve to make state schools so cheap and so excellent that they drive down tuition everywhere? We might as well collectivize agriculture, or embark on a five-year plan for tractor production.

One of the arguments that the Ivy League brass made in their defense back in 1991 was that universities were not businesses but charitable institutions. This struck them as axiomatic, because of a very simple economic fact: tuition costs were high, but they could have been much, much higher.

After all, what universities were selling then, and what they are selling today, is an extremely valuable commodity: entry into what sociologists call the professional-managerial class. There’s a reason that Lexus LX 570 that almost ran you down in the crosswalk the other day had a Harvard sticker neatly centered on its rear window. And it isn’t because the driver believes we would all profit from immersing ourselves in theories of intersectionality, or because of a lifelong attachment to Crimson field hockey. That sticker is there because “Harvard” is a crucial part of who that SUV driver is. A college degree from a prestigious school is the credential that matters most in American life, and growing college-enrollment figures suggest that an increasing number of Americans have figured this out.

Why do they think this? Because just about everyone tells them that it is so. We live in a “knowledge economy,” the consensus assures us, and awesome universities are both America’s great competitive advantage over the rest of the world and every child’s ticket to personal financial success.

In such a situation, the fact that the cost of attending an elite college has spiraled up like a runaway ICBM is utterly unsurprising, and it has little to do with the expenses involved in transferring wisdom from the professor’s head into yours.3 An annual pass to Disneyland would also cost $54,000 if society believed that what it took to make you eligible for success was a great many hours spent absorbing the subtle lessons of the Finding Nemo Submarine Voyage. And absent any flood of top-tier, quaintly antique universities into the marketplace, such costs will continue to increase until they hit the limit that people will pay for such a golden ticket. Ten years from now, in fact, college students may well look back with jealousy on their predecessors who got away with a mere hundred grand in debt.

Even in 1991, it had been a long time since anyone took seriously what the universities offered as their all-purpose defense: that everything they do is permissible because they are charitable institutions. Charitable institutions do not exploit the labor of their charges, nor do they relentlessly bid down their wages, as universities do with the grad students and new Ph.D.’s who take on much of the teaching nowadays. They don’t run their endowments as you would a hedge fund (or, as is often the case, invest them directly in such concerns). They don’t take kickbacks to steer kids into the toothy mouths of expensive private lenders. They don’t sell their souls for seats on corporate boards or research grants from tobacco companies or a Division I title. They don’t replace scholarly leaders with armies of professional managers who proceed to fiddle with the curriculum, funnel resources to business schools, and strive for supremacy as (in the winning words of one expert on the subject) “one among many industries that pursue intellectual properties.” These are the deeds of profit-maximizing entities. The fact that universities don’t have shareholders and don’t pay exorbitant bonuses to top officers is merely a matter of organizational detail.

Then again, given the valuable cultural real estate that universities control, one wonders why it took them so long to actualize their inner corporation. We are living in a golden age of price discovery, in which our masters have figured out that no one is going to stop them from charging as much as they want for necessities that ought to be or used to be considered public goods. Medicine, of course, is the classic example: how much can you get Americans to pay for the chemotherapy they need to stay alive? Electric power was also, briefly, an arena for this kind of behavior, back when Enron was selectively plunging millions of California households into darkness. And before long, our masters will no doubt have figured out ways to extend the logic to other necessities: food, highways, public safety, political representation, a prime poolside spot in the afterlife, all of them yielding whatever the traffic will bear.

It is easy to criticize the corporatization of education, since the examples are so plentiful and almost no one denies that it’s taking place. But criticizing it is different from actually halting its progress—a political step we seem unable to take.

Indeed, the trends all point in the opposite direction. Until recently, the United Kingdom, which has long had one of the best higher-education systems in the world, capped university fees at the annual equivalent of $5,200. (Before 1998, tuition was free throughout the United Kingdom.) Now Britain is moving rapidly toward the American model, with its galaxy of private, for-profit institutions and its staggering price tags. It is doing so because British leaders, like their American brethren, have convinced themselves that what universities are really about is getting rich; that they exist to deliver the goods in the knowledge economy; and that in order to prepare students for wealth accumulation in a lean-and-mean knowledge-transmission sector, those students must be made to pay for what they receive. Without indebtedness to sharpen the point of the stick (and make the carrot seem that much juicier), students will just sit around in their quadrangles as they always have, wallowing in pointless disciplines and tossing frisbees.

Massive indebtedness changes a person, maybe even more than a college education does, and it’s reasonable to suspect that the politicos who have allowed the tuition disaster to take its course know this. To saddle young people with enormous, inescapable debt— total student debt is now more than one trillion dollars—is ultimately to transform them into profit-maximizing machines. I mean, working as a schoolteacher or an editorial assistant at a publishing house isn’t going to help you chip away at that forty grand you owe. You can’t get out of it by bankruptcy, either. And our political leaders, lost in a fantasy of punitive individualism, certainly won’t propose the bailout measures they could take to rescue the young from the crushing burden.

What will happen to the young debtors instead is that they will become Homo economicus, whether or not they studied that noble creature. David Graeber, the anthropologist who wrote the soon-to-be-classic Debt: The First 5,000 Years, likens the process to a horror movie, in which the zombies or the vampires attack the humans as a kind of recruitment policy. “They turn you into one of them,” as Graeber told me.

Actually, they do worse than that. Graeber relates the story of a woman he met who got a Ph.D. from Columbia University, but whose $80,000 debt load put an academic career off-limits, since adjuncts earn close to nothing. Instead, the woman wound up working as an escort for Wall Street types. “Here’s someone who ought to be a professor,” Graeber explains, “doing sexual services for the guys who lent her the money.”

The story hit home for me, because I, too, wanted to be a professor once. I remember the waves of enlightenment that washed over me in my first few years in college, the ecstasy of finally beginning to understand what moved human affairs this way or that, the exciting sense of a generation arriving at a shared sensibility. Oh, I might have gone on doing that kind of work forever, whether or not it made me rich, if journalism had not intervened.

It’s hard to find that kind of ecstasy among the current crop of college graduates. The sensibility shared by their generation seems to revolve around student debt, which has been clamped onto them like some sort of interest-bearing iron maiden. They’ve been screwed— that’s what their moment of enlightenment has taught them.

As for my own cohort, or at least the members of it who struggled through and made it to one of the coveted positions in the knowledge factory, the new generational feeling seems to be one of disgust. Our enthusiasm for learning, which we trumpeted to the world, merely led the nation’s children into debt bondage. Consider the remarks of Nicholas Mirzoeff, a professor of media at New York University, who sums up the diminishing returns of the profession on his blog: “I used to say that in academia one at least did very little harm. Now I feel like a pimp for loan sharks.”

1. MIT chose to fight on alone. The school was convicted of price fixing in U.S. District Court in 1992, but the following year, an appeals court sent the case back for review. Before the trial could begin again, MIT settled as well, working out a compromise with the Justice Department that was subsequently written into law.

2. When that day comes, you can be pretty sure that tomorrow’s Tea Partiers will also blame the usual scapegoats: college professors who teach inexcusably airy subjects like English and philology (but never the professors who teach marketing or civil procedure).

3. The ascending cost of state universities is propelled by an obvious, additional cause: cutbacks in state funding.

From Harper's Magazine, June, 2012

Pity the Billionaire

From the bestselling author of What's the Matter with Kansas?, a wonderfully insightful and sardonic look at why the worst economy since the 1930s has brought about the revival of conservatism

The Wrecking Crew

Casting his eyes from the Bush administration's final months of plunder to the earliest days of the Republican revolution, Thomas Frank uncovers the deep logic behind the graft and incompetence of conservatives in power.