The US’s higher educational institutions today are a far cry from the promise progressives have envisioned for higher education. Successful public higher educational institutions have, rightly so, been defined as those that uphold education as a public good by providing it at an accessible and equitable cost for the many; are funded by collective sources of revenue; foster sustainable lifestyles for employees; and act as economic mobility engines for their communities. Instead, skyrocketing student debt, massive funding cuts, and extreme wealth concentration plague today’s universities. In the 21st century, our higher educational system looks far more like a “pay to play” system than one that was designed to ensure access and equity for all.
In this report, Aman Banerji, Brigid Kennedy, and Ademali Sengal document how the decline in state funding has impacted Michigan State University (MSU) and its students. We argue that despite state funding challenges, MSU must be held accountable for the institutional spending priorities it has enacted in the last two decades – priorities that are neither set by nor serve students, faculty, or workers on the campus. The financialization of higher education—a growing phenomenon in today’s economy, where financial actors and their values play an outsized role on college campuses—has led to financial actors playing an outsized role within colleges and universities. This can be seen in administrative decision-making that prioritizes revenue for the financial sector, chiefly borrowing, risky investments, and astronomical executive pay.
In order to fund such spending priorities, universities have both increased costs on campus, including tuition price and additional fees, while simultaneously redirecting existing institutional resources away from scholarships and faculty and campus worker wages and benefits.
The university’s decisions to decrease annual endowment spending to 4.6%, invest in hedge funds (and pay the astronomical attendant fees) instead of the S & P 500 index, and gamble on interest rate swaps have cost the university a staggering $493.6 million, enough to provide the full cost of attendance for 20,111 in-state students for one year.
For every $1 MSU spent on scholarships and fellowships in the 2016-17 school year, it spent 32 cents paying hedge fund managers on its investments, and 74 cents on interest payments for capital and related financing activities.
Our report demonstrates how MSU, like public institutions nationwide, is increasingly operating more as a company or financial corporation than as an institution providing a public good. This report criticizes university leadership that has both facilitated and consistently reinforced these practices, creating a scenario where higher education’s role as a source of economic mobility is declining.