Al Lord says he’s sorry:
A former CEO of the student loan lender Sallie Mae says the cost of tuition at U.S. universities is “criminal,” but acknowledges that he played a role in their rising, according to a forthcoming book.
In an adaption of Wall Street Journal reporter Josh Mitchell’s “The Debt Trap,” set to be published on Aug. 3, Al Lord, who joined Sallie Mae in 1981, said that he first felt the impact of tuition costs when he started paying those of one of his grandchildren.
Lord said he paid $175 a semester during the 1960s when he attended Pennsylvania State University, a stark difference to the tuition he paid for his grandson, who enrolled at the University of Miami several years ago. The college currently charges $75,230 for an undergraduate on campus, which includes tuition, fees, housing and meals, transportation and other expenses.
“It’s criminal,” Lord reportedly said.
He has reportedly also paid the tuition of several other grandchildren, at close to $200,000 a person.
“Boy, am I sure glad we saved for my grandkids. If the average income is $40,000 or $50,000 or $60,000, I just don’t know how you do it,” Lord said.
He reportedly acknowledges in the book that he understands he played a role in encouraging colleges to increase their rates.
According to “The Debt Trap,” after Lord started his first run as CEO for Sallie Mae in 1997, he started a series of incentives to allow students to take out more loans so that colleges could charge more. Sallie Mae started bundling packages of student loans that were then sold to investors.
Additionally, Lord persuaded schools to have students borrow money from either the banks, where Sallie Mae bought its student loans, or the student lender itself, according to the book. Promises from Sallie Mae that additional money from private investors would be available for students to tap into led its stocks to subsequently soar.
Here’s a stat that I didn’t actually believe when I first read it, so I dug up the source documents to check whether or not it was correct (it was):
Over the the last decade core revenue at independent (non-religiously affiliated) private colleges and universities in the USA has increased by 148% in inflation-adjusted per student terms!
(Core revenue includes tuition, government subsidies, endowment income and other private gifts, and research grants. It doesn’t include revenue from associated activities like student housing and hospitals.)
At religiously affiliated private colleges and universities core revenue has increased by 87% in real per-student terms over the last ten years.
Meanwhile, at public institutions, core revenue has increased by “only” 23.4% in these terms. (This is still 36% greater than per capita GDP growth over this same period).
Overall, core revenue revenue increased by nearly 50% in real per capita terms at American colleges and universities between FY2009 and FY2019.
Where are these hundreds of billions of dollars of increased revenue (core revenue increased from $280 billion to $511 billion between 2009 and 2019) going? They certainly aren’t going into full time faculty salaries, which increased by a combined total of 2.1% over the course of the decade. They aren’t going to the 63% of faculty in American higher ed who have contingent — non-tenure track — employment status. (Average compensation to adjuncts for teaching a three-credit course remains around $3,500, which is the same as it was in nominal dollars two decades ago).
Check this out: in just seven years (FY2012 through FY2019) salary outlays for “management staff” at public institutions have increased by 24% in real dollar per student terms. Again this is during a time when compensation for faculty has been declining, because full-time faculty salaries are flat, while the percentage of adjuncts is increasing.
Then there are all your shiny new buildings, your lazy rivers and climbing walls, your fundraisers, your consultants, your cousin Vinny who is now the assistant vice provost for synergistic interdisciplinary excellence, etc.
The funny thing (not funny like a clown) is that here’s how the first sentence of the summary of the AAUP’s annual report on the economic status of the profession — the profession being college teacher — sums up all these data:
This year’s Annual Report on the Economic Profession outlines how years of unstable funding, combined with the impacts of the COVID-19 pandemic, have created an existential threat to shared governance and academic freedom in higher education that severely weakens our nation’s ability to effectively educate our communities.
If “unstable funding” means “skyrocketing core revenue that isn’t going to the people who are doing the core functions” then yeah, I guess.