Universities profit off of student loans: unfortunately not new news

Today the Huffington Post is reporting that universities are profiting off of Sallie Mae, a large student loan provider, through direct endowment investments.

As horrible as this is, its not news that universities profit from their students massive debt. A few months ago I published a paper on how the University of California uses student fees (inevitably serviced by loans) to gamble on Wall St. Not only do UC and other schools play on Wall St., but they also play in to their games of valuation:

Fitch notes that the university’s “tuition raising flexibility” is “historically… a credit positive.”

Moreover, lets not forget that many regents have private holdings which profit off of student debt. Let’s take UC Regent Richard Blum as an example:

I should note that Regent Blum’s firm has large investments in a number of for-profit education corporations, including ITT Tech, for which he is the largest shareholder, and in which the University of California has invested millions of dollars. Watchdogs have called this a gross conflict of interest, since the UC’s investments inevitably help stabilize and raise share prices, which in turn Blum gets rich from, but the UC and Regent Blum have continued on.

So yes, HuffPo’s Sallie Mae investigation is important and appalling, but its nothing new. Its time that people start to look into their university’s regents, boards, and stakeholdings to understand what’s really driving the decision making at the university level.

[my full paper can be viewed here]

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