Soaring college costs and the Penn State private plane

July 17, 2012
1. How high are universities flying?

I was amazed to see this sentence in the piece the New York Times’s ever-amazing Jo Becker wrote last week about all the goodies outgoing Penn State football coach Joe Paterno negotiated in a new contract even as the Jerry Sandusky scandal was imploding around him: “He would also have the use of the university’s private plane…”

Penn State has a private plane? Sure, the school probably charters a jet when the team travels. But do the university executives have their own jet? How many other universities have perks like this?

As this article from documents, the relentless rise in higher education tuition and other costs has trapped students in debt from readily available student loans backed by us taxpayers. It is fast becoming a national scandal akin to the mortgage crisis. Which means we need some tough, fresh reporting finally holding university leaders accountable for spending and management efficiency.

According to news reports Penn State trustees raised tuition on the main campus last week by 2.9 percent. University officials bragged that this was the “lowest percentage tuition boost in 45 years and one of the smallest in the nation.” However, that raise followed a 4.9 percent increase the year before, and it exceeded the pace of inflation in any event. Sure, state aid to the school was cut, but a check of the university’s website reveals that the overall expense budget for the coming school year is still up $131 million, or 3.2 percent, over the year before, again outpacing inflation and despite those cuts in state aid. The overriding reality is that higher education remains a gold mine for reporters looking for waste and lack of accountability.

Air Paterno may be a good hook to get people interested. Which other schools have planes?

2. Scrutinizing the New York Fed:

The Federal Reserve Bank of New York has now taken center stage in the swirling scandal of who knew what about the manipulation of Libor rates. And I can report from experience that center stage is not where the New York Fed likes to be. In 2010, while writing in the New York Times Magazine about the work of Kenneth Feinberg – the Treasury Department-designated pay czar appointed to curb the compensation of executives at banks bailed out by TARP – I discovered that the New York Fed played a key, behind-the-scenes role in protecting AIG executives from having to accept AIG stock as part of their compensation. New York Fed officials told Feinberg that they agreed with these AIG executives that the stock of their own company was “worthless” and urged him to think of a different way to compensate them.

Because the stock was selling for approximately $40, this seemed a curious position for the New York Fed to take, and it raised questions about why AIG would not be required to disclose that its own executives, not to mention the Federal Reserve Bank of New York, were taking the position in negotiations with the Treasury Department that a $40 stock was worthless.

However, when I tried to get comment from the New York Fed, a spokesman told me that officials there “never” speak on the record. He was serious. And his claim seemed borne out when I looked through news clips about the organization and found that quotes of any substance were unattributed or on background.

With its cathedral-like building in the heart of the financial district  and a board made up of elite Wall Street figures such as JPMorgan CEO Jamie Dimon, the New York Fed is the epitome of the financial establishment – yet it’s a government-funded agency, which should seemingly be open to public scrutiny. Its central role in TARP (Treasury Secretary Timothy Geithner was its president at the time) never produced the kind of full portrait of how it works and what its full influence is that it deserved. The new Libor scandal should get the financial press on the case.

The New York Fed may have played a major positive role, or it may have been an enabler or protector. The point is nobody outside the agency really knows, because the press hasn’t gotten inside to tell us how what may be the country’s most secretive non-national security agency actually works.

3. How did FDR do it?

As the 2012 election approaches, it’s clear that the central question (indeed, it’s already a cliché) is whether and how a president can be elected with unemployment exceeding 8 percent. So how come we haven’t seen a good story on how FDR won re-election in 1936, when the unemployment rate was over 16 percent? FDR not only won – he carried 46 of 48 states and got nearly 61 percent of the popular vote.

Sure, it’s repeatedly mentioned in passing that FDR pulled off a victory despite the state of the economy. But I’d like to know more about how he did it and how his campaign compares with the Obama effort. What were his campaign themes that year, and what were they in 1940 – when unemployment was still a miserable 14.6 percent and people had to be looking for an alternative after not four but eight years of a president trying to manage an economy far worse than the one we have today? And how, if at all, did he attack his opponents, Alf Landon in 1936, and Wendell Willkie (a Wall Streeter) in 1940?

4. Savannah profiles?

Where are the profiles of Savannah Guthrie, the new Today Show co-host? She’s a lawyer, whose bio says she scored first on the Arizona state bar exam. She has all kinds of other academic honors, and has had a lightning-fast rise since joining NBC News in 2008. Obviously lots of intriguing stuff here.

PHOTO: A pair of F-18 jets fly over Beaver stadium before the start of the Alabama versus Penn State NCAA football game in State College, Pennsylvania, September 10, 2011. REUTERS/Tim Shaffer


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Comment only on the Penn State thing: The problem is that institutions of higher ed have a unique product, seen as paramount to ‘success,’ meaning people will more or less pay whatever it costs. Knowing this, universities do literally nothing to control their costs, IE giving raises based on time at the school, fancy cafeterias, etc. It’s impossible to force private schools to control costs, which in turn pushes public schools along the same line. It’s a horrible state of affairs.

Posted by Adam_S | Report as abusive

Do you think John Calipari and Urban Meyer are flying commercial on recruiting trips to Podunk, TX? Please-every major college coach either flies in the University plane or has access to one.

Posted by tiderhawk | Report as abusive

Student debt is a scandal, a racket and another bubble waiting to burst. These colleges drive up the costs for public colleges as well, busy empire building and running their corporation/hedge fund/universities. This is the same face of winning, dog eat dog, capitalism that seems to lack any ethics or morals today.

Thomas Frank wrote a good piece about soaring college costs and the university cartel.

His take-down of the claim made by university’s that they are charitable institutions:

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. 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.

Posted by TheUSofA | Report as abusive

From the Thomas piece, The Price of Admission:

…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-be­classic 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.”

Posted by TheUSofA | Report as abusive

The FRB is not a government funded agency. That is to say, Congress passed the FRB act in 1913 but the FRB itself is a “private bank”. However it does remit to the US Treasury whatever operating surplus the system can generate.

I may well be wrong on this point; however the FRB Dallas is owned by the member banks’ within its authorized district (primarily Texas). Since Im based in the DFW metro, throwing that example out there.

Posted by McGriffen | Report as abusive

I’ll hope this doesn’t double post, but…the FRB is not a gubmint agency. Chartered by the 1913 act, but it is a privately held bank. Although I do believe that annual operating surplus, if any, is passed along to the US Treasury.

Example: the FRB Dallas bank is owned by its members, within its operating district.

Posted by McGriffen | Report as abusive