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SCOTT GALLOWAY: Higher education in the US has become un-American

Kids are still getting into college but are shuffled down to lower-tier schools that charge a top-tier price for a credential worth far less. ...
student using laptop with textbooks open at desk
Galloway says the rising costs of higher education is disastrous for lower- and middle-income Americans.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, "No Mercy / No Malice."
  • In it, Galloway discussed how inflation impacts access to colleges and universities. 

In 1980 a gallon of gasoline cost $1.19. Today it's $3.41, a 2.7% annual increase. But undergraduate tuition has risen nearly three times as fast: 6.7% a year at public colleges, for an increase of nearly 1,400%. The greatest assault on middle-class America's prosperity may be the relentless, four-decade-long inflation in higher education. Student loan debt ($1.7 trillion) is now greater than credit card debt. And that doesn't account for the busted 401(k)s, second mortgages, and general financial oppression me and my colleagues have levied on lower- and middle-income households. The number of Americans who have more than $100,000 in student debt is greater than the population of Utah.

(Note: Huge thanks to College101 and Stig Leschlyf for much of the data in this piece.)

Advertised tuition and fees vs. inflation

This sustained inflation has been devastating for lower- and middle-income households.

Net college costs

And this ability to raise prices faster than inflation is really impressive given the industry is one of the most heavily subsidized in the US.

 

Public subsidy for college revenue

How did we get here?

Higher education's ability to soak America is a function of limiting the supply of freshman seats at our best universities in concert with the continued fetishization of their brands. We can scale Salesforce, Facebook, and Google by 25% to 60% per annum, but we can't seem to bust above 1% per year at our great public universities. The top 200 schools in America educate only 10% of college attendees. And these universities raise prices in perfect lockstep, miraculously, resulting in millions of kids who get arbitraged to mediocre universities but pay an elite price. It's a cartel, enforced by the accreditation organizations, institutions who are as corrupt as the NCAA … minus the charm. Accreditation has teeth because it determines access to federally guaranteed student loans. And in the last 20 years, these organizations have blessed only 159 new institutions — most of them small and specialized schools — which have collectively grown total enrollment by less than 0.15% per year. The result is an ossified industry near void of real innovation, as … why would we?

Rejectionism

Acceptance rates have plummeted, turning senior spring from a time of optimism and opportunity to one of anguish and sacrifice. Kids are still getting into college (total enrollment has kept pace with the growth in graduating seniors) but more and more are shuffled down to lower-tier schools that charge a top-tier price for a credential worth far less.

College deans boast about low admissions rates. But if you accept five of every 100 applications, that's not a 5% admission rate. It's a 95% rejection rate.

This is un-American. Despite well-publicized stories of billionaire college dropouts, a college education remains the most powerful tool for upward mobility. In my age cohort, it's common to hear people say of their alma mater, "I never would have gotten in today." Many of the same deans and administrators crowing over their sky-high rejection rates are enjoying lofty six-figure salaries, at 60, from institutions that would reject them if they were 18 today. They're immigrants who, on the day they're sworn in as citizens, vote to militarize the border.

Just as we're beginning to sentence the insurrectionists, who didn't believe in democracy and wished to take power by force and deceit, we must also register the threat to America of rejectionists. These are institutions and people that unwittingly sequester upward mobility to the rich and freakishly remarkable … at 17. Elite school alumni who wish to pull up the ladder to prosperity behind them. Higher education decries insurrectionism, but it's ground zero for rejectionism.

Rejectionism is cloaked in progressive policies. It's true that the student body at these institutions is more diverse than it was 40 years ago. And that's great. But it's not an excuse for maintaining a rejectionist posture. The mission is to expand opportunity, not reallocate elites. Bigotry is prejudice against a person or people on the basis of their membership of a particular group. Haven't we in higher education become bigoted against unremarkable kids from lower- and middle-income households?

Bloat

Too much money has gone to the establishment of colleges' administrative super state. Virtually every other industry has leveraged technology and volume to create leverage (i.e., decreased the burden of overhead costs).

Administration should not grow 1:1 with faculty or 3:1 with students. The Yale Daily News recently reported that, "the number of managerial and professional staff that Yale employs has risen three times faster than the undergraduate student body." Longtime professors described how burdensome and inefficient they found the swelled ranks of administrative functionaries. Elite schools are rife with recently created centers and departments that are noble in mission but have no measurable output. Many provide a way station or rest home for formerly important people or faculty who aren't pulling their weight.

There are, to be fair, good reasons for increases in administration in targeted areas that need to be addressed. The greatest need is in mental health: 47% of college students are depressed, up from 23% in 2007; and only 40% of those depressed have received mental health treatment. Between 2007 and 2017, suicidal ideation among college students nearly doubled. Today, roughly 1 in 10 college students report that they've attempted suicide. Black college students are almost twice as likely to attempt suicide as their white peers. Trans students are three times as likely as their cisgender peers. But unchecked bureaucratic power is cancer even with the best intentions. Especially with the best intentions. Nobody wants to criticize a "center for diversity" or "sustainability." But to the extent exorbitant tuition is the product of an increased budget to build stronger support systems for a more diverse body of students, it isn't working.

University students with symptoms of depression

And that's a kind interpretation, because student-directed programs are not where all the flab is to be found. At the Ivies, student services expenses as a share of total expenses have actually gone down since 2000 (from 4.8% to 4.4%). The real bloat at these schools is the inward-looking bureaucracy. Academic administration, executive management, business operations, and the like. Across the Ivy League, the share of total expenses allocated to institutional and academic support has gone from 19% in 2000 to 24% in 2020.

At four-year colleges nationwide, it's bloat and more bloat. Between 2010 and 2018, spending on administration far outpaced instructional outlays. And there's one more place the bloat is endemic. Senior leadership salaries.

Some examples: In 2018, after being ousted, USC President Max Nikias received a $7.7 million payout. He was one of a dozen university presidents to make more than $2 million that year. Even presidents of relatively unknown schools, including Bryant and Johnson & Wales, enjoy multimillion-dollar salaries. Many public college leaders register enormous paydays: Last year the president of the University of Kentucky made $1.7 million, the presidents of Texas A&M and the University of Florida each made $1.6 million, and another 13 clocked more than a million. Nearly all of the 100 highest-paid civil servants in Massachusetts are employed by (wait for it) the University of Massachusetts.

Faculty and leadership should be paid well. But my boss at NYU, President Andrew Hamilton, makes over $2 million dollars per year. He donates $75,000 of it to a scholarship fund. In case you're wondering, I've returned all my NYU compensation for the past decade (#virtuesignalling). This isn't an option for most faculty.  Should Andy be making 16 times the average salary of an NYC school principal? The fiduciary boards of these institutions will claim they're victims of supply/demand and the market. Bullshit. We'd have a line out the door of applicants who would take a modest salary of … a million a year. Anyone who would take the job of university president for $2 million per year, but would turn it down for $1 million probably shouldn't be a university president. That $1 million per year could fund 12 undergrads' full-ride scholarships, or increase the number of freshman seats.

What can be done?

  • Private company leadership needs to increase the number of entry-level jobs based on a skills assessment, vs. certification (see above: fetishization of elite colleges). Develop relationships with local public institutions, including two-year schools, that charge modest tuition: That's where you'll find the unremarkables with the potential to become remarkable.
  • State governments also have leverage. We need a Grand Bargain. In a time of scarcity, be bold. Offer to increase state system budgets, but demand that the enrollment grow faster than revenue, not the other way around. Every state should be aiming to increase undergraduate seats by 50% in the next decade.
  • The FTC/DOJ should evaluate the accreditation cartel and the dollar-for-dollar price increases taken by supposedly competing universities over the past 40 years for compliance with antitrust law.
  • Schools of all types should embrace distance learning and other technological tools. These are force multipliers, allowing the institutions to serve more students without building more ivy-covered temples to bloat.
  • Nonprofit should mean public service, not a dragon's hoard of endowment riches. Schools with multibillion-dollar endowments should increase their class sizes or be taxed on endowment gains.
  • The accreditation system should be revamped to encourage the founding of strong, public-service-minded, nonprofit institutions, not protect the incumbents.
  • Dramatically increase student loan forgiveness programs. Canceling all student debt is a bad idea, rife with inequity and moral hazard. But our human capital is over-encumbered by debt incurred under false pretenses.
  • Crimp the firehose of student loan money by putting schools on the hook for a portion of the bad debt; encourage Pell Grant acceptance; and invest in financial literacy for 18-year-olds being asked to make one of the most consequential financial decisions of their lives.

74

The best things in my life — kids who made headslist this semester, a supportive mate, and financial security that (generally) enables me to do whatever I want, whenever I want — are a function of one thing: 74. Specifically, in the eighties, UCLA had an acceptance rate of 74%. I (no joke) had to apply twice. I was the first person on either side of my family to graduate from high school, must less get to attend amazing institutions for undergraduate and graduate degrees. The cost? $7,000 (total) in tuition for a BA and an MBA.

In addition, I was presented this opportunity as a function of being good, not great … much less remarkable. Higher ed catalyzed an upward spiral of prosperity for me and my family that's been good for the commonwealth — we love America and are good citizens.

Today the acceptance rate at UCLA is 12%. Since I graduated, the number of graduating high school seniors in California has grown nearly twice as fast as the number of undergraduate seats at UCLA. To its credit, the UC system has announced plans to add 20,000 more seats to the system by 2030.

At night, alone with the dogs, I hear voices. (No shit.) Not strange voices like the dogs telling me to head to Kroger's in my underwear. But the voices of millions of kids who have one question: "Boss, you got yours, where is mine? When do I get my shot?"  America is not about making the children of rich people and the remarkable billionaires, but giving everyone a shot at being a millionaire and/or making a contribution.  American higher ed has become un-American. We need to fall back in love with the unremarkables, and return to America.

Life is so rich,

Scott

P.S. Making predictions can be dangerous. It might put you in the Twitter crosshairs of Elon Musk. Yet I carry on. Join my free Predictions livestream on December 7. You probably won't regret it.

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