So, you saw the flyers. What’s up? Well, the University of Michigan is changing for the worse—so much so you can see it in almost every part of the campus. We can see it just walking around, where the student body is more affluent and whiter than ever before (in 2000, 18.4% of Michigan students had a family income of $200k or more…in 2010, 27.6%). We can see it in the classrooms, where there are more and more GSIs and lecturers, who are paid only a fraction of what tenure-track professors make. We can see it in the salaries of the university administrators, which have risen a shocking 27% since 2006, while they have similarly raised our tuition (in the same time period) 22%. We hear their claims that there isn’t enough money, that there have to be cuts, that the state has defunded us, but we see the reality that the administrators always get paid, in full, without fail. We can see it in tuition, which has risen at Michigan a jaw-dropping 233% since 1990, pricing many poor and middle-income students out of the university. We can see it in the student loans we are now forced to take out: last year alone Michigan students took out an estimated $412 million (that’s right, for just one school year) in student loans—that’s almost half of what the university took in in tuition last year! And to add insult to injury, we can see it in the $2.3 billion the university administration has borrowed since 2007 to build new buildings, buildings we didn’t need, money we shouldn’t have borrowed, money that students, not the administrators who borrowed it, will eventually have to pay back, with interest in the form of more student loans.
We can all see that the University of Michigan has changed for the worse and that it isn’t getting better and that the administration has no ideas other than to raise tuition and to raise their own pay (…already the administration has announced that, despite state funding going up next year, there will still be a tuition hike!). Those of us involved in Occupy UM have been trying to figure out how things got like this and what we can do about it. In our struggle to figure out how things got so bad, we’ve come across some information that we found helpful. We want to ask you for 15 minutes of your time to share some of this information with you. In this piece, we will try to tell the story of how we got here. It is a story in two parts. The first part is about the Michigan Model and the rise of the for profit university, and the second is about the rise of student debt as a form of predatory lending (a term used to describe when banks use unfair or deceptive practices to get people into debt). By way of conclusion, we’ll make a few proposals for what we can do about it.
The Michigan Model: The Rise of the For Profit University
If the original mission of the University of Michigan was to educate all people, regardless of financial resources or background, how did we get into a situation where a small group of administrators make big bucks and ruthlessly raise tuition each year, driving students deeper and deeper into debt? How did this come to pass?
The most important change that has occurred, and it occurred slowly, beginning in the 1980s but intensifying in the early 2000s under the administration of Mary Sue Coleman, is that Michigan has become a university run on a “for profit” model. What do we mean by “for profit” and how is this a change? Well, since the 1960s, in the United States, a massive change has taken place in the way universities are run. In the 1960s, education was envisioned as a public good, as something that everyone, regardless of class, race, gender, ability, etc., should have access to (even though women, students of color, sexual minorities, and the differently abled were still discriminated against). In theory, then, education was considered a public good, because it benefited society as a whole. A smarter populace would be a better workforce, went the thinking, so universities were run, at least ideally, with the goal of maximizing the number of students and the quality of their education, not the amount of profit. Today, however, education is thought of as a commodity, and especially so at Michigan. While Michigan doesn’t pay out money to shareholders like a corporation, it is now run essentially like a corporation, or a for profit institution, which means that administrators attempt to squeeze money out of students however they can, and, more importantly, administrators are rewarded financially for increasing the bottom line of the university. This shift, from education as a public good, to education as a commodity, has, especially since 2000, led to a vicious spiral of tuition hikes for students and pay raises for the administrators raising tuition. This is a cycle that we must break before it completely breaks our university.
As it turns out, in this shift from thinking of education as a public good to a commodity, as something for sale, Michigan has played an important historical role. In fact, the University of Michigan has often served as a model for other universities seeking to become more profitable. This is the “Michigan Model.”
What is the Michigan Model? It works like this. Universities today all want to be like Harvard, with rich donors, fancy buildings, and students from wealthy and powerful families. Why? Because while educating students can be exciting, rewarding work, it is not flashy or glamorous. Building new buildings and spending and having lots of money are. At some point, beginning in the 1990s, Michigan administrators decided they were tired of the mundane work of educating in-state students and that they wanted to be a Harvard. So they began to work to stop being a state school, in the sense that the duty of state universities is to educate all comers or to serve (in theory at least) as a motor of social and class advancement. That’s the reason that for many years, tuition rates for Michigan closely followed middle-class incomes in the state. Because in order for the university to function as a motor of social advancement, everyday, average people had to be able to afford it. We know that now few students can afford Michigan, even the very wealthy ones, which is why we all have so many loans. In essence, what happened was that Michigan tried to turn itself into a private school, into an ivy league, a glamorous, big money, for profit school, thus leaving behind the thousands of in-state students and families who depended on it for an education.
The University of Michigan became obsessed with profit. And how do you make a profit? Well, at universities there’s really only one reliable way to make more money: raise tuition. So, Michigan started to do that. And it started to change the ratio of in-state to out-of-state students and the difference between the amount of tuition they paid. Why? Well, they found they could charge astronomical amounts of money for out-of-state students, so they began to raise the number of out-of-state students they admitted. Currently, the ratio is 33% out-of-state to 54% in-state and out-of-state students pay 3x the tuition of in-state students (roughly $11,800 versus $35,000 per year). The administration has recently added a new wrinkle to this equation: out-of-country students. This group of students pay $70,000 per year and are not eligible for any financial aid and have to present a bank statement with their application showing that they have four years of tuition and expenses in cash (out-of-country students are now the fastest growing segment of the student body, currently accounting for 13% of all students).
However, in the pursuit of profit, the university administration under Mary Sue has painted itself into a corner. Wealthy, out-of-state and out-of-country students are a tough market to chase, as they have a lot of money (they can pay for almost any school) and every university out there is trying to get them. What this has led to at Michigan is a building spree. In the attempt to court this high-end, tough-to-capture market, the university administration has decided to spend billions ($2.3 billion, to be exact, since 2007) updating and constructing new buildings, because this wealthy strata of students is used to nice things and they see what schools who truly have lots of money (Harvard, Princeton, etc) have to offer. The problem is that Michigan doesn’t really have this kind of money (Harvard’s endowment is around $23 billion, Michigan’s is around $9 billion). Moreover, state funding cannot be used to build buildings (it can only pay for instruction…which is another reason why the university doesn’t actually care that much about drops in state funding). So what the Michigan administration has done is to try to fund their pursuit of this allusive high-end student-consumer on the backs of their current, less affluent students.
They have raised tuition like nobody’s business (293% since 1990) in pursuit of building a university that wealthy out-of-state and out-of-country students would want to attend. What this means is that right now you are taking out student debt and paying interest on it, so that the university can chase a small, high-end market of consumers. How could this have been approved as a strategy? Even as a business model it makes so little sense—why spend money you don’t have to chase students you don’t have? Why have we borrowed billions during the worst financial crisis since the Great Depression and then passed the bill onto students? Driven by vanity and the pursuit of personal profit the Michigan administration has pursued this foolish project, remaking the university, and pricing poor families and students of color out of a Michigan education.
[For more on this see our piece: “Welcome to the University of Michigan, The Engine of Inequality]
Let’s give an example to bring this discussion down to earth. In 1996, general undergraduate tuition at Michigan was $5,710 per year, which meant that in-state students with perhaps a little help from their families and working a minimum wage job could get into Michigan and make it through school without going into debt. That reality is now a long lost, distant past. In-state undergrad tuition this year is $11,800 and the total estimated cost with living expenses is close to $25,000. This is incredibly sad, because it means that the institution has become available only to the extremely wealthy or those willing to take on massive amounts of student debt. The average student leaves Michigan with $27,000 in student loan debt (but since this is an average we know that the actual amount for students with loans is much higher). But let’s take this figure as a baseline. On a 20-year payment plan, meaning you will be 40 before you pay off your loans, at 6.8% interest, the average monthly payment on 27k will be $206.10, and students will pay a total of 22,464.88 in interest over the life of the loan. If you take out $50,000 dollars in loans, roughly half of what 4 years will cost at Michigan, you are immediately talking about payments that will last the rest of your life (the loan payments on $50,000 at 6.8% interest is $325.00 dollars a month for 30 years). This means you will have to choose between buying a house and paying your debt, buying a car to use to get to work and paying your debt, having children or paying your debt. What it means is that none of our lives will ever be the same. What it means is that the university, instead of being an engine for equality, is now an engine for inequality. It means that many of us will actually be worse off for having come to the University of Michigan. This is the new Michigan difference.
The other key to the Michigan Model is attacking what is known as labor, or the janitors, CNAs, secretaries, GSIs, GSRAs, faculty, and lecturers who make the university run. There are two ways to make money at a university: you can raise tuition or you can lower the amount you pay to the people who work there. And Michigan has done both. If in the last 40 years, education has gone from being a public good to a commodity, what do we know about labor in U.S. universities? What we know is that as universities have increasingly become for profit in the last 40 years, they have consistently attacked the salaries and benefits of their employees. For example, in the 1970s, 70% of all teachers were tenured, meaning they were fully employed, had job security, benefits, pensions, health insurance. The other 30% of university teachers did not—they were what we call today adjuncts or lecturers, meaning they make less money, have little to no job security, and generally get few benefits. Today, in universities across the country the percentages have completely flipped: now, only 30% of teachers are full time and 70% of teachers are precarious part-time lecturers or adjuncts.
Here’s an example of how this works at Michigan. A typical undergrad class at Michigan with 24 students (paying $1,200 each for 3 credit hours) brings in $28,800 in revenue for the university. Graduate students receive roughly $8,000 per class they teach, adjuncts $5,000, resulting in a net profit of $20,800-$23,800 per class for Michigan (as class size increases so do the profits). To hire a new tenure track assistant professor costs roughly $74,845. If that person teaches 4 classes per year (as is common at Michigan), the university will make only $10,000 per class, or half of what it makes exploiting young graduate students and adjunct faculty whom it can fire or dismiss at any time, who it harasses for their attempts at unionization or defending contractually obligated benefits.
But why would Michigan move in this direction, isn’t this bad for both teachers and students? Because as a university, Michigan has become a for profit business. This leads to an attempt to “break” labor, to drive down labor costs in any form possible. Here at Michigan, two years ago, the graduate students union (GEO) almost went on strike. Last year, the nurses union, 3000 strong, also almost went on strike, and right now at Michigan there is a major battle with national implications on organizing GSRAs (graduate research assistants, for more info see the Graduate Employees’ Organization at the University of Michigan). But these kinds of struggles are frequently hidden from students and from the general population, and they are frequently not linked to increases in student tuition. However, thinking about Michigan as a for profit institution allows us to see that attacks on labor or workers and steep tuition increases are actually two sides of the same coin. And if we are interested in trying to think about how to fight the loss of public education, the rise of student debt, the rise of the for profit university, we will have to think about labor and network with the people who actually make the university run and who are under attack as much as we as students are.
There’s a lot more we could talk about here, but there is one final piece of the puzzle we want to put on the table. The final shift that forms a part of the Michigan Model, is a shift in who runs the university. Many years ago, the majority of university administrators were drawn from the faculty of the university. Since the 1990s, universities in the United States have seen the rise of a powerful class of administrators, who have never been faculty, but who have been trained in business or finance programs—trained to run universities on a profit maximization model. What this means is that universities are now controlled by people who do not have students’ best interests at heart. Rather, as we can see at Michigan, the university is controlled by people whose first care is for themselves, for their paycheck, and, as a result, the amount of profit the university can generate.
[For more on this shift, see Benjamin Ginsberg’s excellent piece “Administrators Ate My Tuition,”]
“Every year, hosts of administrators and staffers are added to college and university payrolls, even as schools claim to be battling budget crises that are forcing them to reduce the size of their full-time faculties. As a result, universities are now filled with armies of functionaries—vice presidents, associate vice presidents, assistant vice presidents, provosts, associate provosts, vice provosts, assistant provosts, deans, deanlets, and deanlings, all of whom command staffers and assistants—who, more and more, direct the operations of every school.”
So that’s the first part of our story: the rise of the “Michigan Model” and the University of Michigan as a for profit university. Let’s turn to the second, which will be much briefer: the rise of student debt as a form of predatory lending.
Predatory Lending: The Rise of Student Debt
Student debt is one of the most nefarious, darkest areas of contemporary capitalism. But how did it become such a huge part of education? And how important has it really become?
In September 2010, total student loan debt surpassed, for the first time ever, total credit card debt in the United States. Total credit card debt is right now roughly $850 billion. Total student loan debt is over $1 trillion dollars. What this means is that student loans have become an important source of revenue for big Wall Street banks. In a nutshell, the rise of student loan debt has been a ploy by the 1% to make money by driving students into debt. These banks and the federal government have loaned $1 trillion dollars to students, loans that students are going to spend the rest of their lives paying off. In so many words, this is no different than the subprime mortgage crisis that brought the world economy to a halt in 2007. It is an attempt to sell debt to people in unfair or deceptive ways, namely to 17-year-old high school students contemplating whether to go to Michigan or Eastern or Washtenaw Community College and deciding that in the long run it makes sense to take out loans and go to Michigan. This is what predatory lending looks like: lending vast sums of money to people who are not sure what $50,000 of debt is going to feel like at 25 years old in an economy that is still losing jobs. Student loans are predatory lending—it is predatory to loan huge quantities of money to teenagers at high rates of interest by preying upon their justifiable worries about getting ahead in life.
But that’s not the whole story. What is so nefarious about student debt is that the big banks have passed legislation to make student debt, in legal terms, unlike any other form of debt. What they have done is turn it into a completely safe bet for themselves and their institutional investors.
Since the beginning of the federal student loan program in 1965, student borrowers are not allowed, as in it is illegal, to change lenders in order to find better terms or rates for a loan. This means once you have a loan, you are locked in. This is unlike any other form of credit.
Then, in 1998 a bill was pushed through Congress with a critical element: this bill made student loan debt “the only type of loan in United States history that is NON-dischargeable in bankruptcy,” meaning even if you go bankrupt, and many times if you die, you or someone else will still have to pay off your student loans.
What this means is that banks, with the help of the federal government, have turned student loan debt into a special kind of debt: one you can never get rid of. The reason why U.S. citizens have the right to declare bankruptcy is because predatory lending can ruin people’s lives, and people have the right to start over. The possibility of bankruptcy is the risk banks take on when they loan money—that’s why they are allowed to charge interest, because they are taking on risk, the risk that people might default and that they might not get paid back. With this new legislation, banks have essentially made student loan debt risk-free for themselves and have, as a result, locked students into a lifetime of debt servitude.
How does this look at the University of Michigan? Michigan makes roughly $1 billion from tuition each school year, which is by far its largest source of revenue. Almost half of that is in student loan debt. This means that each year the 40,000+ students at the university collectively take out an estimated $412,000,000 in debt and then immediately hand that money over to the university. Every year. The university functions then as a kind of gigantic Walmart where the shelves are lined with debt instruments (Private or federal? Fixed or floating rate?), where the goal of instruction has gotten lost in the drive to move these financial products, to make money. As such, Michigan now generates huge profits for Wall Street banks. Since 1998, since the banks changed the bankruptcy rules, student loan debt is where they are making big money, and the university is complicit in this shift from predatory lending in housing and credit card markets to predatory lending to students. The university cries “state defunding,” but it is clear to any student with loans we can never repay that the hand that rocks the cradle is on Wall Street and on South University, not in Lansing.
University administrators across the country, but especially at Michigan, have been complicit with the rise of predatory lending to students, which functions as a system of capital accumulation for the finance sector. But why? Isn’t it their job to protect students, to look out for our best interests? …And now we have come full circle. Actually, in the university run on a for profit model, it is not. Their job is to increase revenue as much as possible. The more money they squeeze out of students and out of workers, they better they look and the more their compensation rises. Just yesterday (Feb. 20, 2012), the university released a statement saying that even though state funding for Michigan will go up next year, tuition has to be raised. When asked if tuition might sometime in the next future be frozen or rolled back, they replied, not a chance, our costs are out of control. When the combined salaries of 25 highest paid Michigan administrators is whopping $11,158,000 each year (the equivalent of 995 in-state students’ tuition), yeah, costs are definitely out of control. Students shouldn’t be the ones to suffer. It’s time we stood up and said enough. It’s time we said: You, Mary Sue, take a pay cut, before we pay another dollar in tuition, before we take out another dollar of student loan debt.
What to do? Well, frequently, student debt is a private sorrow. People who have a lot of debt or who are worried about it, feel like failures, or feel like they or their family is not good enough. But obviously, student loan debt is a structural, not a personal, problem. So the first thing we can do is bring student loan debt into the light as a form of predatory lending that is propping up an administrative class at Michigan. Student debt has to be addressed as a structural, not a private problem. And one of the best solutions for dealing with it, as a structural problem, has been a proposal to make education free for all from Occupy Wall Street and a professor, Andrew Ross, from NYU. You can read more about it here.
But what about in the long term? What kind of solutions does Occupy UM have? You might be thinking now, well, you all are great at identifying problems, but what about fixing them? Where do we go from here?
We don’t think the university can continue as it is. But we think the problem with the university is actually pretty simple: the problem is with the people who run it. Do you think if students were in charge of the university, tuition would have been increased 233% since 1990? Do you think if workers were in charge of the university they would allow full-time work to be replaced with poorly paid part-time work as a way of “saving” money, i.e., giving more of it to the administrators? And do you think if students, workers, and faculty were in charge of running the university that administrators’ salaries would rise while the university drowned itself in debt to build buildings it doesn’t need? Our vision for the future of the university in general, and Michigan in particular, is simply this: a university run by workers and students, a university without a vampyric administrative class. It would be a university open to all, free to citizens and the undocumented alike, a true engine of equality in our lives and our communities.
But now you are asking: Could that really work? Wouldn’t things just fall apart? When we first began researching information for this piece, one of the things that we were most surprised to learn is that there is in fact a long tradition of student run universities. In fact, many of the very first universities in Europe in the 12th-15th centuries were student run, such as the University of Bologna, which is in fact the oldest university in Europe. The same is true of many universities in Latin America during the 1960s and 70s. The list of experiences is quite extensive, but the model is generally the same. Namely, there is some participatory structure whereby students and workers make decisions about the university’s future. These decisions are passed onto a minimal administrative support staff who execute them. What this creates is a more open, democratic, inclusive university structure where the problems that affect students and workers are the first ones that get addressed, instead of having these groups being the first to get exploited.
How do we get from here to there? We don’t have a road map, but we do have some ideas. All that we ask is that you get involved. Email this piece to your friends, tell them to read it. Check the Facebook page and come to GAs when they are announced. Come to an event or an action. Bring your ideas and your desire to end student and worker exploitation at Michigan. Help us abolish student debt, make education affordable, and turn this university once more into an institution based not around profit, but people.
Will you join us?