“The Art of the Gouge”: NYU as a Model for Predatory Higher Education

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Under Chairman of the Board Martin Lipton and President John Sexton, New York University has been to operate as a real estate development/management business with a predatory higher-education side venture. A group of 400 faculty members at NYU, Faculty Against the Sexton Plan (FASP), have been working for years against what Pam Martens has called “running NYU as a tyrannical slush fund for privileged interests.” FASP just published a devastating document, The Art of the Gouge, which describes how NYU engages in a mind-numbing range of tricks and traps to extract as much in fees as possible from students, while at the same time failing to invest in and often degrading the educational “product”.

The first part of the report, embedded below, goes through a mind-numbing and degrading set of scams perpetrated on students, including the bait and switch of hitting them with extra charges they can’t possibly find out about before they have committed to the school, to the tune of an estimated $10,000 per year; providing mediocre education in programs that require “study abroad” while also requiring them to stay in grossly overpriced university housing; admitting a high proportion of foreign students, precisely because they pay higher fees (and predictably, NYU’s premiums are even higher than that of other schools), and offering shamelessly overpriced, narrow, and not very good health services.

Mind you, that list only scratches the surface.

The second part, which describes how the funds are used, describes in gory detail how the school throws money at real estate empire-building, disproportionately for administrative space and housing when teaching facilities are in short supply. The third document describes how NYU is an even more extreme practitioner of squeezing the incomes of faculty while gold-plating administrator pay and perks. Consider one famous example that we discussed in 2013, Jacob Lew, who was then the presumed incoming Treasury Secretary:

Remember, Lew came from a job at NYU where he already looks to have been considerably overpaid. He received over $840,000 for the academic year 2002-2003, which had him earning more than most university presidents, including NYU’s president. And on top of that, as Pam Martens ferreted out, he was apparently given a $1.3 million house. I’m not making that up, go read her piece. The mechanism was that NYU lent the $1.3 million to buy the house to Lew and then forgave it over five years. Oh, and they paid him the money to pay the interest too. We will assume that the forgiveness of debt was reported properly to the IRS.

Pam Martens has long been bird-dogging the grifting at NYU. As she wrote later in 2013:

In September 2009, the New York Times published a remarkable exercise in inanity, profiling John Sexton, President of NYU..

We don’t, for example, learn from the interview that his home on Fire Island has been financed since 1994 by several million dollars in loans from the NYU School of Law Foundation and NYU itself…

This is not the only residence that NYU has made possible for its President. He has the use of two well appointed apartments owned by NYU in Manhattan. Sexton, who turned 70 in September, is also set to receive a length of service bonus of $2.5 million in 2015 and an annual pension of $800,000 when he retires. That pension is the equivalent of NYU taking $10 million of its assets and placing them in an immediate annuity for Sexton.

Sexton has plenty of company when it comes to getting out of the city in the summer through the generosity of NYU. Richard Tsien, Director of the NYU Neuroscience Institute, bought a house in East Fishkill, New York, 76 miles from the university, for $1,125,000 in February 2012 with $500,000 in financing from NYU. According to an online description, it’s a stone house on 7 park-like acres with a flowing stream and a functioning 12-foot water wheel.

Numerous other NYU professors have country homes financed by the NYU School of Law Foundation or NYU. Between primary residences and vacation homes, NYU and its affiliated nonprofits have an estimated $72 million to $96 million outstanding in loans to faculty and administrators. The university has acknowledged 168 loans.

So the sort of conduct documented in these three reports is no surprise if you’ve been following this story, but having them documented in so much detail is devastating. I hope you’ll read them and circulate them widely, above all to parents whose children might be considering applying to NYU.

The-art-of-the-gouge-Part-1

The-art-of-the-gouge-Part-2

The-art-of-the-gouge-Part-3

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24 comments

  1. Demeter

    It’s all part of the NY mystique: bigger, brighter, bolder (and ever so much more expensive).

  2. Elizabeth

    I’m an NYU grad and my son started there a few years ago. In that 30 years, the cost of housing roughly doubled, while the cost of tuition roughly quadrupled. So, Forbes’ “pocketbook demands of living in New York” rationale doesn’t really fly. The cost of educating a student there must be less now, in the era of faculty serfdom. I wonder if one reason the tuition has skyrocketed is because student loans are so easy to get – often “guaranteed.” Maybe the university charges as much as the families can borrow?

  3. hemeantwell

    Here’s another link to a Doug Henwood KPFA interview, this time with Christy Thornton, a grad student at NYU who was part of a recent successful organizing drive among teaching assistants. It’s particularly good on NYU’s corporate-mimicking multinational strategy, funded by jacking up student fees. The Thornton interview is the second half.
    http://shout.lbo-talk.org/lbo/RadioArchive/2013/13_12_19_16.mp3

  4. Jim Haygood

    Higher education, comrades: as with options, the big profits accrue to the seller, not the buyer. Is anyone surprised that, like our Dear Leader, NYU’s John Sexton is a Harvard Law grad? It’s not the musty old tomes on torts and trusts, but the lifelong networking with fellow toffs and racketeers that pays off big time.

    An NYT article just revealed the biz model:

    Seen from the Internet [sic], it is a vast education empire: hundreds of universities and high schools, with elegant names and smiling professors at sun-dappled American campuses.

    Their websites, glossy and assured, offer online degrees in dozens of disciplines, like nursing and civil engineering.

    Yet on closer examination, this picture shimmers like a mirage. The news reports are fabricated. The professors are paid actors. The university campuses exist only as stock photos on computer servers. The degrees have no true accreditation.

    http://www.nytimes.com/2015/05/18/world/asia/fake-diplomas-real-cash-pakistani-company-axact-reaps-millions-columbiana-barkley.html

    What other kind of biz gets customers lined up and pounding on the door to get in? I love it!

    So I’m starting my own educational empire: Harward, Yates and Princetown. They’re all members of the prestigious Hanseatic League, and are accredited by IATA (the International Academic Transcript Authority).

    Don’t miss our summer sale, at only $995 a credit hour. We accept Paypal and Bitcoin. Enter to win a free PhD Econ degree if you sign up by June 30th!

    1. washunate

      His bio really is a fantastic who’s who of what’s wrong with our leadership class. He’s a banker lawyer professor extraordinaire. And he’s got quite a doctor running the med center.

      President Sexton is Chair of the Independent Colleges and Universities of New York, Chair of the New York Academy of Sciences, and Vice Chair of the American Council on Education. He is a fellow of the American Academy of Arts and Sciences and a member of both the Association of American University Presidents and the Council on Foreign Relations. He has served as the Chairman of the Board of the Federal Reserve Bank of New York (2003-2006) and Chair of the Federal Reserve Systems Council of Chairs (2006). He served as a Board Member for the National Association of Securities Dealers (1996-1998), and was Founding Chair of the Board of NASD Dispute Resolution (2000-2002). He also serves on the Boards of the Council on Foreign Relations, the Institute of International Education and the Association for a Better New York. While Dean of the Law School he was President of the Association of American Law Schools.

      http://www.nyas.org/whoweare/bog/sexton.aspx
      http://nyulangone.org/our-story/our-leadership/executive-leadership/robert-i-grossman-md

  5. sd

    NYU had a scam going with student loans back in the 1980s that finally got exposed in the 1990s. It’s almost impossible to find anything about it now. The story never seemed to grow legs.

  6. Michael Hudson

    NYU is to education what Scientology is to religion.
    Remember a generation ago, when NYU bought a spaghetti factory and claimed tax deductibility for its profits because the spaghetti was part of a tax-exempt “educational institution.”
    There’s a metaphor here.

    1. diptherio

      But, but…they’re in New York City and everybody knows that whatever happens in NYC is better, and more advanced and more important–and just more real–than things that happen anywhere else in the country! Everybody knows that. NYU may have it’s share of problems, but at least it’s not located in some lame city in Missouri….jeesh!

    2. Jim Haygood

      “NYU bought a spaghetti factory”

      How else are you gonna learn to write C code?

      Plus it served as a case study for vertical integration of campus food services.

      Got my doctorate in Motorcycle Mechanics there, based on lifetime experience in benching and wrenching.

  7. diptherio

    I’ll just note that “non-refundable deposit” is an oxymoron.

    The list of scams they’re running is impressive, but in a bad way…go to your in-state public University, kids, you’ll be glad you did (or at least glad you didn’t go to NYU).

    1. Jim A

      I think that many deposits are non-refundable….It should, however be creditable towards tuition.

  8. Rosario

    Today’s universities only offer potentially three valuable opportunities for students: facilities (at huge cost covered by tuition), faculty (sometimes), and peers (the best of the three, think students as laborers versus employer with the potential for unionizing). Students no longer attend universities as hubs of knowledge or information. They are hubs of opportunity. By analogy, it is like paying for the opportunity to get an interview at some high paying job. Thus why attending NYU, Harvard, MIT, etc. is a must for any social climber, and what a dream in NYC with cocktail parties and beautiful people abound in the midst of perpetual fantasy.

  9. craazyman

    The top 10 reasons why NYU bureaucrats get pay and perks worth millions . . .

    Reason $10
    You gotta show the kids how da woiled woiks

    Reason $9
    When you hire the students as hookers, you can afford to pay an internationally competitive fee

    Reason $8
    They want their own rung in Dante’s inferno! Whoa!

    Reason $7
    Take a look at Raphael’s School at Athens then think about all the marble and pillars. That’s not a low rent operation.

    Reason $6
    They’re too old to have their toga parties in a frat house.

    Reason $5
    When you live and work in NYU mansions, you’re always on the job! Isn’t that worth overtime pay?

    Reason $4
    They say they’re salesmen and salesmen make a lot of money. OK bucko?

    Reason $3
    Buildings are taller in New York than most other places. So there’s more to administer

    Reason $2
    They say they don’t need a reason.

    and Reason $1 why NYU bureaucrats get pay and perks worth millions . . . drum roll please . . .

    They’re not really sure, but they’ve hired themselves as high-priced consultants to figure it out!!! . . whoa! ka-ching!

  10. ginnie nyc

    Wow, Yves, thanks for posting this report. I made the very expensive mistake of enrolling in grad school at NYU in the early ’90’s – the degree of fraud and shaving, simply in the academic sense, was astonishing. My advisor was nowhere to be found after classes began for the entire first year; they lied about who headed my department (no one), and when someone was finally hired at year’s end, he was an administrative hack from within who had absolutely no foundation in the department, the division, or any related discipline. All my ‘professors’ except one were much-abused adjuncts.

    The main library, Bobst, is a fitting monument to its pederast donor (look it up). A good deal of the collection was ‘missing’ or heavily vandalized; the NY Public Libraries books in circulation are in much better shape with far more users. There were no carrells for masters candidates in the library, for love or money. Most of the library’s cubic footage is occupied by a vast, central atrium that travels the height of the building, with the book collection squeezed around the periphery. This atrium is a favorite place for stressed students to end it all.

    I decided to take some courses at their IFA (Institute of Fine Arts), which is near the Metropolitan Museum. The administrator there refused to let me enroll as I was not “in the school”. I thought about this, called the professors directly, got signed letters from them (naturally), and happily returned to give the admin apoplexy. None of this crap took place when I was an undergrad at Penn – I never had a problem enrolling in PhD classes, administratively, whether inside or outside my school.

    New York University is not a university, it’s a random collection of isolated departments and special institutes created around famous, very expensive names, who usually do not stay beyond 4 or 5 years. It costs more than Columbia, which is Ivy League, for what that’s worth, and took me 15 years to pay off. Even after I had to go on SSDI, which was helluva lot of fun.

  11. Michael Fiorillo

    As a lifelong Villager, NYU has always been The Enemy, and it has been a stock phrase of mine for a generation that it’s a real estate development company with a higher education subsidiary.

    The university is a classic example of how geography is destiny, since for years it was a second-tier commuter school that happened to be located in a globally-hyped youth ghetto (which it then institutionalized). In many respects, it’s still a second-tier school (worse, given their extreme grabbiness) tarted up with some celebrity academics that students, treated like rubes, will never see.

    From personal experience, I know that most departments are profit centers. Twenty years ago, I got a Master’s degree in education (and, to be fair, they gave me a fairly generous financial aid package). I had young children, so it was mostly a matter of convenience. Of the dozen classes I took, apart from student teaching and observations, only three were taught by full-time, tenured faculty. The others were taught by adjuncts and TAs who ranged from OK to really terrible.

    That was graduate school; I hate to think of the poor, deluded kids who can’t afford the extortionate hustle of attending this school, indebting themselves for many years to do so.

  12. lord koos

    Universities are now just another institution to loot. This piece reminds me of a scene in the 2014 documentary “Ivory Tower”, which if people haven’t seen, they really need to. Although I’m sure many readers here are familiar with the story of Cooper Union, there is an interview with the University president that is a priceless peek at the looting class. He basically squandered Cooper Union’s legacy by taking the college’s money and gambling it in the stock market a little before the crash of 2008 and by spending $170,000,000 of the college’s money on a building that was not really needed. A school that had been pretty much funded in perpetuity (Cooper Union owns the land under the Chrysler building), became indebted for millions of dollars and they now must charge students to attend, as well as having to sell off assets. I can’t believe the guy is still president of the school. https://en.wikipedia.org/wiki/Cooper_Union_financial_crisis_and_tuition_protests

  13. hyperpolarizer

    Too bad it has come to this. I went to NYU in the Bronx when there was an NYU in the Bronx.

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