NYU’s loans for summer homes highlights student debt injustice | Helaine Olen
Why is NYU loaning money to star academics to buy vacation homes, at a time when its students are struggling to pay?
As is quite well known to many who follow the student loan foibles, New York University has, as they say, some problems.
NYU is one of the most expensive undergraduate institutions in the United States. Tuition, room and board will cost more than $64,000 for the 2013-2014 year. Financial aid, on the other hand, can be less than generous. The result? NYU students go straight to the bank. They borrow, and borrow and they borrow some more. The Department of Education claims the school is responsible for a collective $659m in student loans for 2010 alone.
This, however, is not the only type of loan the school is encouraging. According to excellent digging by Ariel Kaminer and Alain Delaquérière at the New York Times, a number of high-ranking staff are borrowing money too – but not, alas, for educational enrichment:
The house, which is owned by John Sexton, the president of New York University, was bought with a $600,000 loan from an NYU foundation that eventually grew to be $1m, according to Suffolk County land records.
It is one of a number of loans that NYU has made to executives and star professors for expensive vacation homes in areas like East Hampton, Fire Island and Litchfield County, Connecticut, in what educational experts call a bold new frontier for lavish university compensation.
Welcome to something we can call the “loans for summer homes” program.
These loans, let me add, are do not work like student loans or, for that matter, the home mortgage that you and I might apply for at the local bank. As the Times reports, Sexton’s loans came with generous “forgiveness” provisions. They also carried an interest rate described as “the current short-term applicable federal rate,” which, the article adds, was less than 1% at the time the papers were signed.
No doubt all too many NYU students – where stories are legion of students graduating more than $100,000 in hock to private lenders – are wishing they could get such a deal.
Privately issued student loans, let me remind everyone, not only lack forgiveness provisions, but they leave co-signing parents with a bill if their children die. Moreover, the rates are set to double to almost seven percent on July 1 on student loans with federal subsidies, unless our moribund Congress gets it together to pass legislation to fix the situation.
When Massachusetts senator Elizabeth Warren proposed a one-year fix that would see the rates on such things as the federal Stafford Loan go down to the same percentage offered to banks borrowing from the federal reserve discount window – that is, about .75% – she was lambasted for offering a “populist values statement” in lieu of serious legislation.
Perhaps if Warren had simply named her bill ‘Loans for Summer Homes’ instead of the Bank on Student Loans Fairness Act, her plan would have gotten more respect.
Back to the subject at hand. It’s also worth noting that the news of the loans for summer homes program comes only a few months after it was revealed that NYU had helped Jack Lew, the school’s former chief operating officer who is now Secretary of the Treasury, pay the mortgage bills on his 4,000 sq ft home in an exclusive area of the city’s Riverdale section of the Bronx.
Experts tell the New York Times that the loans for summer homes program is quite legal indeed. Nonetheless, it seems highly unlikely very many parents paying the school’s exorbitant tuition bills thought their money was going to helping the NYU’s top dogs escape the eau de garbage of New York City in July and August. So a few questions:
• Will alums continue to give money to NYU now that they know some portion of their funds are going to keep high-level administrators and professors familiar with ocean breezes and elite beaches?
• Will parents continue to allow their children to apply to attend NYU now that they know that too?
• And will students, knowing John Sexton is reliably out of town for at least part of the summer, decide his office will make a nice low-cost, air-conditioned place to spend the dog days of July and August? After all, Cooper Union is less than a mile away.
About Helaine Olen
I am the voice of The Bills, a column about the intersection of money and life, at Slate. At Inc., I contribute to the Spread the Wealth personal finance column. My work on politics, economics, workplace culture and women’s issues has been published in numerous other print and on-line publications, including The New York Times, The Wall Street Journal, The Washington Post, The Atlantic, Salon, Pacific Standard, and The Los Angeles Times, where I wrote and edited the popular “Money Makeover” feature.
I'm the author of the critically acclaimed book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, and The Index Card: Why Personal Finance Doesn’t Have to be so Complicated, which I co-wrote with Harold Pollack.
What else? I’m a passionate bibliophile, a fan of 1970s pop music and a lover of rummage sales. I live in New York City.
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