"Every great cause begins as a movement, becomes a business, and turns into a racket." Eric Hoffer
American higher education, once a ladder to opportunity, has become a vast machine of wealth extraction. Debt burdens students for decades. Professors and campus workers are trapped in precarious jobs. Entire communities are pushed out by campus expansions. And a select few elite universities sit atop fortunes that rival hedge funds—all while claiming tax-exempt status and public goodwill.
This is the higher education racket: a sector that has turned away from its public mission and now operates with the logic of capital accumulation, enabled by deregulation, political influence, and privatization.
From Movement to Market: Postwar Expansion and Privatization
The 1944 G.I. Bill launched a golden age of public higher education, providing veterans access to tuition-free college and transforming American society. Enrollment surged, inequality shrank, and community colleges became lifelines for working-class students. Colleges were seen as civic institutions, essential to democratic life.
That vision began to erode in the 1980s, as neoliberal policymakers slashed state funding, forcing institutions to raise tuition, court corporate donors, and cut labor costs. By 2020, public universities received less than half the state funding (per student) they did in 1980, adjusted for inflation (Center on Budget and Policy Priorities).
Trump Administration: Deregulating the Racket
Under Donald Trump, the Department of Education, led by billionaire Betsy DeVos, launched an all-out campaign to roll back protections for students and favor the worst actors in higher ed:
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Gutted Borrower Defense rules, making it harder for defrauded students to cancel loans.
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Eliminated the Gainful Employment rule, allowing for-profit colleges to peddle useless degrees.
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Weakened accreditors' oversight, enabling bad schools to access federal aid with little accountability.
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Backed anti-union efforts, including trying to strip grad students at private universities of their employee status.
This deregulatory spree enriched predatory schools, student loan servicers, and debt collectors—while stripping students and workers of protections.
The Academic Underclass
While university presidents earn seven-figure salaries, and campuses build luxury dorms and biotech labs, the people doing the teaching are increasingly disposable. More than 70% of college faculty now work off the tenure track, many as adjuncts earning below minimum wage on a per-course basis (AAUP).
Campus workers—grad students, maintenance staff, food service employees—are organizing for better wages and benefits, but often face union-busting tactics. From Columbia to the University of California, administrators stall negotiations and outsource labor to avoid union contracts (The Guardian, 2022).
Universities as Urban Developers
Historian Davarian Baldwin has documented how universities function as engines of gentrification in cities like New Haven, Chicago, and Philadelphia. In In the Shadow of the Ivory Tower, Baldwin argues that universities have become "shadow governments", gobbling up real estate, policing their neighborhoods, and reshaping urban economies—all without democratic accountability.
These “anchor institutions” claim to uplift communities, but their expansion often displaces low-income Black and brown residents, raises housing costs, and erodes the local tax base—since universities are typically exempt from property taxes.
“Higher education is not just about learning anymore. It’s about real estate, policing, health care, and urban planning—all under the control of tax-exempt institutions.” —Davarian Baldwin
Endowment Empires
Nowhere is the inequality of U.S. higher education more glaring than in university endowments. Harvard, Yale, Stanford, and Princeton each have endowments exceeding $30 billion, managed like hedge funds with investments in private equity, real estate, and offshore accounts (NACUBO 2023 Endowment Study).
Despite their wealth:
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These universities often provide limited financial aid to working-class students.
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They pay no federal taxes on endowment income under $500,000 per student.
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They resist efforts to contribute to municipal budgets, even as they consume city resources.
During the COVID-19 pandemic, many elite institutions furloughed workers and froze wages—despite posting strong investment returns and sitting on endowments worth more than the GDP of some nations.
Critics argue that these funds should be tapped for student debt relief, housing support, or public education reinvestment—not hoarded like private wealth.
The Price of the Racket
The numbers are staggering:
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$1.7 trillion in student debt
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Tens of thousands of adjuncts living in poverty
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Campus police forces more militarized than local law enforcement
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Communities displaced by campus-led gentrification
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Universities with endowments larger than some countries' national budgets
The higher education racket isn’t just an economic problem. It’s a betrayal of public trust.
Reclaiming the Public Good
If higher education is to serve the people—not private interests—structural reforms are necessary:
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Cancel student debt and offer tuition-free public college
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Mandate living wages and fair contracts for all campus workers
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Tax large endowments and require community reinvestment
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Reinstate regulations to hold predatory institutions accountable
Higher education once expanded opportunity. It can again—but only if we dismantle the racket.
Sources:
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Baldwin, Davarian L. In the Shadow of the Ivory Tower (Bold Type Books, 2021)
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AAUP – Contingent Faculty Data
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NACUBO – 2023 Endowment Study
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The Guardian – University Union-Busting
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NPR – DeVos Deregulation
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Center on Budget and Policy Priorities – State Funding Cuts
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College Board – Trends in Tuition
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