In 1971, sociologist Herbert J. Gans published The Positive Functions of Poverty, a provocative essay that argued poverty persists not due to a lack of solutions, but because it benefits powerful institutions. Over fifty years later, his thesis haunts U.S. higher education, which does not merely reflect inequality but actively relies on it. The system functions less as an engine of mobility and more as a mechanism for managing and monetizing the poor.
Today, poverty is not an accident of the US higher education system—it is a prerequisite for its operation.
Poverty as Institutional Legitimacy
Colleges and universities frequently promote themselves as pathways out of poverty, showcasing stories of Pell Grant recipients and first-generation students to validate their missions. These narratives help secure federal funding, private donations, and political goodwill. Yet the vast majority of poor students never cross the commencement stage. Instead, their presence serves to bolster institutional credibility while masking the reality of systemic failure.
Programs like TRIO, GEAR UP, and Promise scholarships function not to eliminate poverty, but to manage it. They offer modest hope while ensuring the system continues undisturbed.
Poor Students as a Revenue Stream
The financial foundation of higher education rests heavily on low-income students. For-profit colleges, many of them reincarnated under new branding or partnerships, depend almost entirely on federal aid and student loans tied to impoverished enrollees. These institutions aggressively recruit students with big promises and deliver little in return. Graduation rates remain dismal, while student debt mounts.
Private student lenders have filled the remaining gaps left by federal aid caps and rising tuition. Fintech platforms like SoFi, College Ave, and Earnest offer loans with complex terms and minimal consumer protections, particularly to vulnerable students desperate for access. For many borrowers, this creates a lifetime of indebtedness for a credential that may never yield a return.
The Administrative Industry of Poverty
A burgeoning sector of higher education administration is devoted to managing the symptoms of poverty. Diversity, Equity, and Inclusion (DEI) offices—now under political assault—often oversee food banks, mental health outreach, and “resilience” programming for first-gen students. Meanwhile, a growing HR specialty has emerged to “track and support” the poor.
These staffers may act with sincere intention, but their existence also reveals the transactional nature of institutional concern. Without poor students to manage, their roles—and the bureaucracies behind them—would shrink. Food insecurity and academic struggle have become normalized to the point that colleges maintain food pantries as a permanent feature of campus life.
Exploiting the Educated Underclass
As sociologist Gary Roth has observed, higher education produces a surplus of credentialed workers with no corresponding demand. These graduates, often from poor backgrounds, return to campus as adjunct faculty, graduate assistants, or gig workers—essential but expendable.
Their labor sustains the system at low cost. They teach core courses, staff libraries, and support faculty research while earning poverty wages themselves. The promise of education becomes a loop of unfulfilled mobility.
Poor Students as Research Subjects
Low-income students are not only sources of revenue and labor—they are also the subjects of academic research. Entire disciplines, from sociology to education and public health, have been built upon the study of poverty. Yet few researchers challenge the institutional structures that perpetuate the very inequalities they document.
Faculty careers flourish. Tenure is won. Grants are secured. The students themselves often see no tangible benefit from this knowledge production.
Reinforcing the Myth of Meritocracy
Elite universities use a handful of poor students to validate the myth of meritocracy. These “success stories” are amplified through PR campaigns, donor appeals, and glossy admissions brochures. They function as symbolic proof that the system works—even as the vast majority of poor students are shunted into lower-tier institutions with fewer resources and worse outcomes.
The truth is clear: wealth remains the strongest predictor of educational success in the United States.
Stratification by Design
The U.S. higher education system is structured to reproduce class hierarchy. Community colleges and regional public universities disproportionately enroll poor and working-class students. Flagship publics and elite privates cater to the children of the professional and ruling classes.
This credentialing hierarchy maintains social order while offering just enough upward mobility to justify its existence.
Political Utility: Blame the Poor
When institutions face financial shortfalls or declining enrollment, they often scapegoat the poor. Students are labeled unprepared, unmotivated, or emotionally fragile. Rarely are structural causes—such as rising tuition, defunded public services, or predatory loan systems—acknowledged.
Neoliberal reforms and conservative attacks on “woke” education continue to target vulnerable populations, obscuring the institutional failures that drive inequity.
Private Equity and the Monetization of Student Housing
One of the latest frontiers in the commodification of poverty within higher education is campus-adjacent real estate. Private equity (PE) firms are aggressively acquiring student housing near flagship state universities, turning basic shelter into another site of financial extraction.
Evidence of PE Expansion:
Private equity firms such as Investcorp, Rockpoint, and KKR have amassed significant portfolios of student housing near schools like the University of Florida, University of Texas at Austin, and College of Charleston. These acquisitions are not random—they target institutions with large, stable enrollment and limited new housing supply.
Rents on the Rise:
In cities like Tampa, rents increased by 49% from 2019 to 2023—a jump partly attributed to institutional investors, although the exact role of PE firms in driving this increase is contested. Still, anecdotal reports and advocacy groups point to rising rents, increased fees, and aggressive management practices following PE takeovers.
Housing Scarcity as Leverage:
While it's difficult to isolate private equity's influence from broader housing shortages and enrollment growth, it's clear that PE is exploiting structural constraints—just as for-profit colleges exploit financial aid loopholes. Where public universities fail to build sufficient housing, private investors step in, profiting from desperation.
A System That Needs Poverty
Herbert Gans argued that poverty survives because it serves essential functions for society’s powerful institutions. In American higher education, this dynamic is not theoretical—it is lived reality. Colleges and universities don’t just educate the poor; they extract value from them at every level.
From student loans and real estate speculation to adjunct labor and administrative bloat, the system is built around managing—not eradicating—poverty.
Until higher education confronts its own complicity in perpetuating structural inequality, it will remain what it is today: an industry that feeds on hope, and thrives on hardship.
Sources
Gans, Herbert J. “The Positive Functions of Poverty.” American Journal of Sociology, 1971.
Roth, Gary. The Educated Underclass: Students and the Promise of Social Mobility. Pluto Press, 2019.
National Center for Education Statistics (NCES)
U.S. Department of Education, College Scorecard
Private Equity Stakeholder Project
RealPage Analytics
Advocacy reports on student housing and rent inflation
Higher Education Inquirer FOIA research files
