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In some respects, NYU is the poster child for the excesses of 21st-century student debt in America. Although most NYU undergraduates haven't borrowed as much as Lyndsey (who owes $165,000 and will end up paying $350,000 because of interest), the average student is still a whopping $35,000 in debt when they graduate, a figure $11,000 higher than the national average. In fact, NYU creates more student debt than any other nonprofit college or university in the country. The only schools putting students into more debt are the kind of for-profit diploma mills currently being investigated by the United States Senate.
But at the same time, NYU's status as an iconic and prolific generator of student debt is an awkward fit with the populist outrage of national education funding activists and Occupy Wall Street protesters. Prospective NYU students have less-expensive options, and NYU isn't exactly positioning itself as an affordable institution for the masses. In fact, its tuition is so high and its financial aid so low precisely because the university is on a multi-decade spending spree, attempting to launch itself into the highest tiers of elite universities with a state-of-the-art campus and top-notch faculty.
That sort of aspirational spending—the idea that, as former NYU president L. Jay Oliva once said, "There's no way to get excellence, other than buying your way into it"—is, of course, only the institutional mirror of the aspirational spending NYU's students are doing when they pay their tuition bills. For many, the belief that a diploma from a prestigious school like NYU can catapult a student into a higher socioeconomic register makes NYU's staggering tuition seem worth it.
There is a significant difference between these double strands of big dreams and lavish spending, though: NYU is financing its dreams with student tuition. The students are financing theirs with enormous loans that can weigh on them and limit their options for decades to come.
Why does NYU put its students in so much debt? Some of the answers are obvious and come quickly to the tongue of university spokesmen when asked the familiar question: NYU is in the heart of New York City, one of the most expensive real estate markets in the world. Everything is more expensive here, from buildings to salaries to food and laundry.
School officials also point to the school's relatively meager endowment. At $2.5 billion, NYU's endowment sounds like a lot until you start comparing it with those of the big-name schools with which NYU competes: Five miles uptown, Columbia has $7.8 billion. Yale has almost $20 billion. Harvard has $32 billion.
Schools like these can use the interest accrued by their massive endowments to help cover their costs, lessening their reliance on tuition and increasing the generosity of their financial aid. Princeton funds nearly half of its operating budget with its endowment. At NYU, the figure is 5 percent.
But while NYU pleads poverty to its students, it's worth understanding why its endowment is so small. For one thing, NYU hasn't been around collecting compound interest for as long as some of its ivy-covered brethren. It was founded in 1831, nearly 200 years after Harvard. And for much of its history, NYU wasn't exactly serving the sort of old-money elites and future captains of industry that could be counted on to give generously to their alma mater.
For most of the past century, NYU was a modest regional commuter school. Most of its operations were in the Bronx, in a spacious, conventional campus in University Heights. But faced with a financial crisis in the early 1970s, the school's board of directors began implementing a sort of moon-shot effort to save the school. If the challenge was to go big or go home, NYU was going to go big.
It sold the Bronx campus, now home to Bronx Community College, and rebranded itself as the school in the heart of downtown. President John Brademas launched a billion-dollar fundraising campaign. But contrary to conventional doctrine, NYU socked little of the money away, instead going on a spending spree, expanding the university's Greenwich Village footprint, and upgrading its existing facilities.
Longtime residents fought back against this construction boom and the institutionalization of their neighborhood, but though the resistance to NYU's ongoing expansion is still noisy, in decades of struggle, they have had little success in reining in the NYU juggernaut.
The development was mostly for dorms and academic buildings, but NYU's holdings also include a lot of swanky faculty housing, which, combined with a generous war chest, have helped to lure big-name professors who would never have considered NYU 30 years ago.
The spending spree struck many at other universities as risky and dangerous. Spending so much and saving so little allowed NYU to grow rapidly in size and stature, but it left the school with little to fall back on in hard times and placed an outsize share of the burden of running the school on the backs of students.
Still, by most measures, the strategy was an unqualified success. Forty years after its near bankruptcy, NYU's Hail Mary transformation is complete. The Bronx now far behind, the school is firmly entrenched in the Village, with 15 million square feet citywide. It has a world-class faculty and now competes for some of the best students in the world.