The College Cartel
The American higher education system has transformed from institutions of learning into massive financial machines that prioritize wealth accumulation over student affordability and educational outcomes. This shift represents one of the most significant yet under-discussed economic issues facing younger generations today.
The origins of our current educational model can be traced back to the Prussian system of the 19th century, which was designed specifically to produce obedient, punctual workers for industrial capitalism. What began as classical education aimed at cultivating moral reasoning and civic engagement has morphed into a credentialing system primarily focused on economic productivity. Knowledge became job training, and learning became credentialism. The sacred pursuit of enlightenment was replaced by the practical goal of employment, with universities functioning as supply chains for labor markets rather than sanctuaries for intellectual inquiry.
Perhaps the most troubling aspect of modern universities is their transformation into financialized institutions with billions in endowments. Harvard alone sits on $53 billion, while other elite schools manage over $30 billion each. Despite these vast resources, they spend just 4-5% annually, citing donor restrictions that prevent them from meaningfully addressing affordability. The financial aid provided by these wealthy institutions is strikingly small in comparison to their wealth – Harvard gives just $250 million in aid despite its massive endowment. This accumulation of wealth occurs while students take on crushing debt burdens to attend these very institutions.
The federal government's role in enabling this system cannot be overlooked. By guaranteeing student loans, the government transfers financial risk from universities to students and taxpayers. Universities receive full tuition upfront regardless of student outcomes, creating perverse incentives. Schools can raise tuition continuously knowing students can borrow virtually unlimited sums. The arrangement benefits all institutional players – schools get guaranteed income, lenders collect interest, and politicians earn political capital for "investing in education" – while students bear the ultimate burden of debt they cannot discharge, even in bankruptcy.
Universities maintain this profitable arrangement through powerful lobbying organizations that protect their financial interests. Groups like the American Council on Education (ACE) and the Association of American Universities (AAU) successfully resist regulation by framing higher education as a pure social good rather than the industry it has increasingly become. This political framework shields universities from scrutiny about their business practices and allows them to merge the language of public good with private capital accumulation.
The psychological impact of this system on students is profound. From early childhood, we're conditioned to believe college is the only viable path to success. Few alternatives like vocational training or apprenticeships are valorized, and challenging the college system means questioning the broader illusion that success is fairly earned through our educational meritocracy. Once students incur debt, cognitive dissonance often prevents them from questioning whether college was truly worth the financial burden.
Perhaps the most striking disconnect is between tuition inflation and wage stagnation. Since the 1980s, college tuition has increased by over 1,200%, vastly outpacing inflation and wage growth. Meanwhile, real wages for college graduates have remained nearly flat. The average private university now costs over $55,000 per year, forcing most students to take substantial loans. Yet many graduates find themselves underemployed, working jobs that don't require their expensive degrees. The promise that education guarantees upward mobility is increasingly contradicted by economic data.
We're supporting a system that functions more like a hedge fund with classrooms than a public good dedicated to education and opportunity for all. What would a fairer model look like? Well…
Tune in to “The College Cartel: The Hijacking of Higher Education” on The Evolved Podcast for more!
