Neoliberalism and the Crisis in Higher
Education: The Cost of Ideology
By Beth Mintz*
ABstrAct. A number of factors have contributed to the crisis in higher
education, including the long- term transformation in funding. In this
article, I argue that neoliberalism can explain many of the processes
leading to our changing commitment to colleges and universities and
the cost increases that this change has produced. A number of neoliberal
assumptions firmly rooted in conventional wisdom have contributed
to a “student- as- customer” phenomenon, which is, itself, a cost driver.
I look at the development of the student as customer as a vehicle
for exploring tuition increases. I also examine the tension between
education as a public and a private good and the marketization of
higher education as crucial drivers of these transformations. In doing
so, I emphasize that the student as customer has been created by the
changes in the way we think about, organize, and fund education,
rather than any fundamental change in young people.
Part of this increased cost [of a college education] is associated with the
perverse assumption that students are “customers,” that the customer is
always right, and what he or she demands must be purchased. Money is
well- spent on psychological counselling, but the number of offices that
focus on student activities, athletics and athletic facilities, summer job
placement and outsourced dining services, to say nothing of the dormitory
rooms and suites that only the Four Seasons can match, leads to an expan-
sion of administrators and increased cost of administration. (Cole 2011)
Exchanging pleasantries with a barista at Starbucks one afternoon
before COVID- 19, I learned that the young woman behind the counter
American Journal of Economics and Sociology, Vol. 80, No. 1 (January, 2021).
© 2021 American Journal of Economics and Sociology, Inc.
*Professor emeritus of sociology at the University of Vermont. Co- author of The
Power Structure of American Business (University of Chicago Press 1985) and co-
editor of Corporate Control, Capital Formation, and Organized Networks (Tokyo: Chou
University Press 1996). Email: Beth.Mintz@uvm.edu
80 The American Journal of Economics and Sociology
was a college student having a great day. When I asked what made
it so good, she told me that her classes had been canceled. At the
risk of harkening back to a golden age of student engagement that
never really existed, faculty around the country have, for a while now,
been trying to understand what has happened to undergraduates.
Particularly mystifying has been the emergence of the “student- as-
customer” approach to higher education, a result, they have spec-
ulated, of popular culture or, perhaps, contemporary childrearing
patterns with their emphasis on self- esteem.
Student orientation to higher education has changed dramatically,
but this transformation is rooted in the way that we think about, or-
ganize, and fund education, rather than any fundamental change in
young people. Nevertheless, the outcome of what undergraduates
expect as part of the college experience has profound implications
for the health of the academy. The student- as- customer development
presents a useful vehicle for examining some of the processes that
contribute to the crisis in higher education, including rising student
debt. Due to the growing view of education as a private rather than a
public good, the ways that colleges and universities are funded, and
the “marketization” of higher education, students today are customers.
This situation has contributed to tuition increases. Neoliberal assump-
tions about privatization, deregulation, and spending cuts in social
services have become firmly rooted in conventional wisdom and have
driven the public policy that is partly responsible for the rise of the
student- as- customer model of higher education.
Beginning with a brief discussion of the rise of neoliberalism, I
examine the tension between education as a public good or a private
good, exploring how the victory of the latter has contributed to the
rise of education as consumerism. I then explore some of the ways
in which treating higher education as a commodity has created the
student- as- customer phenomenon and how this has contributed to
the cost of higher education. I conclude with some implications for
understanding higher education in a post- COVID world.
The Neoliberal Sensibility
It is not clear exactly when liberalism died in the popular imagination,
but the death knell was plainly heard when, in the 1988 presidential
81Neoliberalism and the Crisis in Higher Education
race, Michael Dukakis was attacked as a spendthrift liberal.1 Seven
years of the Reagan presidency helped solidify the ascendance of
the subsequent paradigm, neoliberalism, with its emphasis on the
efficiency of the free market, the need for deregulation and privat-
ization, the reduction of government spending on social services,
and the replacement of the concept of “public good” with individual
responsibility (Greenwood 2009). By the mid- 1990s, these neoliberal
assumptions had infiltrated Democratic thought, too, as illustrated by
President Clinton’s health care reform proposal featuring market com-
petition and personal responsibility and, later, by President Obama’s
policies marketizing education (Mora and Christianakis 2011).
Neoliberalism equates a state’s success with its ability to nurture and
sustain the economy (Brown 2003). However, unlike liberalism, it is
unconcerned with the contradiction between the right to pursue profits
in a capitalist economic system and the ideal of equal opportunity in a
democratic society. Thus, while economic freedom is central to tradi-
tional liberal philosophy, it is coupled with an understanding that unbri-
dled property rights produce inequality when some people profit at the
expense of others. The solution offered in the liberal tradition is a strong
government to supervise the economy and public support for those
who have not had an equal opportunity to compete. Neoliberalism, on
the other hand, assumes that government cannot effectively provide for
the needs of its citizens; it also sees public support for the disadvan-
taged as antithetical to the ethos of personal responsibility.
Over time, neoliberal ideas and practices have structured our eco-
nomic and political lives, and this shift has had profound implica-
tions for social arrangements of varying stripes. Among the institutions
shaped by this change is the university, where a number of neoliber-
alism’s fundamental tenets provide a valuable analytic framework for
examining the development of the “student as customer.” In particular,
several elements of neoliberalism have become conventional wisdom:
• the belief in the efficiency of the free market,
• the need to deregulate the economy and privatize the public
• the commitment to tax reduction,
82 The American Journal of Economics and Sociology
• the abandonment of the welfare state, and
• the replacement of the notion of the public good with personal
responsibility for one’s own welfare.
Those elements of neoliberalism have shaped both public policy and
Neoliberal assumptions consider a college education as a financial
investment for the student and a vehicle for serving the needs and
demands of the business community (Saltmarsh 2011). Advocates of
neoliberalism also presume that colleges and universities should com-
pete for students as customers in a marketplace and should produce
highly trained workers who will enable the nation to compete suc-
cessfully in a global arena.
Finally, a core value of neoliberalism is efficiency. Market competi-
tion is supposed to lead to efficient results. However, the introduction of
market logic into higher education has not made it efficient, but instead
has contributed to the runaway costs that we see today. Of particular
interest here are the ways in which neoliberalism has solidified the rise
of the “student as customer” with its attendant costs and consequences.
The Student as Customer: Public Versus Private Goods
Our nation is at risk. Our once unchallenged preeminence in commerce,
industry, science, and technological innovation is being overtaken by com-
petitors throughout the world. (Gardner 1983: 5)
In recent decades, the belief in the importance of economic devel-
opment as a strategy for maintaining the nation’s competitive edge in
the global market has framed most discussions about the direction of
the American educational system. The National Academies of Science
(2005) clearly articulated this vision when it called for a comprehen-
sive federal effort to strengthen the nation’s commitment to long- term
basic research. At least until the Trump administration, discussions
about state and federal education policy focused on the future of
schooling. President Obama (2011: 4) summarizes this well:
[We have a responsibility] to invest in the skills and education of our
young people. If we expect companies to do business and hire in America,
83Neoliberalism and the Crisis in Higher Education
America needs a pool of trained, talented workers that can out- compete
anybody in the world.
History confirms that education is an engine of economic success.
Goldin and Katz (2008) note, for example, that “the twentieth century
was both the American century and the Human Capital Century,” sug-
gesting that the remarkable strides made during that period were the
payoff for investing in universal education.
Underpinning these messages about the importance of school is
the assumption that it will, like a rising tide, “lift all boats.” More gen-
erally, in the United States, ideas about the funding of education turn
on whether it is considered a public good— that is, whether the whole
community benefits from an educated population. Traditionally, our
ideology included the notion that an educated citizenry is crucial for
maintaining a democratic society, and that the collective skills and
knowledge of a population benefit all.
Today, education is considered a public good when it is viewed as
the economic driver discussed above, particularly when its task is to
train future workers to fill necessary market positions. This became
evident for K– 12 with the No Child Left Behind Act of 2001 (NCLB),
which favored marketable skills over broad educational outcomes,
and perpetuated skill development as the central theme in much of
the discourse about schooling in the United States. In higher edu-
cation, “training for ‘employability’” dominates community colleges
(Levidow 2002: 227). Their primary charge is now job training rather
than preparing students to enter bachelor’s degree programs (Kane
and Rouse 1999). At four- year institutions, the neoliberal emphasis
on marketability of educational skills is reflected in the popularity of
majors like business administration and computer science and in the
increased funding of STEM at the expense of the humanities. These
trends show that the neoliberal vision of the educational system “as
[a] production facilit[y] whose primary mission was providing industry
with its required human capital” has been realized (Hyslop- Margison
and Sears 2006: 1).
But even this limited frame of schooling in the public interest com-
petes with the notion of education as a private good, something pur-
sued by the individual as an investment that will yield a return in
84 The American Journal of Economics and Sociology
the form of future earnings. In the language of the economist, these
investments are “human capital,” with the profits enjoyed by the indi-
vidual, rather than the community. Although the potential for personal
gain is far from new, in the last few decades, the view of education as
a private good and the neoliberal corollary that emphasizes individual
responsibility and individual consequences have increasingly framed
the discourse of education policy.
The ascendance of this neoliberal view has had a profound impact
on the financing of education, in general, and of higher education,
in particular. The neoliberal assumptions that beneficiaries of an in-
vestment should pay for it, and that education is a private good, help
explain the privileging of loans over grants and the systematic de-
funding of public colleges and universities. All of these beliefs have
implications for access to higher education.
Bowles and Gintis (1976) and Bourdieu and Passeron (1979) argue
that schools reproduce the class system, but the victory of the neolib-
eral agenda has intensified the role of education in solidifying advan-
tage. It has institutionalized the gap in access to higher education in
new ways, as more low- and middle- income students are either priced
out of the academy or trade down in terms of status and prestige. This
is consistent with David Harvey’s (2005) understanding that increasing
social inequality is so central to neoliberalism that it can be viewed
as structural. Henry Giroux (2008: 8) suggests that, by defining the
public good as private, neoliberal ideology “produces, legitimates, and
exacerbates” poverty and disparity.2 More specifically, the emphasis on
personal responsibility and the application of market principles to the
nonprofit sector has contributed to the public defunding of higher edu-
cation. This translates into the structural requirement of privileging the
affluent, since institutions now survive on those who can pay the bills.
For colleges and universities now must attract high- performing stu-
dents who can finance a large portion of their tuition or who have access
to student loans. Slaughter and Rhoades 2004: (292, 294– 295) explain:
Precisely because tuition revenues are an increasingly significant share of
institutional revenues, colleges and universities move to attract consumers
who have more money and seek to extract as much revenue as possible
85Neoliberalism and the Crisis in Higher Education
Crenshaw (2002: 1) adds:
American colleges and universities have become like airlines and hotels,
practicing “yield management” to try to maximize the revenue generated
by every seat or bed.
Labarree (1997) suggests that the concept of education as a private
good, with its emphasis on school as a vehicle for individual social
mobility, also has a profound effect on student behavior. Whereas
education was formerly based on a model of knowledge acquisition,
education is now often seen as a commodity to be used for competi-
tive advantage in the labor market. This has contributed to the ongoing
differentiation between elite and non- elite schools, fueling the intense
competition for access to the most selective colleges and universities,
and reflecting the high- stakes game of maximizing individual educa-
tional advantage in an era of “credential inflation” (Collins 1979).
Moreover, when the primary goal of education is merely to earn
a credential, the most rational students figure out how little they can
do to earn their degree. Menand (2011), for example, notes that, in
a society encouraging young people to maximize personal advan-
tage, there is little incentive for broad intellectual development; when
given a choice in this context, people will learn only what they need
for occupational success. Indeed, empirical evidence suggests that
contemporary college students spend less time on academics than
previous generations. Arum and Roksa (2011) point out that in the
early 1960s, students spent an average of 40 hours a week— a typical
work- week— studying and attending classes, but they found that only
half of college seniors today, including those from more selective insti-
tutions, spend a comparable amount of time on academics. Although
some of this may be attributed to the need to work for wages while in
school, evidence also suggests that, in traditional- style residential col-
leges, friendships and social learning are more important to students
than academics (Grigsby 2009).
In sum, neoliberalism, with its emphasis on education as a private
good, has solidified the rise of students as customers, which helps
explain why we are transferring the cost of higher education from the
community to the individual. This ideological shift has been used to
86 The American Journal of Economics and Sociology
justify the massive underfunding of higher education (Lewis 2008).
The attendant consequences and costs of this will be explored below.
Any notion of higher education as a public good that remains salient
today is organized around workforce development. The tension be-
tween the public and private good plays out as a contradiction be-
tween the business interest in subsidized training of future workers,
on the one hand, and the ideology that emphasizes higher education
as a vehicle for personal gain, on the other.
The Student as Customer: The Role of the Market
Truckloads of glossy brochures sent to high school students by col-
leges and universities represent only a small portion of their mar-
keting budgets. Collectively, four- year nonprofit schools (public and
private) spend nearly half a billion dollars on advertising each year
(Cellini and Chaudhary 2020). Some argue that this is efficient; given
imperfect information, it is necessary to match consumers with pro-
viders (Mause 2009). But when tuition dollars form the foundation of
university revenues, the game changes profoundly.
Marketing is part of the larger process of marketization— the in-
creasing influence of competition and market logic on university cost
structures (Williams 1995). Many believe that marketing plays a major
role in rising prices (Slaughter and Leslie 1997; Slaughter and Rhoades
2004). Since higher education is highly regulated and subsidized, it is
not really a market in the formal sense; however, the United States has
the most market- oriented system in the world (Dill 2003). Traditional
colleges and universities compete for students, faculty, administra-
tors, research dollars, donations, and endowments, while private for-
profit institutions target students who have access to Pell grants and/
or government- subsidized loans. Multiple factors have contributed to
this competition, and the rise of the student as customer, again, helps
Financial aid is an important case in point. In its early days, federal
financial aid included a variety of programs designed to meet national
educational goals, only some of which were income based (Hannah
1996). This took the form of grants and subsidized loans, distributed
to individual colleges and universities for each to allocate to their
87Neoliberalism and the Crisis in Higher Education
students. The 1970s brought a change to this practice, resolving an
ongoing debate over whether these monies should go to schools or
directly to the recipient to take where he or she enrolls (Hannah
1996). With an eye on equal opportunity, transportability by the stu-
dent won out, assuming that this would provide all needy, qualified
students a standardized aid package. This procedure is the foundation
for federal financial aid policies today (Hearn 1998; Slaughter and
Rhoades 2004). Given the consequences detailed below, however, it
did not work out as legislators envisioned.
Fast forward to the 1990s, when, reflecting the neoliberal rhetoric
of personal responsibility and belief in education as a private good,
loans replaced grants in federal financial aid policy. At the same time,
transportability remained, perhaps because it fit so well with the as-
sumption that competition based on the informed choices of students
would bring market forces to bear on tuition costs, thus increasing
efficiency and quality. But the market did not function in quite that
way. Indeed, just a few years later, we see the beginning of a profound
shift in campus life that is known as “the amenity wars”:
For decades the design trend in college dormitories could be summed up
in one word: cheap…. But in recent years that trend has reversed itself, led
by cash- rich universities in search of a competitive advantage. At the head
of this class is Boston University, which is now building a superdorm at a
cost of $100,000 per student, double the national average. The glass- and-
steel tower looks less like a rooming house than a sleek yuppie condo,
with sweeping views of the Charles River and the Boston skyline. All bed-
rooms are private, sharing carpeted suites and genuine kitchens— adult-
size fridges, built- in microwaves, garbage disposals, the works. (Barnes
The luxury dorms at Boston University were on the cutting edge of
contemporary campus living, soon normalized as other institutions
followed. New York University, for example, quickly began a building
spree including a $95 million, 16- story dorm, the third in a series that
the New York Times described as lavish, complete with a state- of- the-
art health club, a dance studio with a maple suspension floor, a pool,
a gym, a juice bar, and a $100,000, two- and- a- half- story, climbing wall
88 The American Journal of Economics and Sociology
To attract students, colleges and universities have followed these
leads, trying to keep competitive in the market for enrollments. Today,
this is no longer confined to the wealthiest private institutions but is
a necessary part of campus life. As the Delta Cost Project notes, these
facilities bring students to campus. Moreover, they “are vital parts of
institutional marketing, and recruitment strategies and facilities invest-
ments play a role in students’ enrollment decisions” (Kirshstein and
Kadamus 2012: 3). In recent years, campus recreational facilities have
been joined by a more general building spree designed to attract stu-
dents, with less than half of new campus construction taking the form
of fancy dining halls and new residential complexes.
These facilities are typically funded through long- term borrowing
in the form of bond issues. Between 2002 and 2012, interest payments
on this debt increased from $6 billion to $11 billion for four- year pub-
lic and nonprofit private colleges and universities, a majority of which
was for amenity investment (Eaton et al. 2014). As expected, debt lev-
els varied within and across institutional categories, although private
(nonprofit) schools typically spend more on average than public ones
(Eaton et al. 2014). In 2007, the nonprofit sector of higher education
spent 51 cents on consumption amenities for every dollar on academ-
ics (Jacob et al. 2018).
The magnitude of this for individual institutions is illustrated nicely
by the University of Colorado, which, in 2019, owed approximately
$1.5 billion, with 3.6 percent of its annual operating budget going to
debt servicing. Bond rating agencies consider this a moderate debt
ratio and prudent financial practice, even though the university paid
$126.4 million in 2019 in interest charges (University of Colorado
2019), enough to fund a part of the enormous amount of deferred
maintenance on the typical university campus. Note that some of
these commitments are paid for directly by students where residence
fees fund debt servicing. In other cases, such as student unions, the
cost is indirect and embedded in operating budgets.
In addition to debt servicing, the expansion of student services has
increased expenses in other ways. These include a wide assortment
of offices and departments. Universities distinguish between costs di-
rectly related to instruction (faculty salaries/benefits and academic
department administration); academic support (libraries, academic
89Neoliberalism and the Crisis in Higher Education
computing, deans’ offices); student services (career counseling, ad-
missions, intramural athletics); and plant and equipment. Over the last
few decades, instructional spending as a percentage of total expenses
has declined in both the public and private (nonprofit) sectors and in
2017– 2018, it accounted for between 27 and 31 percent of four- year
schools’ budgets, respectively (NCES 2020).
Student services, on the other hand, are growing, as students ex-
pect an assortment of items included with their tuition dollars. Those
attending colleges with more amenities and services rate the quality
of life at their institutions much higher than those at places that spend
less (Foubert et al. 1998).
Defined narrowly, about 4.9 percent of spending in public col-
leges and 8.4 percent of spending in private (nonprofit) four- year
institutions is on student services (NCES 2019a, 2019b). There is con-
siderable variation among institutions. Jacob et al. (2018) found that
schools targeting high- achieving students invest less in these services,
while campuses with a less academically inclined population maxi-
mize life- style enhancements. Using a broader measure that includes
auxiliary enterprises such as residence halls, food services, and stu-
dent health services (but not debt servicing), the numbers increase
dramatically to 14.6 percent (public) and 17.1 percent (private) spent
on student services (NCES 2019b).
These services are not wasted; students use and enjoy what is avail-
able. For less selective institutions, this spending may increase grad-
uation and retention rates, although the impact on learning has not
been measured (Webber and Ehrenberg 2009). Those campuses trying
to raise academic quality may find themselves in a double bind, how-
ever, since increasing spending on instruction at the expense of these
features may harm enrollment. Precisely when higher education is
under increasing scrutiny for academic value added, then, very expen-
sive amenities, including student services and auxiliary enterprises,
are necessary components of many college campuses.
Archibald and Feldman (2010) argue persuasively that the cost of
highly educated labor, rather than amenities, drives college costs; this
is not contradictory, since the growth in student services— no matter
how defined— is accompanied by additional personnel to administer
these programs. Although many people, including faculty, look to
90 The American Journal of Economics and Sociology
high- level executive compensation to explain the spiraling cost of a
college education, the staff who report to the most highly compen-
sated executive are collectively the most taxing (Martin and Hill 2013).
Thus, expanding the scope of amenities from the obligatory climb-
ing wall to include student services broadly conceived demonstrates
that student choice has developed into a very expensive competition.
The marketization of admissions has not increased efficiency. Instead,
it has created a student as customer who selects among enticements
that do not advance academic quality or intellectual development.
One irony, then, is that student choice and market efficiency have led
to the very expensive amenities and services that continue to drive up
tuition and fees.3 A second irony is that students are borrowing to attend
universities with ever- increasing sticker prices, and those universities are
themselves saddled with rising debt loads to attract their incoming classes.
The Student as Customer: Market Forces and the Drive for Prestige
Within this status- conscious world of higher education, high tuition may
not be a deterrent but an attraction, since it advertises the exclusivity and
high standing of the institution. (Labarree 1997: 52)
Princeton, Harvard, and Columbia are number one, two, and three
respectively, in U.S. News & World Report’s 2021 rankings of national
universities. Williams takes top billing among liberal arts colleges,
with Amherst and Swarthmore not far behind. The competition among
institutions for place in the rankings is intense, and both students (and
parents) and colleges and universities take the results very seriously.
Indeed, the stakes are extremely high for both groups.
Among upper- middle- class families, prestige has become the cen-
terpiece of college aspiration. Some suggest that, since evaluating a
school’s educational offering is so difficult, prestige plays a signaling
function for the student, substituting for concrete measures of quality
and value (Brewer et al. 2002). This may be so, but in the contempo-
rary world, the value of prestige is best understood in terms of dif-
ferentiation and credentialing. When education is viewed as a vehicle
for competitive advantage in a labor market— as a private good— and
attending a prestigious college or university is believed to distinguish
91Neoliberalism and the Crisis in Higher Education
one from the large pool of college- educated competitors, it is seen
as a good investment. In this situation, students pursue prestige as a
rational strategy for investment maximization. This explains why the
competition for place is so very intense.
For colleges and universities, rankings reflect a drive for prestige
that has become a central part of institutional strategy. Often, the com-
petition for tuition dollars drives the attention that schools pay to the
U. S New & World Report lists. Since these rankings are an important
arbiter of college desirability, vying for position is a logical strategy.
But the pursuit of prestige contributes to the increasing cost of a col-
lege education; so much so that some have called it “a positional arms
race” (Frank 2001).
Colleges seek outstanding students because peers are viewed as
an important part of the learning process. But they also target accom-
plished students to increase their prestige rankings, since selectivity is
one metric in the rating system. The most highly ranked institutions
face no shortage of willing attendees, although competition for the
very best and brightest remains intense, given that selectivity accounts
for 7 percent of an institution’s ranking by U.S. News & World Report
(2020). This probably explains why an associate dean of admissions
at Princeton was once caught hacking into Yale’s confidential on- line
admissions system (Karabel 2005). Maintaining one’s position, even
for the most selective schools, remains important since the system is
self- reinforcing: perceived quality generates prestige levels. This is ap-
parent in the U.S. News & World Report rankings, where undergraduate
academic reputation accounts for 20 percent of an institution’s total
score (Morse and Brooks 2020).
For the many less selective schools, climbing the rankings ladder is
a vehicle for increasing prestige and, thus, increasing attractiveness to
those most able to pay the tuition bill. Tuchman (2011) suggests that
the “prestige seeking” institution is an important development in the
landscape of higher education. Brewer at al. (2002) also examine the
rise of prestige- seeking institutions.
Attentive institutions have figured out ways to game the system, but
once everyone learns the tricks, they no longer differentiate among
schools. Indeed, admissions offices have adopted an assortment of
practices that have become much too widespread to be unique. A
92 The American Journal of Economics and Sociology
very common— and expensive— case in point is playing off tuition
and financial aid to attract high- achieving customers.
The tuition rates posted in college guides and on the websites of
institutions of higher learning are sticker prices, but, as in the auto
business, few pay full price. When discounts are included, average
tuition increases have been much more modest than the formal re-
cord indicates: a recent analysis suggests that the actual price paid for
college tuition in the 2018– 2019 academic year at private nonprofits
averaged 55 percent of the published figure, with nearly 82 percent
of undergraduates receiving aid (NACUBO 2020). In 2017, four- year
schools spent $3 billion on financial aid, up from an inflation- adjusted
$1 billion in 2001, with 50 percent of their student bodies receiving a
discounted rate (NCES 2020).
Indeed, in recent years, colleges and universities have become
major sources of financial aid, a sizable portion of which is merit-
based. Termed institutional grants, this is best understood as tuition
discounting, and it explains why the average price of attendance is so
much less than the sticker suggests. Used as a recruitment mechanism,
this practice can cover a large part of the tuition costs for the most
attractive students. However, it has become enormously expensive for
institutions. In the 2018– 2019 academic year, about 28 percent of all
student aid came directly from individual schools, which collectively
spent about $65 billion on this aid, up 78 percent over a 10- year pe-
riod (College Board 2019b).
Figure1 compares the growth of published versus net tuition over
a 20- year period. The extent to which published tuition increases are
offset by discounting, especially for private schools, is most striking.
In this group, the 65 percent increase in sticker price averaged a much
more modest 9 percent growth in net tuition revenue. Given that av-
erage family income over time has remained flat, this increase was felt
by students forced to borrow to meet costs. But it was also painful for
many institutions. In addition to increases in expenditures over time
in wages and salaries, health care, and IT upgrades, schools had to
cover interest payments on ballooning long- term debt. Between 2011
and 2018, institutional debt per full- time student equivalent grew by
43 percent (Lundy and Ladd 2020).
93Neoliberalism and the Crisis in Higher Education
Figure 1 also demonstrates that public colleges and universities
have experienced the highest increase in actual costs; the average
published and actual cost of tuition at these institutions for in- state
students has doubled over time. This reflects the decline in state ap-
propriations, which, consistent with the neoliberal assumption of
education as a private good, effectively transferred the cost of an ed-
ucation from the collective to the individual. Between 2008 and 2018,
for example— in the aftermath of the Great Recession— state funding
for public colleges and universities shrank by an inflation- adjusted
$6.6 billion, with nearly every state shifting costs to students over at
least a 25- year period (Mitchell et al. 2019).
Thus, for public colleges and universities, net tuition increases, after
institutional aid, help replace the funds cut by state governments that
continue to disinvest in higher education. At the same time, shrinking
resources bring larger classes, fewer program choices, more adjunct
faculty, and enormous amounts of deferred maintenance.
For the wealthier private universities, investment continues to
fund cutting- edge facilities, innovative programs, and the aggressive
Published vs. Discounted Tuition:
Public (Instate) and Private Schools
Source: College Board (2019a). Inflation adjusted. Public Institutions: In- state
94 The American Journal of Economics and Sociology
recruitment of academic stars. But for both sectors, the goal is to pay
the bills by maximizing the number of students who pay full tuition,
and to do this, schools strive to maintain (or increase) their position
in the cutthroat world of academia; the drive for prestige remains in-
tense in both the public and the private sectors. This has played out
in enormous sums expended on merit money.
In today’s world of high- sticker- price tuition, merit competes with
need in allocating institutional aid. Available data suggest that about
40 percent of institutional grant monies in public four- year schools
go to high- achieving students (Burd 2020). Upper- middle- class and
wealthy recipients are the primary beneficiaries (Bradley and Harris
2010). Grant size tends to increase with income levels (Dillon and
Carey 2009). For private institutions, in 2017, 44.5 percent went to stu-
dents in the highest income quartile (Delisle and Christensen 2019).
This pattern is relatively new: in the early 1990s, the financial
aid provided directly by colleges and universities was responsive to
both need and merit, but in more recent years, attention to academic
achievement has ballooned (Doyle 2010). Originally envisioned as a
mechanism to attract students in an increasingly competitive market
and to reward hard work in the context of declining scholastic at-
tainment, merit money has developed into a strategy for increasing
prestige (McPherson and Schapiro 1998). As Ort (2000: 19) notes,
the function of institutional grants has changed over time “from sup-
porting traditional goals of access and choice to recruiting students
and maximizing institutional revenues.” The drive for selectivity to
increase prestige has institutionalized tuition discounting as a strat-
egy for recruiting high- achieving customers, which helps colleges and
universities compete in the rankings game. Indeed, as Griffith (2011)
found, at least at private universities, merit awards tend to increase
when SAT scores fail to keep pace with peer institutions and when a
school finds its ranking by U.S. News & World Report slipping.
Merit- based aid, although pervasive, is not without controversy.
Early critics cautioned against its expansion, arguing that any short-
term advantage would quickly disappear as the competition adopted
similar practices and that it would favor wealthy students at the ex-
pense of those in need (Baum and Schwartz 1988). As predicted,
95Neoliberalism and the Crisis in Higher Education
increasing merit aid has not necessarily been a winning bet. Even
early on, the strategy was not an effective way to maximize revenue.
As of 2005, at least for private universities, merit aid was accompanied
by increased net costs for most schools examined. Although it helped
them remain competitive in recruiting high- achieving students, the
gains were fairly modest (Griffith 2011).
Since then, the total value of grants to students made by colleges
and universities has almost doubled, stretching the resources of all
but the wealthiest schools (Scott- Clayton 2017). The impact of these
increases seems to vary. For example, merit money is less important in
attracting students to more selective institutions, while it helps lesser
ranked schools recruit low- income high achievers who could not af-
ford to go to a more prestigious place. Some studies have found that
merit money boosts retention (DesJardins et al. 2002; Battaglini 2004).
However, other studies by Singell and Stater (2006) and by Gross et
al. (2015) suggest that merit money does not affect retention. Thus,
schools are financing students who would stay anyway. Other work
demonstrates that merit money helps keep high- achieving students in
state (Jaquette and Curs 2015).
The drive for selectivity to increase a school’s prestige has institu-
tionalized merit money in the form of tuition discounting as a strategy
for recruiting customers. As more institutions compete in this way,
however, schools must continue tuition discounting to remain com-
petitive, even as the practice becomes less effective in differentiating
among schools. Once every institution does it, it becomes a very ex-
pensive enterprise. To cover this cost, many colleges and universities
have been forced to raise their tuition, shifting costs to less attractive
students. This process is akin to cost- shifting in health care, where
help for one segment of the population is transferred to others in the
form of higher prices. Using merit aid to increase enrollments has
contributed greatly to the escalation in tuition costs.
In recent years, merit aid has come to play a dual role in public
universities, particularly in flagships, as many have turned to recruit-
ing out- of- state students to counter decreases in state funding. While
enrolling high- achieving students contributes to a school’s prestige as
measured by national rankings, for the public universities, nonresi-
dent students also present an opportunity to increase total revenues
96 The American Journal of Economics and Sociology
since they typically pay much higher tuition rates than in- staters. A
number of studies have demonstrated that the enrollment decisions
of a nonresident student are highly sensitive to institutional grant of-
fers, and public institutions have responded to this: for the 2011– 2012
academic year, institutional financial aid for out- of- state students at
public research universities averaged $6,843 (compared to $2,160 for
residents) but even with this increased discount, net tuition revenue
received from nonresidents was about three times more than from
state residents (Jaquette and Curs 2015).
Given this differential, high tuition/high aid strategies seem to
make sense in this context, so it is not surprising that merit money is
used to aid the recruiting effort. But, here again, once everyone has
incorporated merit- based financial aid into their recruitment strate-
gies, it becomes less effective in differentiating among institutions.
Preliminary research has found that this approach may actually lower
tuition revenue (Curs and Singell2010). State universities have be-
come particularly vulnerable to the market failure of merit grants.
At the same time, it is clear, as early critics warned, that merit
money privileges the wealthy; the academic scholarships that have
grown at the expense of need- based aid go predominately to upper-
income students (Heller 2006; Gross et al. 2015). Award amounts tend
to increase with income levels (Dillon and Carey 2009). Families in the
bottom 20 percent of the income distribution receive only about $400
more, on average, than those in the highest quintile (College Board
2014). This means that students least likely to get merit money come
from populations that have been traditionally underrepresented in
higher education. This is associated with a decrease in the proportion
of both low- income and African American undergraduates in more
selective colleges and universities (Griffith 2009). The current distri-
bution of merit money has also hit public- sector schools especially
hard (College Board 2014). Declining need- based aid and the active
recruitment of out- of- state students to public schools are practices that
have a profound impact on stratification within the academy (Jaquette
2017). Evidence suggests that early fears about the expansion of merit
aid seem to be playing out as predicted in a process underscoring
David Harvey’s (2005) point that neoliberalism and increasing in-
equality go hand in hand.
97Neoliberalism and the Crisis in Higher Education
The Student as Customer: The Growth of Honors Programs
Recent years have seen a proliferation of programs designed espe-
cially for high- achieving students on U.S. campuses. Data on the exact
number of schools with these offerings are not readily available, but
in the early 2000s, nearly half of all public four- year colleges and
universities, and about 11 percent of private universities, had devel-
oped some type of honors program (Long 2002). Currently, nearly
900 institutions belong to the National Collegiate Honors Council, the
professional association of undergraduate honors programs, and this
includes public four- year institutions, private universities, small lib-
eral arts schools, and an assortment of community colleges (National
Collegiate Honors Council 2020). But most of the members are large,
competitive or very competitive, research institutions (Long 2002).
Honors programs at major universities are typically advertised as
cost- effective alternatives to elite schools. Often characterized by en-
riched classes, better facilities, and enhanced student services, honors
programs are part of contemporary enrollment management strategies
targeting the most accomplished high school seniors, and institutional
patterns of growth suggest that they have developed as a mechanism
for attracting high- ability students (Long 2002; Bastedo and Gumport
2003). In this way, they are best viewed as part of a strategy that targets
students most likely to increase a school’s prestige. This is in keeping
with the shift from need- based to merit- based financial aid that has
overtaken higher education in recent years. Indeed, as Goodstein and
Szarek (2013) suggest, honors programs are particularly promising,
since they focus on students with academic records that help bolster
the institution’s position in the national rankings.
Although systematic data on the cost of honors programs are un-
available, institutional investment varies greatly. The University of
Vermont, for example, inaugurated its Honors College in 2006, open-
ing with the completion of a new $35 million residential living com-
plex. The complex— including its debt servicing— is designed to be
financially self- sufficient; the cost of construction is borne entirely by
the students who live there. The university, for its part, spends about
$900,000 directly on the college, most of which goes to administrative
salaries. Out of a total operating budget of around $500 million, this
98 The American Journal of Economics and Sociology
is a very modest amount, although in an era of scant resources and
large lectures, it would buy eight or ten additional faculty lines. Other
costs include staffing small classes, special programs and activities,
academic mentoring, and thesis advising, and these begin to add up.
The 30 sophomore honors classes a year, each with a maximum ca-
pacity of 20, for example, require about six full- time faculty.
Western Carolina University boasts a slightly more ambitious pro-
gram. Housed in a new $51 million residential facility and supported by
a dean and a full- time staff of three, the university increased the num-
ber of honors students from 77 to 1,326 over a 15- year period, while
raising their admissions standards and boosting the program budget
by nearly 600 percent. Underscoring the importance of the program to
the school’s economic health, Railsback (2012) notes that even with the
financial difficulties that the university has faced in recent years, there
has been no mention of reducing the honors program’s size or cost.
Another example is the expanded Commonwealth Honors College
at the University of Massachusetts, which enrolls 3,380 students
housed in its new $177 million residential and teaching complex, with
a boilerplate honors program description on its webpage:
You will enrich your studies with small, intensive classes where you’ll
develop enduring ties with faculty members. You’ll be challenged in an
engaging array of interdisciplinary seminars and courses in your field as
well as have opportunities to participate in Community Service- Learning
honors courses. (University of Massachusetts 2020)
These examples illustrate that honors programs are part of the land-
scape of higher education, particularly in institutions with lower selec-
tivity rates that are reaching for students with impressive credentials.
Three questions are particularly relevant here: 1) Do honors programs
serve their students well? 2) Who is admitted? and 3) Are they cost
effective in their role as a recruitment strategy?
Surprisingly, given the many schools that have invested substantial
effort and resources in their development, the effectiveness of these
programs has not been addressed in as much detail as one might
expect. Available data present a mixed portrait of their success. Early
research found that students in honors programs were more likely
99Neoliberalism and the Crisis in Higher Education
to graduate within four years and with higher GPAs than similarly
motivated students who did not participate (Cosgrove 2004; Pritchard
and Wilson 2003). One particularly influential study found that by the
end of their first year, gains in the cognitive abilities of participating
students were modest (Seifert et al. 2007). A larger body of work
has looked at retention. Depending on the study, rates of students
who remain in honors programs for their entire undergraduate ca-
reers ranged from 19 percent to 35 percent (Campbell and Fuqua
2008; Mckay 2009). More recent work has demonstrated that, after
controlling for background characteristics, honors education contrib-
utes to student success in a number of ways. This success was most
pronounced in African American and Latinx populations. Diaz et al.
(2019) note, however, that we know little about progress after initial
experience. Other studies have found honors students are no more
likely than non- honors students to graduate or to remain in their col-
lege or university after the first year (Slavin et al. 2008; Cosgrove 2004;
Wolgemuth et al. 2007).
These results suggest that honors programs are less impressive than
the hyperbole surrounding them. Not surprisingly, given their selec-
tion criteria, these programs tend to exclude low- income and minority
students (Callahan 2007). Indeed, honors students typically come
from white, high- income families, with fathers who disproportionately
have graduate degrees (Callahan 2007). But honors programs have
flourished in less selective institutions, and it is here where they seem
to work well as an educational vehicle: they provide high- achieving,
low- income students with heightened academic skills and, therefore,
they have the potential to be effective vehicles for social mobility
In spite of their limitations, honors programs in schools of low
selectivity may serve as a vehicle for decreasing stratification between
institutions (Galinova 2005). Nevertheless, they generally create strati-
fication within schools. In more selective places, they sort students by
socioeconomic status, enrolling students who are generally more elite
than their non- honor peers (Callahan 2007). Indeed, available research
suggests that honors courses are often taken by status- conscious stu-
dents interested in distinguishing themselves from the larger field by
100 The American Journal of Economics and Sociology
acquiring the additional cultural capital that these programs promise
(Callahan 2007). The programs have developed into mechanisms at-
tracting high- status enrollees. They also reflect the pattern of strati-
fication in higher education more generally: access is most open in
schools of lower selectivity and most gated in more selective places.
The advantages of participation are similarly stratified.
Whether they are financially successful for the institution is more
difficult to evaluate, given the goal of recruiting students who will
increase the school’s prestige ranking in the hope of attracting addi-
tional students able to pay the bill.
In the same way that the drive for prestige has institutionalized tui-
tion discounting as a requirement of doing business, honors programs
are destined to become too widespread to remain effective recruiting
mechanisms; here too, when everyone is doing it, it simply becomes
another necessity without a financial payback. Given the data on the
academic success of honors- program students, many schools would
probably have been better off investing in scholastic initiatives target-
ing increased learning for all.
A particular set of neoliberal assumptions, including a belief in per-
sonal responsibility, an overriding faith in the market, the need for
the privatization of public services, and a view of education as job
training, have become firmly rooted in conventional wisdom. These
ideas have contributed to the rise of “the student as customer” with its
attendant costs. The contemporary narrative of education as a private
good has solidified this image of students. It helps explain why we
are transferring the cost of higher education from the community to
the individual. The neoliberal corollary of personal responsibility has
provided the ideological shift that justifies the massive underfunding
of higher education.
Given neoliberalism’s belief in the power of the market, the non-
profit world has increasingly been subject to the rules and processes
that drive the private sector. Colleges and universities have responded
with practices designed to help them survive marketization and pri-
vatization. The organizational imperative to attract students able to
101Neoliberalism and the Crisis in Higher Education
pay the bills explains many of the strategies that have been widely
adopted, including those designed to aid in the drive for prestige. But
many of the practices that were created to distinguish a school from
its competitors have been so widely adopted that they have lost their
edge. Instead of providing advantage in the competition for revenue,
the strategies to attract students have become very expensive neces-
sities. These practices include the construction of luxurious dormito-
ries, the growth of student services, the pervasive tuition discounting
that is paralyzing many schools, and even the relatively inexpensive
These trends raise tuition and fees, and they influence who can
afford to attend a four- year institution, thereby affecting the class and
racial/ethnic composition of higher education. They also contribute to
the high debt loads that students carry. But these trends are especially
consequential in what Clawson and Page (2010) describe as the quint-
essential residential college— where students with backpacks stroll on
the quad and where prices have escalated most dramatically.
Archibald and Feldman (2010) suggest that the upscale residential
facilities on many of these campuses are consistent with the general
upgrading of the U.S. housing stock; in this way they reflect the life-
styles of contemporary students, many of whom might be willing to
pay for such improvements. Armstrong and Hamilton (2014) provide
a different way of understanding this when they argue that many
schools organize the college experience in ways that systematically
advantage the affluent. The need to target those most able to pay the
bills also structures recruitment efforts in ways that privilege the afflu-
ent and raise costs for all students.
In the example of luxurious dorms, the student- as- customer model
in higher education imposes a burden on any student who might pre-
fer more modest accommodations to reduce future debt. The student-
as- customer model also skews the use of merit- based aid, which is
used to recruit high- achieving students as part of a strategy to max-
imize revenue. The characteristics defined as meritorious are both
class- based and racialized. Because of this, merit aid and need- based
aid tend to be mutually exclusive. It also explains why the high- tuition-
high- aid approach to maximizing tuition dollars has led to a decrease
102 The American Journal of Economics and Sociology
in the enrollment of African American and low- income students in
four- year colleges and universities. The need to remain competitive
with student services and designer programs, such as honors colleges,
follows a similar dynamic.
These processes play out in additional ways on college campuses.
The economic costs of recruiting a student body that might help raise
an institution’s rank in the U.S. News & World Report listings, for exam-
ple, are real, but this competition is not limited to students. Colleges
and universities compete for reputation with their faculty and with
their research dollars, each of which contributes to the overall cost of
the education that they provide.
But not all market forces borrowed from the corporate world are
prestige- or reputation- based. In trying to understand why tuition is
so high, many scholars examine executive salaries; following the lead
of the corporate sector, high- level administrator compensation has
skyrocketed. Indeed, presidential salaries are reaching record highs,
as colleges and universities continue to raise tuition and cut positions.
The Chronicle of Higher Education reports that in 2019, the highest
paid college president of a public institution earned almost $3 million,
dwarfed by the $6,283,616 paid to the leader of Bryant University
(Bauman et al. 2020).
The proverbial golden parachute is a variation on the same
theme. In 2012, Pennsylvania State University’s president, fired amid
a child- abuse scandal, left with a separation package of about $2.9
million (Stripling 2013). In 2020, after a scandal, Jerry Falwell, Jr.
left Liberty University with a $10.5 million settlement (Bailey et al.
Surely, top salaries pale in comparison to the giants of industry
and, although symbolic, relatively few administrators earn these lofty
incomes; they account for a very small proportion of an institution’s
costs. Nevertheless, the reason that these packages are so out of line
with faculty compensation is unclear, although one Washington, DC
lawyer specializing in presidential contracts argues that golden para-
chutes and large administrative salaries are often needed to attract
qualified candidates (Kiley 2011). One can debate whether this is
so, but the striking feature of these packages is the market- based
103Neoliberalism and the Crisis in Higher Education
discourse surrounding them— the orthodoxy of the market as the ar-
biter of academic decision- making.
As Patrick Callan (quoted in Lewin 2009), president of the National
Center for Public Policy and Higher Education, notes, however, execu-
tive compensation packages reflect “a set of values that is not the way
most Americans think of higher education.” Indeed, outrage about the
high cost of a college degree more generally is quite visible, especially
among middle- class families. As a result, proposals for tuition- free
higher education are now part of the political landscape. However,
to the extent that neoliberal assumptions frame the way Americans
think about education— and their world, more generally— meaningful
change will remain elusive.
Over the years, we have developed a neoliberal sensibility; that is,
some of the major tenets of neoliberalism have become conventional
wisdom and many see the world through this lens. This obscures the
consequences of neoliberal policies, including the role of the market
in the cost escalation within higher education, the limitations of orga-
nizing an educational system around workforce development, and the
problem with undervaluing a broad education that is a staple of sus-
taining democracy; equal opportunity is also an increasingly hard sell.
This article has examined some of the institutional practices that
have developed in response to the broader neoliberal agenda of mar-
ketization and privatization. As suggested, the impact on students is
real, both on their pocketbooks and on their view of the educational
enterprise. When compared to the conventional wisdom to trust the
market, the conclusion is very different: corporatization and marketi-
zation are important drivers in tuition cost escalation.
At this writing, colleges and universities throughout the country—
and the world— are dealing with the financial impact of COVID- 19.
Many institutions, desperate for their paying customers to return to
campus to live in residence halls and use campus amenities, opened
schools prematurely (Kaiser 2020). A number quickly returned to dis-
tance learning. Even those that managed to stay open are in financial
distress, given the defunding of higher education that transferred costs
from the collectivity to the individual and the ensuing competition for
the best amenities. A recent report on the state of facilities sums this
up particularly well:
104 The American Journal of Economics and Sociology
The combination of swollen campus footprints and declining tuition rev-
enues has been aggravated even further by the COVID- 19 pandemic, put-
ting many institutions at risk. … Facilities strategies are at the forefront
of the industry’s race to confront its greatest challenge in generations.
(Gordian Research 2020: 1)
Not all will survive. In the spirit of Naomi Klein’s (2008) Shock Doctrine,
some institutions have taken the opportunity to make permanent cuts
in faculty, staff, and administrative salaries, while others experience
temporary layoffs and provide only online instruction.
As the pandemic threatens to change the world, the question now
is what the future of higher education will look like. Burns (2020) sug-
gests that the neoliberal understanding of higher education, with its
emphasis on the bottom line, measured by metrics juxtaposing course
enrollments and majors, labor costs, and tuition revenue, will reinvigo-
rate the appeal of “massive open online courses” (MOOCs), with their
promise of a corporate- mediated answer to perpetual funding cri-
ses. This is certainly possible— perhaps probable— but the most likely
outcome is a still more bifurcated system of higher education, with a
small elite population attending the residential college of old, while a
vast majority of students learn from home. It is in this small pocket of
elite institutions that tenure may thrive, with these schools competing
for the most accomplished researchers, while adjuncts populate most
other venues. We can also expect the continuing shrinkage of liberal
arts, especially in less- prestigious schools, as the neoliberal function
of education as job training becomes even more fully entrenched.
1. The term “liberal” has had many meanings historically, and its mean-
ing in the United States differs from the way the term is used in many other
countries. In this article, I use it to refer to the principles that provided a
broad consensus in U.S. politics from the 1930s through the 1970s. The most
fundamental principle of that consensus around liberalism was the belief that
government can act in ways that promote the common good by limiting the
scope of the market and by providing services that are either universal or
targeted to those in greatest need.
105Neoliberalism and the Crisis in Higher Education
2. Lipman (2011), quoting Stsephen Haynes, suggests that the cultural
politics of race has been central to constructing consent for the neoliberal
The concepts “public” and “private” are racialized metaphors. Private is
equated with being “good” and “white” and public with being “bad” and
3. It is interesting to note that this market approach to education is alive
and well in K– 12 policy circles. We see it in the emphasis on student choice
that views charter schools as an alternative to traditional public schools, and
in the push for portability of funds in the form of vouchers. We might read
higher education’s experience with the role of transportability in cost escala-
tion as a cautionary tale.
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