The Perversity of Hamptons: Why Is NYU Turning Loans into Vacation Homes?
It's an awkward moment to be a top professor at New York University — especially if your employer subsidizes luxury housing for you and your spouse. In the past few weeks we've seen NYU instructors shame obese people; secretly film women in dressing rooms; and attack passersby with fruit juice in Brooklyn. And now this: According to The New York Times, the Manhattan university — where tuition, room and board cost $63,537 per year — has been offering sweetheart loans to star faculty, including NYU President John Sexton, for the purchase of expensive vacation homes on Fire Island and in the Hamptons. The loans are notable for a couple of reasons: they bear unusually low annual interest rates (most recently, 0.19%) and, in certain cases, have forgiveness clauses built-in. Sexton, for example, received a $200,000 loan (among several others) from NYU to pay for a getaway home on Fire Island. That loan's principal automatically declined 20% per year until it was completely forgiven. By contrast, typical student loans — which NYU has been accused of saddling students with — have much higher rates and, barring catastrophic injury, can never be discharged.
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The Times notes, fairly, that other universities dangle cheap mortgages, intended for primary residences, in front of professors they want to poach from other schools. However, there does not appear to be any other university in the United States that provisions such mortgages for luxury vacation property — an arrangement that seems designed to further rankle NYU's faculty, whose members have recently issued several different votes of no-confidence in Sexton's leadership. The loans remain rare, though. NYU professor Jay Rosen told The Atlantic Wire that they're aimed at "people in the stratosphere — Nobel winners and the like. It would not be available or even mentioned to the average faculty member. I didn't know about it until I saw the front page of the Times today." University spokesman John Beckman added that "NYU's loan programs [enable] us to successfully recruit and retain outstanding scholars from around the world — as well as experienced, innovative leadership — in the country’s most expensive real estate market."
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That doesn't mean these mortgages make sense, though. Rosen suggested that these loan programs were a symptom of academia's tendency to heap rewards on to a vanishingly small number of individuals. (Think Niall Ferguson at Harvard, Paul Krugman at Princeton, or Judith Butler at Berkeley.) "Is this thing perverse? Of course!" Rosen said. "The faculty-in-the-stratosphere case is only one case of a known phenomenon, superstar economics, that has all kinds of distortions and craziness to it. Defending that system is pretty hard. Understanding why it exists: not that hard." In other words, NYU wants it all: not only a star-studded faculty, but campuses on several different continents and even more real estate in Manhattan's Greenwich Village. Its ambition is limitless. A few houses in the Hamptons are a small price to pay to achieve a global reputation.
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At the same time, that ambition throws the careers of its equally ambitious graduates into a particularly striking relief. Stories of NYUers graduating with crushing student debt are legion, in part because NYU, which remains dependent on a steady stream of students paying full freight, has steered needy applicants to private loans instead of increasing their grant packages. The idea that even a small portion of their loan payments is directly funding the Fire Island getaways of the school's well-paid faculty and administrators is the kind of picture that NYU probably wants to avoid.
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