NYU Local recently reported on a study showing how Generation Y (1980-2000 babies, otherwise known as millennials) are characterized by their debt. Some of the lovely stats included that only “58% of millennials pay their monthly bills on time, 70% do not build a cash cushion and 43% are amassing too much debt.” Budgeting is not our strong suit.

Yet our universities may share some blame. New reports suggest that many are not only encouraging credit card use but are actually making huge profits from our consumer habits. Now that we’re graduating and trying to support ourselves in a recovering economy, early addictions to credit cards are no surprise, especially in a city like New York. But if NYU is allowing them to be marketed to alumni are they encouraging these habits?

The Huffington Post Investigative Fund just reported a shocking study that revealed how “some of the nation’s largest and most elite universities stand to gain millions of dollars from selling the names and addresses of students and alumni to credit card companies while granting the companies special access to school events.”

They received seventeen “affinity” agreements from different schools and their alumni associations, including Cornell, Brown, University of Michigan, Princeton and the University of Pennsylvania. According to the report, “all of the agreements call for colleges to provide students’ names, phone numbers and addresses” to the banks for marketing purposes. Many of the agreements include huge million dollar payouts to the university in exchange for compiling lists of students, alumni and faculty.

We contacted NYU’s alumni office to inquire about any affinity deals the school has with credit card issuing banks. We discovered that the NYU Alumni Association (NYUAA) has had an exclusive contract with Bank of America (BoA) since 2000 worth at least $3.9 million through 2012. Marian Newsom, the Associate Director of Alumni Relations, was happy to share the agreement they signed with BoA allowing the bank to offer an alumni credit card.

She also shared the letter the University sent to Congressman Patrick J. Murphy (D-PA) after he authored a provision to a credit card law that required all universities make their contracts public. We have embedded the full document below from NYU Local’s Scribd channel.

After examining the agreement, here are some of the key findings:

• NYU allows Bank of America to conduct “at least” two direct mail and two telemarketing campaigns to alumni each calendar year. (page 5)
• $1.00 is paid to NYUAA for each new credit card that is opened. (page 14)
• $3.00 is paid to NYUAA for every account, when the annual fee is paid. If the card has no fee, then the $3 is paid for each account that has a balance greater than zero as of the last business day of every twelfth month. (page 14)
• 0.50% of all retail purchases is paid to NYUAA. (page 14)
• NYUAA gets an advance on royalties from Bank of America in the amount of $300,000 every July 1st. (page 16)
• NYUAA was guaranteed $1.5 million for the original contract, which ended in 2004. (page 17)
• In July 2005, an addendum was made to the agreement which stated that “NYUAA shall be guaranteed to accrue Royalties…equal to or greater than $2,400,000″ over the eight year extension of the contract. (page 21)

The wording in the letter sent to Congressman Murphy is a bit confusing. The letter quotes the alumni website which states that the royalties help fund “important alumni initiatives, including [the] NYU Alumni Magazine,” but then says “all funds attained…are used to support the NYU Alumni Magazine.” The agreement does not state anywhere that NYUAA will only use the royalties for the alumni magazine.

Thinking that $300,000 per year sounded like a lot of money for an alumni magazine, we inquired about the costs of producing it. John Beckman, NYU’s Vice President for Public Affairs, would not go into the details of the magazine’s costs but did say “that the twice-yearly magazine has a circulation of 175,000,” and that “applying the revenue from the credit card to a magazine distributed free to alums seems to me like a pretty natural connection to make.”

Do you think NYUAA has the right to market a credit card to alumni and accrue royalties? Should NYU be allowed to profit from a bank marketing fake money to its alumni, when many are millennials that only know prosperity? Do you think assuming NYUAA is using all the money for the alumni magazine is a “natural connection to make?” Let us know in the comments.

NYUAA Affinity Agreement with Bank of America