The Class of ’26 is now in the job market -- reportedly the worst entry-level job market in years. But at many schools, a surprising number of graduates already had their first gig lined up. Starting this fall, they’ll be working at investment banks, which have come to dominate campus recruiting to the degree that students honestly think they’re the only good jobs available.Especially at selective colleges, the math on college graduate employment at investment banks is astounding. While investment banks represent less than 0.5% of the U.S. economy, 22.5% of Yale graduates start their professional lives there. At Harvard, it’s 21%. What’s going on?For soon-to-be graduates, the math is compelling enough. The pay is so high that landing an entry-level analyst position at an investment bank feels like a golden ticket, especially for a first-generation student, a student from a low-income background, or a student with any student loan debt. And for a generation scarred by Covid, wars, and the risk of AI, now worrying over job prospects, demand for safety, security, and certainty may be at an all-time high.But the downsides of the banking surge go beyond the predictably punishing schedule and the unexpected career limitations (some estimates suggest that only 10% of analysts end up working outside financial services). The flood of young talent into banking is also problematic for the country. While the U.S. grapples with ongoing shortages of teachers, nurses, and other jobs we sorely need, our world-beating, super-efficient capital markets are warping the country’s labor market and, derivatively, distorting higher education.At many schools, investment banks’ presence is felt almost from day one. Whereas 20 years ago, banks began recruiting for summer interns in the spring, today the process begins two years ahead of time. The upshot is that entering freshmen only have a few months before being bombarded by banks and banking hype is unavoidable. For students who have made it to elite schools by following the rules and acing the test, it’s understandably compelling to navigate another selective process that resembles the college application experience they recently navigated successfully. As a result, every year thousands of students who had contemplated teaching or pharmacy or public service become accidental financiers.College recruitinggettyMORE FOR YOUWhat happens when banks are the only companies recruiting a nervous generation two years ahead of time? Banking and investing clubs happen, transforming the student experience. Alongside consulting clubs, these student organizations are usually the most popular on campus. They exist to help prepare students for interviews as well as to signal interest. But every new pseudo-pre-professional finance club means fewer students exploring actual interests. It means less student acting, singing, journalism, debate, intramural sports, community service, real student entrepreneurship, activism, and protests. And the more anxious students become about their career prospects, the more attractive banks and banking clubs become.How have investment banks come to dominate campus life? It’s not like there aren’t entry-level workers at all companies and across the economy. The most important driver is the unit economics of campus recruitment + making inexperienced, unproductive new workers productive. The significant time and effort involved makes most sense when recruiting, hiring, training, and mentoring large numbers for identical (or at least similar) jobs. For companies that have to hire a handful of new workers every year across 20 or 50 departments or functions, the math doesn’t work. Conversely, investment banks can drop large numbers of new grads into identical jobs. The banking business model is built atop an army of young analysts (and, in time, associates and VPs) grinding through deals. So recruiting, hiring, training, and mentoring dozens, hundreds, or thousands of new analysts is a cost of doing business. And because they can do it in one fell swoop, there’s a strong return on investment.This model has worked well enough for the banks that we can’t expect them to self-regulate. So if colleges recognize that career funneling and the corresponding gravitational distortion of campus life are problems, it’s on them to take action. First, colleges need to make life harder for banks — for instance, by restricting them from recruiting more than a year ahead of time. Second, and more importantly, they need to present students with plenty of other options. Alumni affairs could play a role here, communicating that campus recruitment is tantamount to making a donation, running campaigns to solicit recruitment by alumni companies, and helping manage the process for alums. So could career services departments, which too often end up directing students to investment banking when they should instead be counseling students about all the compelling options available to them after they graduate. And of course, it’s on colleges and companies alike to add more resources to work-based learning programs like apprenticeships, co-ops, and internships. Even – in fact, especially – the smartest students will gravitate to whatever job options are both attractive and available. The more options colleges present, the better-prepared their graduates will be to enter the jobs that our economy and society need much more than banking.This isn’t a new issue. Over 40 years ago, Yale economist and Nobel laureate James Tobin expressed concern that “we are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services.” What changed in the past generation is that companies other than banks and consulting firms have disappeared from campus recruiting, and colleges have allowed a recruiting race to the bottom in return. It’s changed college life for the worse and exacerbated the financialization of our economy. Higher education was never supposed to be a finishing school for banks.