Advance degrees are advancing student debt

April 13, 2014 

In a time of tight job markets and intense competition among job seekers, it’s commonly thought that an advanced degree is the new college degree. A B.A. or B.S. is simply not enough to make the cut for better-paying careers.

But that thinking may be proliferating not because advanced degrees are essential credentials, but because selling such degrees has become lucrative for schools and lenders and deceptively easy to finance for students. That’s a twist that emerges from a new report from the the New America Foundation, a nonprofit, nonpartisan public policy institute.

The report reveals that debt load for borrowers who earned master’s, medical, law or doctoral degrees has climbed more sharply in recent years than the debt load of students who earned undergraduate degrees. According a Wall Street Journal report on the study, the debt load for borrowers who received advanced degrees increased an inflation-adjusted 43 percent to $57,600 in 2012, a figure that includes loans for both undergraduate and advanced degrees. The median debt load for students who borrowed to pay for a bachelor’s degree grew 39 percent over the period to $27,000 in 2012.

While most discussion of mounting student debt focuses on the rising cost of college, the report found that graduate school loans account for about 40 percent of the $1 trillion owed by students overall even though graduate students account for only 1 in 6 borrowers. The proportions raise questions about why graduate costs are escalating, the value of advanced degrees and how the borrowed billions will be paid back. One issue is whether the proportions indicate the need for federal policies capping the amount of federally borrowing for advanced degrees. A previous federal cap on total borrowing was lifted in 2006.

The study’s author, Jason Delisle, told The Wall Street Journal that graduate schools are feeding off easy lending. “Graduate schools have essentially found a way to capture more of someone’s future spending than what would probably occur if we had some sort of underwriting standards and loan limits.”

Advanced degrees no doubt help graduates get hired , but it’s not clear whether the cost is worth it. And those who can’t find work that pays adequately can get into financial trouble quickly and suffer damage to their credit that makes it difficult for them to buy a car or qualify for a mortgage.

The report also warns that unpaid debt may eventually be carried by taxpayers in the form of loan forgiveness as the government tries to ease the stifling burden on a generation already stymied by the Great Recession.

The authors rightly note that it’s time for the federal government to look again at how it supports student borrowing. Its easy-money policies for graduate degrees, while producing significant returns for the government in loans that are paid, may be fueling education costs and hurting careers.

The report says that, “Policymakers may wish to re-examine if that is the best way the federal government can support our higher education system or whether these policies themselves are to blame for the marked increase in borrowing for graduate and professional degrees in recent years.”

Students pursue advanced degrees to advance themselves, but when the degree comes with staggering debt and no sure prospect of a substantial increase in earning ability, the extra education can set a person back. Federal lawmakers and education officials should again look at loan caps and continue to pressure universities to hold down costs.

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