Master’s Degrees Saddle Graduates With Debt

• Graduates of some master's programs have considerable debt and insufficient income.
• Master's degrees have become increasingly popular over the past few decades.
• Without institutional aid, master's degree students take out large loans to finance degrees.
• Critics decry these programs as cash cows and suggest they be subject to oversight.

Much has been written about the student loan crisis in America. That's because the figures are staggering, almost unimaginable. Collectively, Americans are $1.7 trillion in debt with student loans.

Just how enormous is that number? Spread the debt evenly across the world's population — some 7.8 billion people — and each individual would owe just under $22,000.

Yet often lost in the coverage of undergraduate student debt is the additional burden of graduate school. Master's degree students take out hefty loans to finance their futures, and many struggle to pay them back.

New Report Sheds Light on Graduate Debt

Recently The Wall Street Journal published a report on graduate student debt, highlighting master's degree programs at elite private institutions. Examining data from the Department of Education, the Journal revealed that thousands of students have incurred debt loads beyond their capacity to repay them. The promise of increased income didn't materialize, leaving students disillusioned and on the brink of loan default.

The article's exhibit A is Columbia University's master of fine arts in film at its School of the Arts. According to the Journal, these film students graduate with a median debt of $181,000 and earn less than $30,000 per year on average two years after receiving their degree. They're lured by the prestige of the university and the credential, thinking the right doors will open on the other side.

"As a poor kid and a high-school dropout, there was an attraction to getting an Ivy League master's degree," said Columbia film graduate Patrick Clement, who graduated in 2020 with more than $360,000 in federal loans.

Additional Columbia programs offered similar results. The study found that 14 of the university's 32 master's degree programs — including history, social work, and architecture — left graduates with more debt than their incomes could withstand.

Columbia's not alone in this regard, noted the Journal. At nearby New York University, graduates of the master's degree in publishing program borrowed $116,000 on average and earned $42,000 two years after graduating. Half of those earning degrees in speech language pathology at Northwestern University borrowed $148,000 or more, with a median income of $60,000. And half of the graduates of the University of Southern California's marriage and family counseling program earned under $50,000 despite borrowing a median of $124,000.

"There's always those 2 a.m. panic attacks where you're thinking, 'How the hell am I ever going to pay this off?'" said Zack Morrison, a 2018 Columbia film graduate.

Proliferation of Master's Degree Programs

Master's degrees have become a big business for universities. The number of master's degrees conferred has risen 66% since 2000 and tripled since 1970. According to the Urban Institute, universities now award two master's degrees for every five bachelor's degrees.

Some of this growth can be attributed to the rising popularity of the MBA. Enrollment in MBA programs grew from 26,490 in 1970 to 191,571 by 2012.

In such fields as education, social work, and healthcare, the master's degree has replaced the bachelor's degree as the entry credential.

They tend to pay off, too. One estimate suggests earning a master's degree will net an additional $400,000 over a career.

"The master's degree has become a much more important part of the American mobility story," said Katherine S. Newman, dean of arts and sciences at Johns Hopkins University.

Demand Fuels Growth in Loan Debt

Universities can barely keep pace with the growing demand for master's degree programs, particularly the online variety. According to EAB, from 2016 to 2019 demand for online master's degrees grew 339% faster than the number of institutions offering them.

A seller's market means institutions don't have to offer too many financial incentives to grow enrollment. Fewer than 40% of master's degree students receive institutional financial aid. By comparison, 86% of undergraduates receive financial support. Yale, for example, claims "most students pursuing master's degrees do not receive financial support from the Graduate School and are responsible for paying tuition."

So graduate students instead use loans to mortgage their futures. Graduate students account for only 14% of college and university enrollments nationwide but take out 40% of student loans.

And the funding well never runs dry. Grad students (except for some in the health professions) face a lending cap of $20,500 annually in direct unsubsidized loans but can borrow an unlimited amount cumulatively through Grad PLUS loans, which is how some students manage to ring up hundreds of thousands of dollars in debt.

Compounding the problem, so to speak, are interest rates that run higher than those for undergraduate loans. Federal graduate loans offer a rate of 5.28%, or 6.28% for PLUS loans, while undergrad loans are at 3.73%.

It all adds up to an average student loan debt for master's graduates that has increased 57% since 2000. Today, the typical master's graduate owes $51,200 just from grad school. For those earning a master of arts, it's $53,900. And for an MBA, it's $66,300.

No wonder 60% of master's students feel stressed about their financial situation.

Regulating the Cash Cows

Some observers blame universities for treating master's programs as cash cows that bring in much-needed funding to address budget shortfalls.

"For colleges and universities," wrote Jordan Weissmann in Slate, "master's degrees have essentially become an enormous moneymaking scheme, wherein the line between for-profit and nonprofit education has been utterly blurred."

Jon Marcus of The Hechinger Report agrees. "Cash-strapped private universities and colleges are relying on the money they take in from their graduate programs to stabilize increasingly wobbly budgets," he wrote. "Public institutions are using revenue from graduate offerings to make up for state cuts and undergraduate tuition freezes ordered by governors and legislatures.

"But it also means that higher education's money problems are quietly being balanced on the backs of graduate students who face escalating debt."

Kevin Carey, director of the education policy program at New America, believes tighter regulations are in order and that these predatory programs should be treated as for-profit enterprises — especially since the taxpaying public is on the hook for unpaid federal loans.

"From a regulatory standpoint, all master's programs should be treated as for-profit, because I think they essentially are," he said. "I think if you just look at what nonprofit and public institutions charge in master's programs, they are charging market rates. There's really not much difference between them, just whatever the market can bear."

Carey points to the Gainful Employment Rule established during the Obama administration, which largely targeted for-profit schools that left graduates debt-ridden and unable to secure suitable employment. A bad debt-to-earnings ratio would render an institution ineligible for federal aid. He believes traditional universities should undergo the same scrutiny.

Universities, after all, reap all the financial benefits while students take the risks.

"The students certainly are being victimized," he said. "Their trust is being exploited. People have been instructed by the culture that they should trust colleges, and that trust is being turned into money by colleges with very little thought for the consequences."

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