Report Reveals ‘Weak Connection’ Between Debt and Earnings Outcomes for Graduate Students

Even when students take out significant loans to fund their graduate school education, earnings outcomes vary greatly from program to program.
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Jessica Bryant
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Jessica Bryant is a higher education analyst and senior data reporter for BestColleges. She covers higher education trends and data, focusing on issues impacting underserved students. She has a BA in journalism and previously worked with the South Fl...
Published on August 17, 2023
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  • On average, 17% of advanced degree programs left graduates with "unaffordable debt" as of 2022.
  • Private for-profit institutions had the highest percentages of programs with high debt burdens at the master's, doctoral, and professional degree level.
  • Between 2004 and 2016, the percentage of graduate students who borrowed $80,000 or more rose from 1% to nearly 11%.
  • Earnings have remained mostly stagnant for graduate degree-holders over the last 20 years, when adjusted for inflation.

An August 2023 Department of Education (ED) report is calling into question the return on investment (ROI) of graduate degrees.

ED analyzed the 2022 median earnings of graduate students along with the median level of debt incurred by graduate degree-holders and found that across various programs and institutions, earnings outcomes were so wide-ranging that they had little connection to students' level of debt.

At public and private nonprofit institutions, programs with higher levels of borrowing typically correlated with higher earnings three years after graduating. But at for-profit institutions, there was no correlation whatsoever.

Further, when assessing programs with similar levels of borrowing at different types of institutions, earnings outcomes largely varied.

ED found that overall, about a tenth or more of all master's, doctoral, and professional programs had high debt burdens — labeled "unaffordable debt" — where annual debt payments of the typical graduate were more than 8% of their median earnings or 20% of discretionary earnings.

More than 2 in 5 professional programs at private for-profit institutions (44%) had high debt burdens in 2022. Conversely, only 2% of master's programs at public institutions had high debt burdens during the same year.

The large percentages of programs with unaffordable debt at for-profit institutions are particularly worrisome for Black graduate students who disproportionately attend these schools and already face significant student loan debt.

Between 2004 and 2012, Black graduate enrollment increased by 79%, but more than half of that enrollment was at for-profit institutions.

According to the report, graduate student loans made up a record-high 47% of federal student loan disbursements in 2021-2022. Soon, they may comprise the majority, even though there are more than four undergraduates for every grad student, according to recent enrollment data.

And it's no surprise that so many advanced degree programs leave their graduates with these significant debt burdens.

From 2004 to 2016, average one-year tuition and fees at graduate institutions increased by more than 32%, per the National Center for Education Statistics. In the same period, the percentage of graduate borrowers who took out more than $80,000 in federal loans rose from just over 1% to nearly 11%.

At the same time, average earnings for graduate degree-holders compared to earnings for high school graduates and bachelor's degree-holders remained stagnant despite being relatively high.

ED's report suggests that the value of obtaining an advanced degree may have fallen over the last 20 years.

This isn't the first time analysts have asserted that graduate school debt is decreasing students' ROI. Another recent report from January found that between 2003 and 2018 average annual earnings for graduate degree-holders only rose by just over $400, yet average debt during a similar period increased by more than $26,000.

To combat this rising debt and lower-than-expected earnings outcomes, the Biden administration introduced Gainful Employment regulations earlier this year.

Under Gainful Employment, certificate and degree programs at private for-profit colleges must provide training that prepares students for gainful employment in a recognized occupation if they want to continue to offer students federal loans or other aid.

However, these regulations only cover about a quarter of graduate students enrolled in programs with unaffordable debt. So, the administration has introduced other initiatives to make students more aware of typical graduate debt and earnings outcomes before taking out loans.