Dive Overview:
A graduate degree generally leads to higher earnings, but ever-rising costs and high debt burdens make graduate education a “risky” bet for students, according to a study released Wednesday by Georgetown University’s Center on Education and the Workforce. The cost to students of a graduate degree tripled between 2000 and 2020, and the average debt principal for student loan borrowers rose by more than 47% to $50,000, according to the report. At the same time, degree recipients’ job prospects are unequal. To protect future students, the report’s authors suggest tying eligibility for federally subsidized graduate loans to an income premium and a debt-to-income ratio test.
Dive Insights:
Graduate degrees, including master’s degrees, doctorates and professional certifications, still give students a competitive edge: As the CEW study notes, graduate degrees “offer the highest earnings prospects and job opportunities of all educational qualifications.”
The researchers also noted that while the earnings premium of those with graduate degrees compared to those with bachelor’s degrees has remained constant over the past 30 years, that premium has been shrinking as student expenses and debt have increased along with the cost of graduate programs.
Speaking of those costs, the CEW researchers found that between 2000 and 2020, the median annual tuition and fees for graduate programs rose from $3,000 to $10,000, a growth rate of 233%.
“High debt is not necessarily a problem as long as borrowers have enough income to repay the debt,” the report states, “but a significant number of programs leave graduates with levels of debt that they cannot reasonably repay.”
Graduate degree programs are a source of revenue for universities — after all, all that rising student fees have to go somewhere.
Nearly all university executives surveyed said increasing graduate and adult enrollment was a priority for their institution, according to a 2022 survey by consulting firm EAB, and 56% of those surveyed reported an increase in the number of programs offered in adult and graduate education since spring 2020.
To earn a graduate degree, students can borrow from both subsidized and unsubsidized federal loan programs. CEW research found that the unsubsidized Grad PLUS loan program administers a smaller percentage of payments to graduate students compared to direct unsubsidized Stafford loans, at 32% and 68%, respectively. But Grad PLUS loans are limited only by program costs, which is problematic.
“The high borrowing amounts allowed under Grad PLUS give institutions limited incentive to keep costs in line with projected revenues,” the CEW report argues.
According to the CEW study, historically marginalized students are most at risk: Black and African American students, for example, are “particularly over-represented” in Grad PLUS programs, making up 16% of loan recipients, compared with 12% of all graduate students.
And the median income of people from historically marginalized groups with graduate degrees is at least $10,000 lower than that of white adults with the same education level.
Inspired by the Department of Education’s Gainful Employment and Financial Value Transparency regulations, CEW researchers proposed tying a college’s access to federal loans to a measure of program graduates’ improved earning capacity and debt-to-income ratios. Under the proposal, if a program fails either test for two or three consecutive years, it would not be eligible for Grad PLUS loans.
“Taken together, these regulations will impose some cost discipline on institutions and provide transparency to students regarding program performance,” the researchers wrote.
