Total student debt has surpassed $1 trillion, and a huge chunk of that problem is caused not by for-profit degree mills or even by undergraduate programs, but by overpriced graduate degrees. A New America Foundation study found that 40 percent of all student debt comes from these programs, even though graduate borrowers make up only 17 percent of all borrowers. And graduate debt has grown by more than 40 percent in the past decade, to a median level of $57,600 in 2012, far higher than the $27,000 median figure for bachelor’s programs.Some graduate programs are more burdensome than others. As the WSJ notes, graduates of professional programs like medicine and business are well equipped to service their debt, but humanities grads rarely find jobs that pay as well, ending up with more outstanding debt as a result.While universities deserve much of the blame for high prices, federal policy has played a key role in driving up debt as well:
The foundation’s report … points to a 2006 law that removed a limit on how much graduate students may borrow from the federal government. Before the change, graduate students—excluding medical students—could borrow no more than $138,500 total for their education and were limited in how much they could borrow annually. Now they can borrow up to the “cost of attendance,” a figure that includes tuition, books, transportation and living expenses. Undergraduates still face a lifetime borrowing cap, currently $57,500.
Income-based repayment plans, which permit loan forgiveness after the student has participated for the required 10-20 years, have also encouraged students to borrow more liberally.There’s more than enough evidence to suggest that federal lending policies are contributing to tuition inflation by encouraging students to borrow more than they would otherwise. Policymakers should look for ways to reverse these incentives and put pressure on colleges to lower costs, instead of encouraging students to borrow more. In the meantime, prospective students—especially graduate students—should take a close look at programs before they apply to see if the degree is really worth the cost.