How grad schools became the hidden culprit behind America's student-debt crisis

How grad schools became the hidden culprit behind America's student-debt crisis
How grad schools became the hidden culprit behind America's student-debt crisis - Business Insider

Over half of the massive US student-loan debt comes from graduate schools, and it's a sign master's degrees aren't the path to wealth they used to be.

  • Households with at least one advanced degree carried 51% of overall student-loan debt in 2016.
  • More students are attending and completing graduate school, but as master's degrees become more expensive, they're also borrowing more.
  • Graduate students can more easily pay off loans because they tend to get high-paying jobs. Sometimes, though, those high-paying jobs earn less than the debt the borrower accumulated.
  • Visit Business Insider's homepage for more stories.

At $1.5 trillion, the nation's student-loan debt is at an all-time high.

The climbing cost of undergraduate school often bares the brunt of the blame, but graduate school is also a key player in the student-debt crisis.

More students are attending graduate school than they did a decade ago. This has led the amount of government debt shouldered by grad students to increase from 32% in 2002 to 40% today, according to NPR.

What's more, households with at least one advanced degree carried over half (51%) of overall student debt in 2016, according to "Inequality and Opportunity in a Perfect Storm of Graduate Student Debt," a paper by the Wisconsin Center for Education and Research.

Read more: 10 mind-blowing facts that show just how dire the student-loan crisis in America is

"We already know that the economic returns to graduate and professional degrees have been rising at a faster rate than returns to undergraduate degrees," wrote Jaymes Pyne, co-author of the paper. "Combine increasing returns and increasing enrollments with a policy environment that views advanced degrees as a private rather than a public good, and you get more debt."

Here's how the nation's ongoing student loan crisis has affected graduate students.

More people go to graduate school than they did a decade ago — but the degree has gotten more expensive.

Law school graduation
Flickr / Villanova Law

More people enroll to get a master's degree now than they did a decade ago, according to data from the Council of Graduate Schools. Since 2006, total graduate school enrollment increased by about 1.1% each year. 

Some of the growth can be attributed to more underrepresented minority students going to grad school, though international student enrollment flattened. Degrees awarded in earth sciences, engineer, and computer science increased the most over the last five years, CGS found.

As more people get a master's degree, the cost to attend graduate school rose faster than for undergraduates.

The net price students pay for a master's degree — meaning the tuition and fees minus any grants they receive — increased 79% since 1996. The net price for a bachelor's degree increased by just 47% within the same time period, according to the think tank Urban Institute. The average net price of a master's degree was about $16,000 a year in 2016, compared to $8,000 for a bachelor's degree.

Graduate-student borrowers made up more than half of the $1.3 trillion student-loan debt recorded in 2016.

University of Michigan Medical School
University of Michigan Medical School/Facebook

In 1992, 45% of advanced-degree households comprised the national $41.5 billion student-loan-debt total (in real 2016 dollars); in 2016, 51% of advanced-degree households comprised the $1.3 trillion in debt, according to "Inequality and Opportunity in a Perfect Storm of Graduate Student Debt," a working paper by Jaymes Pyne and Eric Grodsky.

More graduate students are enrolling in master's programs, borrowing more when they do, and completing them, according to Pyne and Grodsky.






Federally subsidized student loans have higher interest rates for graduate students than for undergraduate students.


Graduate student loans work differently than for undergrads.

For one, graduate students receive less financial aid, particularly from federal, need-based Pell Grants. Many low-income students who relied on this type of funding to pay for undergrad will have to take out debt for grad school, according to US News & World Report.

Plus, graduate-student loans have higher interest rates, as well as a higher borrowing limit than undergrad aid. Loan limits can even reach over $200,000 for students in certain health fields, US News found. 

Since graduate students attend school later in life, many have higher rent to pay and families to provide for — factors that make paying for school more difficult, according to NPR.

"If graduate students aren't paying off all their interest on time, then their debt can really add up," NPR's Cardiff Garcia said.

Still, graduate students can pay off their loans more easily because they get high-paying jobs after their programs.

usc graduation
AP Photo/Damian Dovarganes

While graduate students may shoulder more of the loan burden, they tend to pay off their loans after getting jobs.

People with graduate degrees are less likely to default on their loans than those who never graduated undergrad. Drop-outs with low debt levels tend to default due to their inability to find a high-paying job without a degree, writes MarketWatch's Jillian Berman.

But those high-paying jobs aren't always the path to wealth they once were.

dentistry medicine law tuition comparison v2
Andy Kiersz/Business Insider

As of 2018, 37-year-old orthodontist Mike Meru owed $1,060,945 in student loans, the Wall Street Journal reported — a small sum compared with the $2 million loan balance he's expected to face in two decades.

Meru pays about $1,590 a month — 10% of his monthly income, but not enough to cover the interest. At this rate, his debt grows by $130 a day, according to the Journal.

As the graph above shows, dental school is the most expensive professional-degree program in the US. During the 2015-16 school year, private nonprofit dental schools charged on average more than $71,000, while public in-state dental schools charged about $38,000, according to the Urban Institute.

Average tuition for private medical schools charged $53,240, and public in-state medical schools charged $28,720. Law-school tuition isn't far behind. Private law school cost $47,450 on average in 2016, and public in-state tuition was nearly $19,000 less.

While dentists, doctors, and lawyers make six-figure salaries, many have student debt that outweighs their income. Though dental school has the highest price tag on average for a professional degree, dentists aren't the highest-paid professionals. The median-earning dentist in the US makes $151,440 a year, and the median-earning physician makes at least $208,000, according to the Bureau of Labor Statistics.

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