Where student loan debt is a real problem

Politicians and reporters often trot out recent college graduates struggling to pay off their student loan debt to illustrate the dangers of runaway college costs. But usually ignored in the outcry over student loan debt — which has doubled since the Great Recession to nearly $1.2 trillion — is that it is disproportionately the result of going to graduate school.

A report released recently by the Urban Institute found that in 2015-16, graduate students, including those pursuing professional degrees, accounted for 38 percent of federal education loans but just 17 percent of students. What’s more, those pursuing advanced degrees borrowed, on average, three times as much as the typical undergraduate — $18,210, compared with $5,460. Perhaps even more worrisome is that the share of advanced-degree recipients borrowing at least $75,000 more than doubled between 2008 and 2012.

A separate report by the American Enterprise Institute finds that the payoff from master’s degrees varies greatly, based on field of study, and often isn’t understood by prospective students who lack salary data typically associated with earning a bachelor’s degree over a high school diploma.

Using new data from three states — Colorado, Florida and Texas — the study found that master’s degree graduates in fields such as philosophy, art and early-childhood education have the lowest median earnings, often less than graduates with bachelor’s or even associate degrees, who go into other fields.

“As more and more students pay ever-increasing tuition and borrow more and more money to pay for their studies, it’s remarkable how little information we have about the wage outcomes associated with different programs,” said Mark Schneider, vice president of the American Institutes for Research and one of the authors of the report.

One reason graduate school debt has grown is that students have nearly unlimited borrowing capability from federal programs — with few credit checks or examinations of ability to repay.

The imbalance between graduate and undergraduate debt has given ammunition to critics who argue that the federal government is indirectly causing higher tuition prices by increasing aid each year or not putting caps on it. This theory is known as the “Bennett hypothesis,” named after former U.S. education secretary William Bennett, who, in a seminal essay in 1987, touched off a firestorm of debate when he suggested that “increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions.”

The theory is perhaps about to get another test on a grand scale. In a bill released last month to renew the federal Higher Education Act, which governs student aid programs, Republicans in the House of Representatives proposed capping the amount of money graduate students could borrow at $28,500 annually, instead of allowing them to borrow whatever schools charge. The bill also would reduce benefits for borrowers in income-based repayment programs and eliminate the Public Service Loan Forgiveness Program, which zeros out balances for borrowers who work for the government and at many nonprofit organizations after they make 10 years of payments.