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Graduate students account for only 15 percent of enrollment but 40 percent of annual federal loans. Each year, students take out $37 billion in federal student loans for graduate school. With just under four million graduate students nationwide (compared to about 22 million undergraduates borrowing about $55 billion each year), graduate students account for a disproportionate share of student debt.
According to data from the National Center for Education Statistics, the cumulative student debt for master's completes increased as follows between 2000 and 2016:
- 71 percent for master of education degrees (from $32,200 to $55,200)
- 65 percent for master of arts degrees (from $44,000 to $72,800)
- 39 percent for master of science degrees (from $44,900 to $62,300)
- 59 percent for “other” master’s degrees (from $47,200 to $75,100)
A master's degree has become an essential credential for professional mobility and increasingly entry into a good-paying job. The increase in demand for master's degrees has driven an enormous growth in graduate student enrollment, up nearly 40 percent since 2000. Four in 10 degrees are now conferred on graduate students. Since 1970, American colleges and universities have tripled the number of master's degrees they grant each year.
Given that colleges and universities have increasingly relied on master's degrees to balance the books, schools are reluctant to provide grants or other tuition discounting. The net price for graduate programs has increased nearly twice as fast as undergraduate programs in the past 10 years. Unlike undergraduate borrowing, the amount of loans that a graduate student can take out is not capped. And graduate students even pay a higher interest rate on federal student loans than undergraduates.
There are three ways to reverse these trends and reduce graduate student debt.
Option No. 1: Fewer people could go to graduate schools. Fewer graduate students would not reduce personal debt but would bring down the overall debt levels.
Option No. 2: Schools could offer more grants or other scholarships, or the federal government could forgive graduate student debt.
Option No. 3: Schools could reduce the cost of graduate programs.
Option No. 1 may end up occurring, as noncredit programs from universities with global brands may end up weakening demand for master's degrees from regionally known schools.
For option No. 2, I don't know if what will happen, if anything, with graduate student federal debt, but I wouldn't hold my breath.
The best option, at least in my mind, is bending the master's degree cost curve.
Today, we have a small but growing number of low-cost online master's programs from schools with global brand recognition. In 2019, I counted 21 low-cost online master's degrees that universities were offering in collaboration with Coursera and edX.
These programs include a $22,000 M.B.A. (the iMBA) from Illinois, a $26,000 master of computer and information technology from Penn and a $10,000 master's degree in analytics from Georgia Tech.
While I have not counted low-cost online master's for 2021, I've got to believe the number of programs has grown.
The reality is that low-cost online master's remain a small proportion of all master's programs.
If we want to address the issue of graduate student debt and also increase access to graduate school, it seems to me that we should want to see schools offer more low-cost online master's programs.
We can (and should) have conversations about the relative quality of these programs. The quality issue is as important as costs. Quality and brand are deeply embedded in a school's decision to investigate the economics of a potential low-cost online master's program.
What would it take for a new cost norm for master's programs to take hold?
What proportion of all master's programs would need to be affordable (say, half the cost of traditional residential master's programs) to bend the graduate program cost curve?
What are the enablers and the inhibitors for schools developing and launching their own low-cost online master's programs?
I'll consider those questions in a subsequent post.
