When Americans think of higher education reform and student debt loans, most focus their attention on undergraduate programs. As the presidential election goes into full swing, we are likely to hear many proposals about tuition-free college and more money for federal grant programs.

What you aren’t likely to hear is a serious discussion about graduate school debt.

That’s because few people consider this debt since most advanced degree holders are not defaulting on their loans—despite the staggering costs of their degrees.

The Center for American Progress hopes to change that by addressing the issues that affect the cost of graduate school and the subsequent loans taken by students pursuing these degrees.1

In addition to their suggestions to lower grad school debt, offering a student financial wellbeing program can help students assess the need for debt and determine if the benefits outweigh the costs.

The Scope of the Problem

When thinking about financial wellness, or the lack thereof, student loan debt is a hot topic. According to the US Federal Reserve and the Federal Reserve Bank of New York2:

  • 69 percent of 2019 college graduates took out loans
  • Average debt for a 2019 college graduate was $29,900
  • Additionally, 14 percent of parents took out loans for their children with an average of $37,200
  • Overall, 45 million American borrowers owe $1.64 trillion in student loan debt
  • Student loan debt exceeds US credit card debt by $587 billion
  • 11.1 percent of student loans are 90+ days delinquent or in default

How much of this debt comes from those attending graduate programs or getting professional degrees? According to The Center for American Progress’s report, 40 percent of federal student loans are for graduate programs.

And, unlike undergraduate loans, which have decreased $15 billion in the last 10 years, graduate program student debt has increased by $2.3 billion.

The same report suggests that if graduate school debt continues to fly under the radar, that all higher education will become less affordable.

What Spurred on Graduate School Student Loan Debt?

How did graduate school student loan debt get so high? There are several factors to consider:

Graduate school is more expensive than undergraduate programs: The average yearly cost of a four-year undergraduate degree at a public institution (tuition, fees, room and board) for the 2016-17 school year was $17,237 and 2.5 times that for private nonprofit institutions.

It is harder to determine costs for a graduate program because of variation based on program, location and program fees.3

For instance, the average cost of a master’s degree in education is about $18,000 per year, while a master’s degree in engineering costs just over $25,000 per year.

For those attending law school, the average annual tuition ranges from $28,000 (public in-state) to $49,000 (private), and an MBA has an average cost of $50,000 for a one year program and $80,000 for a two-year program.

Limited federal grant aid: The only federal grants available for college graduates are based on financial need, including the TEACH Grant for teachers who commit to teaching in an underprivileged area for four years, Fulbright Grants4 for students interested in international studies and research projects, and the U.S. Department of Education: Iraq and Afghanistan Service Grant for students under the age of 24 who had a parent die during military service in Iraq or Afghanistan after September 11, 2001.

Unlimited lending: Graduate students can borrow up to $20,500 per year in federal unsubsidized loans in addition to grad PLUS loans up to their school’s cost of attendance.5

Employers demanding advanced degrees: Some employers insist on an advanced degree, but then do not then compensate those employees enough to pay back the loan.

For instance, those graduating with a master’s in social work have an average debt of $115,000 but typically earn $50,000 annually.1

These conditions leave graduate students with high debt for many years.

What Can Be Done?

The report Graduate School Debt suggests many options for combating the problem.1

However, they also agree that many of these proposed solutions invite a different set of problems. For instance:

Borrowing limits and pricing caps: The argument is that by limiting the amount of money that can be borrowed, graduate students will be saddled with less debt.

However, this could lead to more private loans with less favorable terms, as well as the inability of marginalized groups to access these loans, thus limiting their enrollment in higher education.

Penalizing schools: Another idea is to rate schools based on their students’ debt to earnings and not funding programs with poor returns.

Once again, the fear is that marginalized groups will have less access to higher education or that the programming quality will be reduced to keep the cost ratio down.

National Health Service Corps: Increase the federal program for medical and dental school in exchange for practicing in under-served locations.

Reduce required credit hours: Reduce the number of credit hours needed for certain programs.

For instance, cutting law school by 33 percent would significantly reduce the cost.

However, it could also reduce the quality of graduates seeking to pass the bar.

Re-examine state credential requirements: Many state jobs, such as teachers and social workers, have to complete graduate-level work to get pay increases.

However, those increases do not pay off the debt. States need to look at these requirements to determine their necessity, and then look for ways to meet those requirements without going into extreme debt.

Student Financial Wellness Programs Can Help

One of the best ways to help cut down on massive graduate student loans is to educate students so they can make informed decisions. A good student financial literacy program can help graduate students understand:

Living expenses: There may be a substantial cost difference between living on and off-campus.

Students can determine the true cost of room and board by considering campus housing vs paying for individual expenses such as rent/mortgage, utilities, food and transportation.

A financial education program can guide students through a budget to determine the costs of advanced education beyond tuition.

Whether they need to work while earning a degree: A strong budgeting program can show the numbers with and without a part-time job to see if the upsides of managing monthly costs outweigh the downside of less time for studying.

Students may also consider starting a gig job on the side.

Participating in a graduate assistantship or fellowship: An assistantship is similar to a part-time job, though it is directly related to your field of study.

A fellowship is awarded through a private organization and is similar to a scholarship. Both can help reduce the cost of gaining a higher education degree.

Finding alternative ways to pay for grad school beyond a student loan: Although federal grants are limited, scholarships and grants are available.

Students should look for opportunities at the state level, through private foundations, public companies, professional organizations and your institution’s financial aid office.

Students can also see if their employer offers tuition assistance or reimbursement or if they are eligible for GI education benefits or the Yellow Ribbon Program through the U.S. Department of Veterans’ Affairs.

Tax credit: Some students may qualify for specific tax credits, such as the Lifetime Learning Credit, that will offset tuition costs.

Understanding student loans: Understanding the loan, how it is to be repaid and how the amount of the loan compares to their eventual salary is extremely useful information.

A student financial literacy program can explain the difference between federal student loans and private student loans, as well as loan forgiveness programs for those who intend to work full-time for the government of qualifying non-profits.

Offering a financial wellness program to students as they go through graduate school can help them make smart, informed financial decisions.

This, along with appropriate changes to graduate student loan regulations, will help reduce graduate school debt.



1 - https://www.americanprogress.org/issues/education-postsecondary/reports/2020/01/13/479220/graduate-school-debt/

2 - https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2019q3.pdf

3 - https://www.mybanktracker.com/savings/faq/how-much-save-graduate-school-300816

4 - https://us.fulbrightonline.org/types-of-grants

5 - https://www.nerdwallet.com/blog/loans/student-loans/public-service-loan-forgiveness/