Via Jordan Weissmann of Slate, the New America Foundation (NAF) issued a policy brief titled, “The Graduate Student Debt Review.” It opens with a suspiciously leading question, “Is America’s student debt problem due more to expensive graduate degrees than unaffordable undergraduate educations?” Like, why would it think graduate debt is a bigger problem than undergraduate debt? Hm … If I didn’t know any better I’d say the NAF has it in for Grad PLUS loans…
…Which I have no problem with. If the NAF wants to dress up in camos, put on war paint, and emerge from the lagoon with a machete clenched in its teeth as it hunts down the beast of unlimited student lending, I say have at it. I might even sneak into the theater to watch.
The obvious question, though, is what does the NAF mean by “America’s student debt problem”? I know what I think it means, but the NAF’s justifications appear to be different:
Students, families, and taxpayers invest significant resources in financing “college,” in large part because a bachelor’s or associate degree is a must for anyone who wants to secure a middle-class income. If students are taking on unmanageable debt to earn those credentials, then many would argue that the system isn’t working. We should not, however, draw the same conclusions from debt levels of students who attend graduate and professional school. While a graduate or professional degree boosts a student’s earnings prospects and the economy at large, it is not the foundation for economic opportunity and middle-class earnings that a two- or four-year degree now provides. (2)
My eyes bleed reading such ideology.
So if someone goes to college, doesn’t take out a lot of debt, but ends up among the 20 percent of graduates who earn less than the median high school graduate in the same age bracket, then the higher education system is working? What about the average defaulted federal loan balance being less than $15,000? How is the system working if someone can borrow a lot of money and pay it off even if they learned their skills on the job?
If I were paranoid, I would suspect that the NAF’s goal is to cut off the worst abuses of the student loan program to save it from critics who think higher education is mostly a positional good. That, or it’s innocently confused on the theoretical debate (such as it is in Washington). Recall that the NAF advocated eliminating Grad PLUS loans while increasing the unsubsidized Stafford loan limit to restore students’ lost purchasing power. It reasoned that Grad PLUS loans can “discourage prudent pricing on the part of institutions,” but the mainstay Stafford certainly does not because education is necessary for the middle class and $30,000 of student debt isn’t so bad.
Okay, so the NAF is probably motivated by a (correctly) assumed conclusion, but what about its findings?
The point of the policy brief is to show that graduate and professional students are borrowing more than a few years ago and that their borrowing accounts for a large portion of total federal student loans (40 percent of the evil $1 trillion+ figure). Therefore, we should separate trends in college borrowing from post-college borrowing. As evidence, the NAF sampled a dataset of people who finished several types of graduate and professional programs in 2004, 2008, and 2012 and displayed their median, 75th percentile, and 90th percentile debt levels.
The tables the NAF provides are interesting for what they are, and along with data provided elsewhere they do show that typical grad students’ debt levels are growing more than undergrads’. However, the tables don’t really answer the questions the NAF is asking. If 40 percent of all student loans are owed by graduates and professionals, we’d want to know the distribution of that 40 percent aggregate by course of study. (How much of it went to med school students? Is it really as bad as those law school scambloggers say? Etc.) That way, we’d know if the growth seen in the tables is systemic as the NAF asserts or isolated to a handful of degree fields.
Instead, the NAF tells us median debt levels for graduates in all fields have gone up, but we knew this already because Grad PLUS loans can go to living expenses and relatively few 2008 grads used them. In a sense the NAF equivocated when it asked, “Is America’s student debt problem due more to expensive graduate degrees than unaffordable undergraduate educations?” Are graduate degrees expensive because tuition costs more or because people are borrowing from the government to leave near campus? We can’t tell, but in Weissmann’s post, the brief’s author, Jason Delisle, claimed Grad PLUS loans mightn’t responsible for the increasing medians but probably the increases at the 75th and 90th percentiles. I don’t believe him either, but that’s what happens when you deny the possibility that credentials are positional goods.
One big reason a distribution analysis would have been more useful is that median debt levels in most graduate degree fields grew by less than $10,000 between 2008 and 2012, and the overall median was only $6,854 higher. The median for “medicine and other health sciences” grew by $23,700, but law grads, as always, stole the show: $44,500 more debt in four years. Indeed, very savvy readers will note that at $128,000, the median 2012 law grad’s debt load was way higher than the weighted average grad’s debt (~$107,000 by looking at the number of graduates and U.S. News debt rankings).
If there’s anything to say about graduate students and debt from this policy brief, it’s that the NAF has discovered that legal education is a unique disaster in higher education.
Instead, it lectures:
Students pursuing [graduate and professional] degrees already have an undergraduate degree, and they should be far more informed consumers. Therefore, they shouldn’t need a lot of public support to finance their next credential, which is why there are no Pell Grants for master’s degrees.
I can’t tell if the gratuitous phrase, “should be far more informed consumers,” is a normative statement against the grad students, their undergraduate institutions for failing to educate them properly, or the grad programs for pitching degrees of dubious value. Chalk one more up to the strategic use of the passive voice, I guess. The worst-case scenario is that the NAF believes that everyone who goes to grad school knows about IBR’s loan cancelation feature, so they irresponsibly attend thinking they won’t have to repay their debts even though they make lots of money because they’re so amazingly educated.
If you think I’m being hard on the NAF—well, I am—but the point is that its policy brief is a bellwether. The Grad PLUS Loan Program is not long for this world, and that’s a very good thing. On the other hand, the NAF is not the ally to the working class—sorry, “middle class”—it fantasizes to be. It’s very much enthralled by human capital theory, and it won’t pay any price if people graduate from college and don’t collect any premium.