When many people think of the student debt crisis, they think of jaw-dropping six-figure debt totals.
But “a lot of those big numbers end up being outliers or it’s graduate students who’ve racked up [debt] based on continuing their education, ”says Rick Castellano, vice president of corporate communications for Sallie Mae. He says undergraduates rarely borrow more than $ 100,000.
Today Americans collectively owe over $ 1.7 trillion in student debt. U.S. student debt has grown by over 100% over the past 10 years, and the fastest growing category of student loans is that incurred by graduate students.
Brookings estimates that although only 25% of student loan borrowers have gone on to graduate school, these students hold about half of all outstanding student debt.
The average amount of student debt for a person with a bachelor’s degree is $ 28,950. But that’s $ 66,300 for an MBA, $ 71,000 for a master’s degree, $ 145,500 for a law degree, and $ 201,490 for a medical degree.
It is regularly claimed that graduate students take out more loans because they can expect to earn more, which is often true. Workers with master’s degrees earn an average of $ 1,545 per week, and workers with professional degrees (such as a JD or MD) earn an average of $ 1,893 per week, according to estimates by the Bureau of Labor Statistics.
However, those with only a bachelor’s degree earn almost $ 1,305 per week and those with only a high school diploma earn more than $ 781 per week on average. Workers with higher education degrees also have significantly lower unemployment rates.
The pandemic has drawn attention to the sacrifices made by many medical professionals – who have some of the highest student debt. New York Congresswoman Carolyn Maloney even introduced a bill that would eliminate student debt for healthcare workers treating coronavirus patients.
More recently, some elite graduate programs have come under scrutiny for leaving graduates struggling with huge amounts of student loans and without early career incomes large enough to pay off their debts.
As total graduate student debt rises, many are calling attention to the problem. Here is why these totals have increased.
One of the reasons for the increase in graduate student debt is that enrollment in graduate programs has increased over the past 10 years.
Census data shows that between 2000 and 2018, the number of people aged 25 and over who obtained master’s and doctoral degrees doubled. In 2000, 8.6% of American adults had a graduate degree – that figure is now closer to 13.1%.
Faced with weak wage growth, many young workers have turned to higher education in hopes of increasing their incomes. For many, higher education has proven to be an opportunity to close stubborn wage gaps.
One reason for this thinking is that women need to graduate more than men to overcome some of the pay disparities they face, according to a 2018 pay gap report from the Georgetown Center on Education and the Workforce. .
“A woman with a bachelor’s degree earns an average of $ 61,000 per year, roughly the equivalent of a man with an associate’s degree,” the report reads. “The same rule holds for women with a master’s degree compared to men with a bachelor’s degree and for each successive level of education.”
For some, higher education can help fill these gaps, but it also comes at a cost. The federal student loans program has charged interest rates as high as 7.9% in recent years. Currently, they are set at 6.28%.
Sky is the limit
Another major reason graduate students have more student debt is that they can borrow unlimited amounts from federal student loans, says Adam Looney, a non-resident principal investigator at Brookings and a professor in the finance department and executive director. by Marriner S. Eccles. University of Utah Institute of Economics and Quantitative Analysis.
The federal student loan limit for dependent undergraduates is $ 31,000, but there is no limit about how much graduate students can borrow, Looney says.
“A dependent undergraduate student cannot borrow more than $ 31,000 in total federal debt over the course of his or her academic career. A graduate student can easily borrow this in one year, ”he explains.
Looney adds that graduate students also often have accumulated debt over the course of their undergraduate careers.
“Plus, graduate students have been in school for more years, often borrowing for both college and graduate study,” Looney said. “And many pay off their loans more slowly initially because all undergraduate loans are deferred until graduate studies, and some professionals like physicians, dentists, or doctorates often enter residency or post-doctoral programs for a few minutes. years before entering formal practice. “
“But I think the important factor is that higher education is expensive and graduate students are allowed to borrow at full cost.”
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