Incurring Debt for Master’s Degrees – Where Is It Working?

On July 8, the Wall Street Journal (WSJ) published Melissa Korn’s and Andrea Fuller’s article, “Financially Hobbled for ‘Life’: The Elite Master’s Degrees That Don’t Pay Off.”

The article opened with the example of recent film program graduates of Columbia University who took out federal loans and had a median debt of $181,000. If the debt load incurred for those degrees wasn’t bad enough, Ms. Korn and Ms. Fuller reported that two years after graduation, half of those student loan borrower graduates were making less than $30,000 a year.

According to these WSJ reporters, the Columbia program is the most extreme example of their analysis of Education Department data for the graduates of master’s degree programs at elite universities. Clearly, the average earnings as reported will not enable those graduates who borrow to begin paying down their student loans.

The writers note that it’s ironic that Columbia allows its master’s graduates to borrow so much money for tuition when its $11.3 billion endowment ranks Columbia as the eighth wealthiest university in the United States. When asked for comments, Columbia’s president Lee Bollinger said that the Education Department data cannot fully assess students’ ability to pay two years after graduation but “this is not what we want it to be.”

Ms. Korn and Ms. Fuller provide several examples at other universities similar to Columbia’s film programs. At New York University (NYU), graduates of its publishing program borrowed a median debt of $116,000 and had an annual salary of $42,000 two years after graduation. Graduates of the University of Southern California’s marriage and family counseling program borrowed a median $124,000, and half of those students earned $50,000 or less two years after graduation.

According to Ms. Korn and Ms. Fuller, the plight of undergraduate students who must repay large student loan balances has been known for years. What’s not as well known is that graduate students have higher loan balances. The reason is that the Federal Grad Plus Loan program has no cap on borrowings; that allows for tuition, fees, and living expenses while the undergraduate loan programs have an annual and cumulative cap on borrowings.

With no limits on graduate loans, student enrollment in master’s degrees has grown substantially since the creation of the Grad Plus loan program by Congress in 2005. In fact, for the first time ever, graduates are on track to borrow the same as undergraduates in 2020-2021. But there are substantially fewer graduate students than undergraduate students.

The reporters note that approximately 38% of master’s programs at top-tier private universities in the U.S. drive average borrowings for their students that exceed their earnings immediately after graduation. This compares to 30% of master’s programs at for-profit universities, a frequent target of politicians and some traditional academics.

It’s also notable that approximately 43% of the grad students who borrowed money at elite universities for master’s degrees had not repaid any loan balances nearly two years after graduating. Despite this statistic, Ms. Korn and Ms. Fuller note that universities who offer low-return graduate degrees face no consequences if students cannot repay their loans after graduation.

If master’s graduates enter loan repayment programs after graduating, they can have their student loans forgiven after 20-25 years. In that case, the taxpayer picks up the tab and once again, the university escapes with no consequences.

At the end of the article, readers can access a tool developed by the Wall Street Journal that allows each of them to compare the debt-to-income ratio of undergraduate, master’s, doctorate, and professional degrees.

A week later, reporters James Benedict, Andrea Fuller, and Lindsay Huth co-authored another WSJ article, “Is a Graduate Degree Worth the Debt? Check It Here.”

The intention of the second article was to provide comparable data for all U.S. universities offering master’s degrees. The tool provided was the same tool mentioned at the end of the previous article about elite institutions.

Mr. Benedict, Ms. Fuller, and Ms. Huth provide a useful example of the difference between debt and earnings at two California universities for students who graduated with a master’s in public health degree. (Note: 123 schools offer a degree that is reported in the Department of Education’s database.)

The University of Southern California and California State University, Long Beach are both located in Los Angeles County, and each offers an MPH. The graduates of each of these programs earned a similar salary after graduation.

However, the graduates of USC’s MPH program accrued 2.5 times as much debt as graduates of CSU Long Beach. USC officials said that tracking graduates’ salaries over a longer period than two years will provide a better measure of the return on investment (ROI) of their MPH program.

American Public University System (APUS), the institution that I led as president for 16 years, has an MPH degree, so I opted to look at it for comparison as well. APUS MPH graduates who borrow have an average of $42,011 in debt at graduation. That compares to $32,052 in debt for CSU Long Beach graduates and $80,065 of debt for USC graduates.

Comparing graduates’ salaries, CSU Long Beach grads earn $48,432, APUS grads earn $58,943, and USC grads earn $48,139. The debt to earnings ratios are .66 for CSU Long Beach, .71 for APUS, and 1.66 for USC. The lower the debt to earnings ratio, the better.

There’s a graphic that allows you to locate the school with the lowest debt to earnings ratio for each degree and in the case of the MPH, it’s The University of West Florida (UWF) with a ratio of .35. UWF’s average debt is $33,200 and its average salary is $94,408.

While the debt of UWF graduates is low, it’s the salary that provides it with the lowest ratio. UWF graduates have the second highest average salary of all 133 schools offering MPH degrees.

I looked at a few other degrees using the tool. The information is helpful, but it does not necessarily represent all the information that may apply to you.

Let’s look at the average debt for all borrowers. Some schools may have affordable tuition that precludes borrowing for students who work full-time or whose employer reimburses tuition. When I was the president of APUS, we tracked the percentage of all graduates who never borrowed money from us or the federal student loan programs. At one point in time, the percentage of graduates who never borrowed to attend APUS classes was 72%.

In addition, the WSJ reporters mentioned that enrollment in graduate programs escalated when Congress authorized the Grad Plus program in 2005 because there is no cap on borrowings. It would be helpful to know, however, what percentage of the borrowings is for tuition and fees versus living expenses.

Tuition and fees will be the same for every student, but living expenses could be drastically different, depending on the income status of the student. A student who works full-time with a means of supporting their living expenses may not need to borrow for those costs.

But a full-time student who does not work at all may need to borrow more for living expenses than tuition and fees. Living expenses may also be different for colleges and universities based in high cost of living areas like New York City and San Francisco versus colleges and universities located in less populated areas.

For borrowers who graduated from APUS’s MPH program, tuition and fees are less than half of the average debt reported. While I don’t know the percentage of APUS MPH graduates who borrowed, I know that APUS’s affordable tuition enables many students to graduate debt-free, thanks to employer tuition reimbursement programs.

I think the tool would be more useful if it provided the ratio of tuition and fees to earnings as well as the ratio of the amount borrowed to earnings. Additionally, I agree with those who commented that earnings two years after graduation is not a reasonable proxy for future earnings in many professions.

It’s the intent of the Department of Education to continue to enhance its reporting by adding salary information annually so that two-year earnings information for a graduating cohort becomes three-year information, etc. Department of Labor averages may be able to be utilized to construct a ratio of tuition and fees compared to estimated earnings 10 and 20 years after graduation.

Kudos to the team at the Wall Street Journal for building this tool. I hope we’ll see additional articles that utilize this data to report on the misalignment of tuition and fees with earnings.

When the Obama administration issued its regulations regarding Gainful Employment reporting and analysis, I wrote that the regulations would only be helpful if they applied to all colleges and universities. This tool provides prospective students and policymakers with some of that information.

In other ways, the tool is potentially misleading. Colleges and universities that provide education at a price level that reduces the number of students who need to borrow should be recognized positively through tools like this one.

If you have any additional ideas how to enhance this type of tool, let me know. Just as importantly, let the WSJ know too! Full and accurate transparency benefits everyone.

Subjects of Interest


Higher Education

Independent Schools


Student Persistence