At the beginning of the article, Mr. Cooper provides a few hard-hitting facts.
- Graduate students will account for 48 percent of new federal student loans in 2023.
- Graduates of master’s degree programs owe more than $55,000 in federal student loans.
- Graduates of professional degree programs owe more than $190,000 in federal loans.
- Grad students are allowed to borrow almost unlimited amounts through GradPLUS.
- Prior to 2006, grad student loans were capped at $18,500 per year.
Mr. Cooper writes that a new research paper authored by economists Sandra Black (Columbia University), Lesley Turner (Vanderbilt University), and Jeffrey Denning (Brigham Young University) examines the impact of GradPLUS on borrowing and tuition. In the years immediately following the creation of GradPLUS, students increased their borrowing by more than $6,000. Universities captured most of the additional loan funds by increasing tuition for graduate programs. The economists calculated that 64 percent of the additional loans went straight to the universities.
The economists revealed other findings. Access to graduate programs by disadvantaged students did not increase following the creation of GradPLUS. The loan expansion did not increase racial diversity. The paper’s authors found evidence that minority and first-generation college students encountered steeper tuition hikes than the average.
Mr. Cooper writes that FREOPP is concerned whether higher education yields a financial return for students. His research indicates that 40 percent of master’s degree programs do not generate a high enough increase in earnings to justify the cost of tuition, not to mention the opportunity cost of the time taken to earn the degree. The economists’ research indicated that GradPLUS increases student debt but has no impact on earnings, meaning that students’ ability to repay loans decreases.
After the creation of the GradPLUS loan program, Mr. Cooper writes that universities created new and expensive degree programs that few private lenders would view as a good investment. Eliminating GradPLUS and restoring a more reasonable cap on loans would constrain universities’ abilities to create cash-cow graduate degree programs that provide little economic mobility for students. The change would also save $22 billion over ten years.
According to Mr. Cooper, colleges with endowment assets exceeding $50,000 per student enroll 29 percent of all grad students but draw nearly half of all GradPLUS dollars borrowed. The University of Southern California takes in more GradPLUS dollars than all HBCU’s in the U.S. combined. Mr. Cooper writes that the Biden administration should drop its focus on the Gainful Employment rule which only impacts for-profit schools and career programs and instead, revamp the rule’s accountability to target all programs with a low return on investment regardless of the tax status of the institution offering the program. I think his proposal is excellent and it mirrors points that I have argued for years.
I have never been a fan of the GradPLUS or ParentPLUS loan programs and have always stated that these programs encourage colleges to increase tuition. I am glad that Mr. Cooper wrote about this recent economist-researched paper quantifying the negative impact of the GradPLUS loan program. Given the substantial lobbying capabilities of the elite colleges that benefit from this program, I doubt that the GradPLUS program will be eliminated anytime soon. The ParentPLUS program allows institutions with small endowments to push parents or grandparents without extensive financial resources to borrow money to send their children or grandchildren to the college that charges more than the undergraduate federal loan caps. Again, why aren’t we looking out for the interests of the students and not the institutions?