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An Army veteran, Anthony Manfre paid for his associate’s and bachelor’s degrees mostly with his GI Bill benefits, although he also took out $4,000 worth of student loans.

“At the time, I thought that was a lot,” he said. “And now I look back and wish I only owed that much.”

That’s because Manfre went on to graduate school, picking up a master’s degree before setting off on the long road to a doctorate in marriage and family therapy while borrowing to also pay his living expenses. And now he’s $200,000 in debt.

“In the back of my mind I was always thinking, this money is an investment — that later on, when I graduate and get a job, I’ll be able to pay it off,” said Manfre, who earns $61,500 a year working for the Veterans Administration. “But now I don’t think I’m going to get the return I thought I would.

While much of the concern about ballooning student debt has so far been focused on undergraduates, there is mounting alarm that it has overlooked a principal source of the problem: graduate students like Manfre, who are less likely to have support from parents or other sources, and who face almost no limits on how much they borrow.

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Graduate students now collectively owe as much as 40 percent of the estimated $1.2 trillion in outstanding student debt, according to the independent think tank the New America Foundation, even though they make up only 14 percent of all university enrollment.

This lopsided situation has gotten so little attention that the National Association of Graduate and Professional Students’ Facebook campaign about it is plaintively titled “Grads Have Debt 2.”

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“People focus on the undergraduates, because there are more of them and they’re younger and more naïve,” said Joel Best, a professor at the University of Delaware and coauthor of The Student Loan Mess. “They aren’t really paying attention to graduate students, but graduate students are really stacking up substantial student-loan debt.”

This indifference, Best and others said, helps graduate programs get away with continually increasing their prices. “They can charge whatever they want and say to themselves that they don’t need to worry about it, the students can get loans,” Best said.

It has also freed lawmakers to raise interest rates on graduate and professional students, who are being charged rates nearly half again as much as undergrads. In 2012, to save about $1.8 billion a year, Congress also stopped subsidizing the interest that accumulates on federal student loans taken out by graduate students while they’re in school and for six months after they finish. And a proposal to streamline existing federal tax credits would reduce the deductions they will be able to take for educational expenses.

Meanwhile, one measure to help student borrowers by limiting their repayments to a portion of their income and forgiving any remaining debt after a certain period of time, could actually disproportionately help graduate degree holders — and cost taxpayers, who would end up having to cover the difference.

“You get a lot of bad behavior all around,” Best said.

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The sharp growth in borrowing for graduate degrees is happening even as the Bureau of Labor Statistics projects that the fastest-growing careers through 2022 will require workers to have graduate degrees.

“We might have a philosophical discussion about, ‘Do you need a master’s degree for X, Y, and Z,’ but in a free and open marketplace employers are asking for them,” said Suzanne Ortega, president of the Council of Graduate Schools.

Yet while enrollment in graduate programs has increased 41 percent since 2000, according to the U.S. Department of Education, the Council of Graduate Schools reports that the pace of applications has stalled — in part because people are put off by the cost, said Neleen Leslie, president of the National Association of Graduate-Professional Students.

“We’re going to have graduate enrollment going down in our universities, because people can’t afford to take on that level of debt,” said Leslie, a doctoral student at Florida State University.

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Often past the point at which their parents help them pay for their tuition, room, and board, graduate students borrow an average of nearly three times more per year than undergraduates, the College Board reports. And while the average debt of undergraduates has more than doubled since 1989, according to the Brookings Institution, it’s more than quadrupled during that time for graduate students.

Graduate degrees unquestionably often lead to higher incomes — a worker with a master’s degree makes about 20 percent more than a bachelor’s degree holder, and with a professional degree, 55 percent more, the Bureau of Labor Statistics calculates. But not always.

About 16 percent of master’s degrees are in education, for example, for which graduates end up with a median debt of $50,879, the New America Foundation reports — compared with $30,724 a decade ago, and requiring a loan repayment of $429 a month — when the average public-school teacher with a master’s degree makes $57,830 a year.

“There’s a misperception that people who pursue advanced degrees are going to be able to make enough to pay back those loans,” said Leslie. “That’s not necessarily true.”

Now a new measure to help graduate students could cause problems for everyone else.

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The change, made by executive order in June, expands a little-known provision called income-based repayment under which borrowers can limit their monthly federal loan repayments to 10 percent of their incomes, and forgives any remaining debt after 20 years. That’s down from 15 percent and 25 years, respectively. It’s scheduled to take effect for students who borrow beginning in late 2015. Federal loans account for the largest share of graduate student debt.

While President Barack Obama, when he signed it, explicitly said the provision was meant to help undergraduates (“If you got a professional degree like a law degree, you would probably be able to pay it off,” said Obama, who graduated from Harvard Law School), some observers say it’s far more likely to be used by graduate degree-holders —including those who do earn high incomes, and may not actually need it.

The change could also encourage graduate students to borrow even more than they already do, and remain enrolled and living off their loans for longer than they need to, said Jason Delisle, director of the Federal Education Budget Project at the New America Foundation.

That’s because they’ll know their monthly payments will never exceed one-tenth of their incomes, and that taxpayers will cover any balance left unpaid after 20 years.

“Why the hell should you worry about how much you’re borrowing? Borrow a million, you’ll still have to pay off the same amount,” Best said.

Delisle called it “a policy accident.”

“And who’s going to figure this out?” he asked. “Probably people with graduate degrees.”

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Jon Marcus writes and edits stories about, and helps plan coverage of, higher education. A former magazine editor, he has written for The Washington Post, The New York Times, The Boston Globe, Wired, Medium.com...

Letters to the Editor

3 Letters

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  1. Rather than using college as a way for students to get a trade or a vocation we need to revise high school so that students can have an apprenticeship or a vocational education. We have forgotten that average doesn’t mean stupid and that college is not for everyone. No one who doesn’t want to go to college should be forced into it because our educational system fails to equip him or her with the skills for finding and keeping a decent job. This is part of what the common core is about. We need to expand our definition of a good high school education back to what it was in the mid 20th century: one that allowed people to hold responsible positions and let them have a good middle class life.

    I have medical school debt, but if I can’t pay back my student loans it’s my own fault. Even if I’m going to be paying them off for 30 years they will be paid off. I may not have an Audi or Mercedes but I have a job that I love and enough coin to drive a used Toyota, insure it for cheap ($25/month at 4AutoInsuranceQuote) and take care of my family. I’m sorry that I’m not sorry that the average American can’t have a luxury vehicle.

  2. From the article:

    “… some observers say [income-based repayment is] far more likely to be used by graduate degree-holders —including those who do earn high incomes, and may not actually need it. (…) “Why the hell should you worry about how much you’re borrowing? Borrow a million, you’ll still have to pay off the same amount,” Best said.”

    If graduate school is just a long jaunt through Candyland, this might be a fair point. Painting graduate degree seekers as irresponsible and a burden to taxpayers is an easy scapegoat. It ignores two important points. First, eligibility for income-based repayment requires a demonstration of hardship. Graduate degree holders who earn high incomes after graduation would not be eligible for the program.

    Second, all of the conditioning policy factors mentioned earlier in the article suggest the real problem lies elsewhere, and that it’s more intractable than blaming greedy graduate students:

    “This indifference, Best and others said, helps graduate programs get away with continually increasing their prices…. It has also freed lawmakers to raise interest rates on graduate and professional students, who are being charged rates nearly half again as much as undergrads. In 2012, to save about $1.8 billion a year, Congress also stopped subsidizing the interest that accumulates on federal student loans taken out by graduate students while they’re in school and for six months after they finish. And a proposal to streamline existing federal tax credits would reduce the deductions they will be able to take for educational expenses.”

    So, budgets are being balanced and tax codes streamlined in a way that protects undergraduates and burdens graduate students. This flies in the face of evidence that other measures show that graduate students are far less of a financial burden on taxpayers. For example, though graduate degree holders own a higher percentage of student loan debt, their default rate is nearly 1/5th the rate of undergraduates. This relation holds historically, as well. Here are the 2014 figures broken down by type of loan, from the Federal Education Budget Project, an initiative of the New America Institute (a DC-based think tank):

    Subsidized Stafford: 21.4% default rate
    Unsubsidized Stafford (Undergraduate): 20.0%
    Unsubsidized Stafford (Graduate): 5.5%
    Parent PLUS: 7.5%
    Grad PLUS: 5.9%

    Why strip existing loan burden relief measures from graduate students and not undergraduates if graduate students are far less of a financial problem than undergraduates? That, I think, is the policy failure. It is not a lamentable situation that graduate students are “accidentally” eligible for debt relief when other policies have inequitably exacerbated their debt situation.

    Also, another inequity: the graphic leaves out any mention of the median debt of PhD holders. They are grouped into a single category, and we are given no information about them despite their being the largest category in the given taxonomy. This is a glaring unevenness in data presentation.

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