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Graduate school, a path to higher learning and potentially higher income, increasingly lands students in higher debt brackets.
But while Congress searches for ways to alleviate the loan burden for undergrads, experts say little attention is being paid to master's students. In fact, lost in the debate over the nation's student loan debt topping the $1 trillion mark is that graduate students account for a third of that sum -- and that their indebtedness is likely about to grow much worse.
Beginning in July, subsidized Stafford loans will no longer be available to graduate students, a shift that experts say will force student borrowers into more expensive loans to cover tuition. These loans are the most popular type for graduate school, with more than one-third of all students signing up for them annually, because the government covers the interest payments during the years of enrollment. In contrast, other loans require students to pay the full cost.Audio
AnnaMaria Andriotis spoke with The Wall Street Journal This Morning about her story .
Without the subsidized Stafford loan, experts say graduate students will likely soon account for a much bigger share of the student-debt pie. Mark Kantrowitz, publisher of FinAid.org, which tracks student debt, estimates their debt load at graduation will increase by about 6% on average.
Experts say the cuts are part of the federal government's broader move to slash spending. (The loan, however, will still be available for undergrads.) Last year, President Obama signed the Budget Control Act of 2011, which included eliminating the subsidized Stafford loan for higher degrees. The measure is expected to save around $21.6 billion over 10 years, nearly $5 billion of which went to the deficit reduction. The administration says the reasons for removing the subsidy were twofold: those with advanced degrees tend to have higher incomes, and the cheaper loans don't encourage more students to enroll in graduate school.
For graduate students, however, the subsidy ends at an inconvenient time. With the economy struggling to rebound, more adults have been returning to college to get master's degrees -- and leaving with a rising amount of debt. Master's degrees account for about $200 billion in outstanding student loan debt, according to FinAid.org, while other advanced degrees make up another $100 billion. This year, roughly 830,000 advanced-degree recipients are expected to graduate with debt averaging roughly $43,500, up 10% from five years ago. Since the fall of 2007, roughly 56% or 3.6 million graduate-degree recipients incurred loans, according to FinAid.org.
Despite these rising debt levels, proponents of the government's decision to eliminate subsidized Stafford loans for graduate students say they don't need as much help because they'll likely have less difficulty paying back more expensive loans. During a 40-year career, individuals with just a bachelor's degree will earn nearly $2.3 million on average while those who get a master's will make an extra $400,000 over that period, estimates Stephen Rose, research professor at the Georgetown University Center on Education and the Workforce.
But consumer advocates point out that those pay gains don't always pan out. While the median annual income for someone with a master's degree is about $12,000 more than someone with just a bachelor's degree, the pay difference is even smaller in some fields, such as the arts and journalism. Then there are professions like teaching and social work that often require expensive graduate degrees, but typically don't yield large salaries.
Meredith Towne-DeVito, a Brooklyn, N.Y.-based high school English teacher, says she's trying to pay back $118,000 in college loans that she acquired while receiving a master's degree at New York University, but her salary isn't large enough to make a dent in the debt she owes. "It's completely overwhelming," she says. "It'll be forever before I pay it off."
Quantifying the financial benefits of a graduate degree has become even harder in recent years as colleges raise tuition costs. Since the recession, tuition has risen 11%, to nearly $22,000, on average for private nonprofit graduate programs, about in line with tuition hikes for undergraduate students, according to the National Center for Education Statistics. At public colleges, tuition for grad students rose 25%, to $9,247, outpacing tuition hikes at the undergraduate level.
Schools are raising these costs even as enrollment continues to soar. Between 2007 and 2010, enrollment in graduate programs grew 11%, to an all-time high of 2.9 million students, according to the latest data from the NCES. One reason costs are climbing, says Kantrowitz, is a controversial practice called "differential tuition," whereby colleges charge higher tuition for programs that are more popular. Public colleges are also receiving less funding from cash-strapped state governments.
Terry Hartle, a senior vice president at the American Council on Education, which represents colleges, counters that graduate degree programs are expensive to run, particularly in tech intensive fields such as engineering and the sciences. Separately, he says, it's not unusual for a profitable department at a university, like the business school, to subsidize another department. Also, colleges say they continue to dole out free aid to eligible students to help offset the costs.
To ease the burden, some financial advisers recommend that graduate students consider attending a public university where tuition costs are lower. The average tuition at a public university is less than half of a private graduate program.
Another consideration, they say, is whether the costs of attaining an advanced degree will be worth it. Someone with a bachelor's degree in business or engineering could earn about $19,000 more a year (based on median salary data) if they go on to get a master's degree, according to Rose. But even if the pay post-master's is significantly higher, students should consider how much they'll have to borrow and how many years they'll need to pay that off before signing up.
Jon Weinman, a lawyer in Long Beach, Calif., says he incurred $140,000 in student-loan debt after enrolling in Southwestern Law School in Los Angeles in 2005, figuring the six-digit salary offers guidance counselors told him he'd fetch at graduation would make it manageable. But Weinman, 30, found work at a small law firm earning just half of what he expected. "Right now, it's not even feasible to think of how long it will take me to pay this off," he says.