Grad school debt can be crushing for students. With wages stagnant, Education Dept worries

Graduate students are taking on more debt than ever to earn their degrees, but their earnings haven’t risen nearly as much, the Department of Education (ED) said in a report. 

The promise of more job opportunities and higher wages has always attracted people to graduate degrees. A change in 2007 that allowed grad students to borrow up to the cost of their program removed a barrier to obtaining one for many people. By contrast, the most an undergraduate can borrow in government loans in an academic year is typically $12,500. 

Since 2007, graduate school attendance, as well as loan amounts, have soared, even as earnings haven’t, the Department said. 

"Too many borrowers graduate with debt levels that are too high relative to their early career earnings,” ED economists Tomás Monarrez and Jordan Matsudaira wrote. This suggests “cause for concern.” 

How much is graduate school debt? 

The economists analyzed debt and earning outcomes at about 5,300 graduate programs. They found that between 2000 and 2016, the share of graduate students who borrowed more than $80,000 to pay for their degree reached nearly 11% in 2016, up from 1.4% in 2000. And on average, graduate students with debt in 2016 borrowed about $66,000 to finance their advanced degree, up from roughly $53,000 in 2000. 

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From July 2021 to June 2022, ED disbursed $39 billion in federal student loans to graduate students and $44 billion to undergraduate students and their parents, the report said. At 47%, that’s the highest share of federal student loan disbursements going to graduate students in history, even though graduate borrowers accounted for only 21% of all borrowers. 

“If these trends continue, graduate loan disbursements may exceed undergraduate disbursements in the next few years,” the economists said. 

How much do graduate degree holders earn? 

Graduate degree holders do earn more than their counterparts with only an undergraduate or high school degree. Graduate degree holders’ median weekly earnings last year were $1,661, compared with $1,432 for undergraduate degree holders, according to the Bureau of Labor Statistics. 

What’s the problem then? 

The percentage difference between wages of graduate degree holders and those with lower degrees has remained stagnant over the past 20 years, the economists said. 

For example, the premium to a master’s degree relative to the earnings of a high-school graduate hovered between 55% and 63% over that time. That, coupled with the soaring debt levels of graduate students, suggests the return on investment of a graduate degree may have fallen, the economists said. They noted, though, further analysis of policy-driven changes to the costs of student loans to graduate students and out-of-pocket payments is necessary. 

“A particular worry is that too many students take outsized loans relative to what they will likely be able to repay based on the typical earnings of graduates in a program,” the economists said. 

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Who may be suffering most? 

Women are -- because their graduate degree attainment increased over the last 30 years at a much higher pace than men.

Within that, Asian women started with similar rates of graduate degree attainment as white men in 1992 but had roughly twice their share by 2021. Black women were one-third as likely as white men to have a graduate degree in 1992 but are more likely to have a graduate degree by 2021, data showed. 

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her atmjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday.