The impact of the growing student loan burden on graduate education

By: Rebecca McPherson, Ph.D.

source: pixabay

Every individual has his or her reason for pursuing a graduate degree. For many, a graduate degree is a path to a specific career; for others, it is simply a personal goal; and at times, it is a requirement for job advancement. Although the benefits of a higher degree are as numerous as the types of degrees and disciplines offered, there is one unifying theme across higher education: rising and often unavoidable student loan debt. Forbes reported that in 2017, the student loan debt in the U.S. had reached an astonishing $1.3 trillion. Of the 44.2 million U.S. borrowers with some type of student loan debt, over 2 million owe at or more than 100,000 dollars. At the top of this mountain of debt are U.S. graduate students, a quarter of whom will borrow close to $100,000 to complete their education,  while a tenth will end up borrowing upwards of $150,000.

Educational debt can extend beyond the typical student loan programs. While tuition poses a major cost to the student, many may not be able to make enough money through stipends or part-time work to meet their cost of living. The Report on the Economic Well-Being of U.S. Households in 2016-May 2017 showed an increase in the rate of borrowing for educational related expenses. Although student loans remain the primary source of borrower debt, credit cards, home-equity loans, and private loans also make up a portion of the total educational debt burden.

With a climate of ever-increasing educational costs and associated debt, many current, past, and future students are left asking, what is being done to curb the impact of mounting educational debt? The Institute for College Access & Success (TICAS) is responsible for enacting and overseeing the National Agenda for the Student Debt Policy in the U.S. Currently, TICAS focuses on risk-reduction strategies for student borrowers, including developing income-driven repayment plans, increasing access to Pell grants, and streamlining student borrower application processes.

The growing concern surrounding the ever-increasing student debt load is also being tackled at the state level. In recent years, several individual states have introduced policies aimed at protecting the student borrower, especially from predatory private student loan lenders. The Private Student Loan Transparency and Improvement Act was passed in Oklahoma in 2013 and requires private and alternate student loan providers to be transparent in the lending and repayment conditions. The state of Connecticut followed by being the first state to implement a borrower’s bill of rights in 2015. Several states offer student loan forgiveness and repayment incentives to entice student loan debt holders to work in specific regions.

What does the rising burden of student debt mean, and what are the ultimate costs to the borrowers? Ultimately, the price of student debt means that many young adults will have to put off major life decisions. Among graduate student borrowers, 43 percent state difficulty in regularly meeting student debt repayment obligations, 61 percent  say they are unable to save for retirement due to debt load, and 45 percent lack the means to save for an emergency fund. The costs of tuition has substantially increased since the early 1990’s and continues to grow; this initial rise in costs was caused by a decline in state support to colleges and universities.   Although there are no exact numbers showing the impact to low income students, the pursuit of a higher degree may, for many students, be out of reach.

Although several policies at both the state and national levels exist, there are gaps in how to deal with and resolve the mounting student debt crisis, and questions remain as to the impact on future training.  TICAS has indicated several areas of the lending and repayment process in need of continued improvement, such as enhancing educational tax benefits, preventing predatory lenders, and promoting student borrower awareness.

Students pursuing advanced degrees – beyond a bachelor’s degree – shoulder the bulk of the student debt burden. At times, wage outcomes fall below borrower expectations in certain fields of study. This can have a serious economic impact for borrowers who are unable to meet loan repayment requirements. Borrowers who have completed a higher level of education at a not-for-profit institute, and consequently have a higher burden of debt (i.e., $100,000 or more) are less likely to fall behind or default on payments.  Counter to this, student borrowers who have attended a for-profit institute or did not finish their degrees are more likely to fall behind on repayments or default on their student loans.  Additionally, those seeking advanced degrees will find that they have a greater ability to borrow from the federal loan program, which often has high caps and few or no credit checks required before borrowing. This leads some to put the blame for the student debt crisis on the federal government, arguing that unchecked borrowing causes educational institutions to continually raise tuition and fees for graduate education.

As of February 2018, no new federal laws regarding the student loan debt burden have been passed. However, several initiatives have been proposed by the current administration in an effort to tackle the expanding costs of the student debt. One such recommendation is the expansion of the income-based repayment plan (IBR), which would consolidate all loans into a single repayment of 12.5 percent of income with loan forgiveness after 15 years. Other recommendations include lowering federal loan interest rates; eliminating the Public Service Loan Forgiveness (PSLF) program, which would instead give focus to the proposed IBR; and a pushing for tuition reduction by imposing educational institutes to cut administrative costs.  On the upcoming 10 year anniversary of the start of PSLF, many argue that cutting the program would dissuade many young professionals from entering into the lower paying public health service.

Ultimately, the impact of the student loan debt burden may negatively affect graduate level training. There are calls to protect borrowers from predatory lenders and proposed legislation to tackle the debt crisis. The willingness to take on large debt and possibly delay major life decisions lies with the individual. For now, the student debt debate continues.

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