Report asks, ‘Is graduate school worth it?’

Graduate school, which includes master’s, professional, and doctoral degrees, can often lead to career advancement and higher wages, but rising tuition and fees, student debt, and uneven outcomes can diminish the value of a graduate program. In a new report, Graduate Degrees: Risky and Unequal Paths to the Top, researchers at the Georgetown University Center on Education and the Workforce say that graduate programs need more regulatory scrutiny and transparency about their outcomes to minimize risks to student borrowers and taxpayers. They also offer policy recommendations for ensuring that graduate students, especially those from low-income or underserved backgrounds, get a return on their investment.

“Pursuing graduate education will continue to be a high-risk endeavor as long as prospective students lack the information to distinguish between programs that are worth large amounts of graduate debt and those that are not,” the report says. “This uncertainty discourages graduate enrollment among students from lower socioeconomic backgrounds and marginalized racial/ethnic groups, heightening social stratification and the chronic equity challenges that afflict higher education and the labor market.” 

Loan programs enabling enrollment but exacerbating debt

There has been a growing focus on the financial risks associated with graduate programs, Inside Higher Ed reports. Last year, two reports, one from the Department of Education and another from the Higher Education Advisory, said the payoff for graduate students varies significantly and depends on their fields of study. 

Graduate program costs have increased 233% since 2000, CEW says, and there have been two federal loan financing options available to students looking to cover those expenses: direct unsubsidized Stafford loans and Grad PLUS loans. Stafford loans make up a larger portion (68%) of total student loan disbursements than Grad PLUS loans (32%), but the latter has a larger role in exacerbating the student loan debt crisis. Grad PLUS student loan borrowers are more likely to enroll in high-cost graduate programs and to come from historically marginalized backgrounds. 

“Grad PLUS loans are an important resource for many graduate students who may not otherwise have access to private lending. But they can also be a source of excessive debt—limited only by the cost of attendance, which universities have few incentives to rein in,” Jeff Strohl, CEW director and report co-author, says in a press release. 

Proposed regulations for graduate student loans

While some critics have called for ending Grad PLUS loans altogether, CEW researchers suggest that graduate programs undergo a debt-to-earning test and an in-field earnings premium test, aiming to mediate access to Grad PLUS loans rather than eliminate them. A program passes the debt-to-earnings test if its graduates’ median federal loan payments are less than 10% of their median earnings above the state living wage for a single person. It passes the in-field earnings premium test if its graduates’ median earnings are at least 5% above the median earnings of young workers (ages 25-34) with a bachelor’s degree in the same state and broad field of study. Under this regulatory framework, all graduate programs would be required to notify prospective students of their performance on these tests. If a program fails either test in two out of three consecutive academic years, its students would lose access to Grad PLUS loans for that program.

“Our approach would ensure that valuable programs can continue to operate, while putting the brakes on runaway costs and borrowing,” says Artem Gulish, lead author of the report and CEW senior federal policy advisor.

Using this framework, 41% of master’s degree programs and 67% of professional programs with available data would fail CEW’s proposed debt-to-earnings test. Approximately 14% of master’s degree programs with available data and 4% of professional degree programs would not pass the in-field earnings premium test. 

However, some of the worst-performing graduate programs are those that lead to public service jobs that are essential to society, including social work, teacher education, psychology, counseling, law, and allied health professions. CEW researchers recommend that federal and state governments fund targeted grants for graduate programs focused on these critical but underpaid professions. To heighten transparency, they also suggest that the Department of Education implement a pass/fail approach using their in-field earnings premium and debt-to-earnings tests for smaller graduate programs where earnings and debt information is currently unavailable.