The Devil Is in the Details with High Graduate Student Loan Borrowing
In recent years, broad concerns about student loans have found focus on a new, and perhaps surprising, target: graduate school debt. The introduction of the Graduate PLUS program in 2007 effectively eliminated caps on graduate borrowing, allowing students to borrow up to the full cost of attendance (i.e., the tuition and fees plus living expenses set by colleges) even after they’ve exceeded the available $20,500 per year in other graduate direct loans. The resulting increase in high loan amounts have contributed to nearly half (47 percent) of all dollars disbursed annually through the federal student loan program going to graduate students, even though graduate students make up just one in five (21 percent) borrowers.
These high debt levels have led to concerns about whether borrowers can afford to repay their loans, whether taxpayers will shoulder high costs for federal loan programs, and how colleges are pricing their graduate programs in the first place. In response to these concerns, there have been bipartisan calls for reforms to federal graduate loan programs, especially by introducing limits to annual and cumulative borrowing.
Many occupations that individuals pursue graduate credentials for, such as law and medicine, are very highly paid on average, and for some graduate borrowers, even six-figure student loan debts may be easily managed. On the other hand, past research has documented that loan levels are often untethered from the earnings prospects of program graduates. When loan levels can reach above $100,000 and as high as $300,000-400,000, a close look at whether programs requiring these levels of debt produce outcomes that justify those costs is even more important.
A new report, along with detailed data, recently released from the Office of the Chief Economist (OCE) at the U.S. Department of Education on borrowing for graduate school based on the Department’s administrative data offers a much richer picture than was previously available of who these high-debt borrowers are, how much they borrow, and which institutions and programs are associated with the highest borrowing levels. This detail provides new insights that are important to current policy discussions about reforms to graduate loan programs. In this report, we highlight some important insights from these new data, giving some important context for ongoing debates about reform of the federal student loan programs.
