Earnings Returns to Graduate Degrees

What Do We Know, and What Do We Need to Know, for Accountability Policy?

Graduate education is the fastest growing segment of U.S. higher education. While undergraduate enrollment has increased by 30 percent over the past two decades, graduate enrollment increased by more than 45 percent over the same period. Grad school is no longer only for the ultra-elite: A full 44 percent of bachelor’s degree graduates enroll in a graduate program within four years, including 41 percent of first-generation college graduates, 42 percent of Pell-recipient college graduates, and 53 percent of Black college graduates. While public institutions have always been the most common destination for graduate students (at 44 percent of graduate enrollments in 2016), for-profit institutions now account for one out of every 10 enrollments, up from less than 2 percent in 2000.

This rapid growth in enrollment has been accompanied by an even faster increase in federal student loans disbursed annually to graduate students, which nearly quadrupled in real terms between 2000–01 and 2020–21 (from $10.6 billion to $39 billion). Graduate borrowing now represents 47 percent of annual federal student loan disbursements, and 40% of total student loans outstanding. Though graduate student borrowers generally have low rates of student loan default (around 5 percent after 5 years in repayment), they are also paying off more slowly in recent years.

The increase in graduate student debt has attracted policy concern and proposals for reform. But far less attention has been given to the other side of the equation: What financial returns do students earn from their graduate degrees? If and when policymakers aim their sights more squarely on graduate program quality and accountability, they may be surprised at the relatively limited evidence on the earnings premia for graduate degrees. Of course, students may enroll in graduate education for reasons beyond earnings—they may seek greater job satisfaction, flexibility, or benefits. Still, earnings outcomes are particularly important for understanding the implications of rising graduate student debt, as well as rising enrollments in for-profit graduate programs—particularly given the generally poor outcomes of such institutions at the undergraduate level.