Biggest Offender in Outsize Debt: Graduate Schools

Kevin Carey, wrote in the New York Times on student debt for graduate school. He said that the new federal data suggests that the graduate school market often behaves in strange and erratic ways.

Within the graduate school sector, the fast-growing master’s degree market is replete with debt levels that make little sense. An accredited university can essentially create a master’s degree in anything, set whatever price it likes, start signing up students for federal loans, and market the program as “accredited.”

At the Academy of Art, people with federal loans who graduated in 2016 and 2017 with a master’s degree in design and applied arts owed an average of $100,252. The university offered nine other master’s programs with average loan balances above $90,000.

The Academy of Art is expensive, charging over $1,000 per credit, with thousands more for materials, supplies and fees. The numbers also reflect a key fact about federal financial aid policy: Although undergraduate student loans are limited to $31,000 for students who are financially dependent on their parents and $57,500 for those who are not, there are no hard caps on how much someone can borrow for graduate school.

That means that students can borrow not merely for tuition, but also for living expenses, notoriously high in cities like San Francisco. (The Academy of Art makes extra money by renting out student housing.) Anyone who passes a credit check is eligible to borrow the full cost of attending any accredited graduate school, regardless of how much money a person has, or doesn’t have, in the bank.