Student loan debt might not be as big an issue as we thought for undergraduate students.
A new report released this week shows that while student debt has in fact ballooned to around $1 trillion, there are two real culprits: grad schools and for-profit schools.
Take those two student populations out and the picture is a little rosier.
The left-leaning New America Foundation found in a new report that between 2004 and 2012, the average debt of borrowers graduating with a graduate degree jumped around 43 percent, from about $40,000 to a whopping $57,600.
Student debt for people with a bachelor’s degree increased only around 35 percent, from just $22,000 to around $29,000 during that same period.
In other words, graduate students make up less than a fifth of student loan recipients, but they eat up around 40 percent of the federal student loan pie.
There are proven economic benefits that come with earning a bachelor’s degree: those with a degree earn significantly more over a lifetime, even when student loans are taken into account, than those with just a high school diploma. The evidence is less clear-cut for graduate school.
As the report notes, “While a graduate or professional degree boosts a student’s earnings prospects and the economy at large, it is not the foundation for economic opportunity and middle-class earnings that a two- or four-year degree now provides.”
That’s especially true for more general graduate degrees like a Master of Arts. While a medical degree is costly, it’s also more likely to pay off because graduates typically go on to land high-paying jobs.
Debt for students graduating with an M.B.A. rose less than an inflation-adjusted $700 between 2004 and 2012, for instance, to around $42,000. But average debt of borrowers graduating with a Master of Arts jumped more than 50 percent, from $38,000 to $59,000, during that same time period.
The increase has broad implications, with some students putting off long-term investments, like buying a home or car, as they struggle to repay loans.
The other major drain on the federal student loan pie, the author of the new report, Jason Delisle, told the Wall Street Journal, is for-profit colleges:
Student loan borrowers who attended for-profit institutions are more likely to default on their loans than other students. The Obama administration would like to tie student loan funding to graduation rates, which would restrict for-profit schools that tend to accept a lot of financial aid students but fail to graduate many of them. Linking funding to graduation rates will take action from Congress, though, which is, as all followers of D.C. politics know all too well, a slow, tenuous process.
Student loan debt stems from a combination of families struggling to save and pay for college in a stagnant economy and cash-strapped schools raising tuition in the face of dwindling state resources. More students, many of them unable to find work in a struggling economy, have also turned to graduate school in recent years.
Perhaps it would be better to do as Hamilton Nolan at Gawker advises: "Take a year off. Travel the world. Hitchhike. Join the Peace Corps. Be a bartender. Huddle in a remote cabin and write your novel. Learn the trombone."
Emily DeRuy is a Washington, D.C.-based associate editor, covering education, reproductive rights, and inequality. A San Francisco native, she enjoys Giants baseball and misses Philz terribly.