Policymakers enacted a series of reforms in the mid-2000s that significantly expanded benefits in the federal student loan program for students pursuing graduate degrees. These reforms allow students to borrow up to the full cost of attendance for their degrees and use an Income-Driven Repayment (IDR) program that offers loan forgiveness after 20 years of payments or as early as 10 years for those who use the Public Service Loan Forgiveness Program. Debt for graduate school now accounts for half of disbursements in the loan program and 80 percent of the projected loan forgiveness in IDR, or about $17 billion annually. Yet despite virtually unlimited access to federal loans and the availability of a generous IDR program, policymakers have done little to prevent institutions from offering high-cost programs and those that consistently leave students with high debts relative to their incomes.
To inform the future development of quality assurance policies, we analyze debt and earnings data in the Department of Education’s College Scorecard for master’s degree programs. Calculating a debt-to-earnings ratio for each type of master’s degree, we find:
- Master’s degrees in social work, counseling, and mental health are the most common among those with high debt-to-earnings ratios, accounting for about half of master’s degrees with the highest debt-to-earnings ratios. Music and fine arts degrees are also prevalent among programs where graduates have high debts relative to their incomes, but these programs are generally small and only account for 7 percent of high debt-to-earnings programs overall.
- Some master’s degrees that policymakers often worry lead to unaffordable debts but are socially valuable, such as those in teaching and nursing, are far less likely to result in high debt-to-earnings ratios than other masters’ degrees. Debt-to-earnings ratios for teaching are in line with what is typical for master’s degrees generally, and nursing degrees tend to result in some of the lowest debt-to-earnings ratios.
- Private non-profit institutions are heavily overrepresented among master’s degree programs that lead to high debt-to-earnings ratios and account for nearly 80 percent of the master’s degrees that result in the highest debt-to-earnings ratios.
- Black and Hispanic students are overrepresented in programs with the highest debt-to-earnings ratios, as are women. The share of students in high debt-to-earnings master’s degree programs who received Pell Grants as undergraduates because their families have low or moderate incomes is, however, similar to the share among the overall population of master’s degree recipients.
- A quality assurance policy that sanctions programs where graduates' debt exceeds their early-career earnings would affect nearly one in four master’s degree recipients who borrow. A higher debt-to-earnings limit, such as one that sanctions programs with debt that exceeds 150 percent of early-career earnings would affect programs that enroll about 7 percent of master’s degree recipients.
- Reinstating the $20,000 annual limit on federal student loans for graduate students could affect about half of master’s degree programs, including many with low debt-to-earnings ratios. A $30,000 annual limit would better target programs with the highest debt-to-earnings ratios but would still affect many master’s degrees in high-earning health care fields.
Although federal loan policies increase access to graduate degrees and the economic payoff they provide, these policies also entail risks for both students and taxpayers. The College Scorecard provides a new source of information that policymakers can use to determine where those risks are greatest and gauge the potential effects of quality assurance policies that target programs where borrowers take on high debt relative to what they can expect to earn with their degrees.