In recent years, graduate degree programs—particularly those at prestigious private universities—have come under scrutiny for leaving students with large amounts of federal student loan debt and relatively low earnings.
Although this media coverage has focused on only a handful of institutions and programs, our broader analysis finds that private nonprofit institutions are overrepresented among graduate programs with high debt-to-earnings (DTE) ratios. We find just three degree types—social work; clinical, counseling, and applied psychology; and mental and social health services—account for nearly half of these programs.
Future policy reforms that restrict graduate lending would most likely affect these programs and nonprofit institutions the most. But degrees in these fields aren’t all fated to produce high debts. Other institutions, mainly public universities, manage to offer them with much lower loan burdens. As such, policymakers and universities could examine why these degrees cost more at private nonprofit institutions and consider whether public universities can play a greater role in offering them.
Defining high debt-to-earnings programs
To conduct our broad analysis, we calculated a DTE ratio for all master’s degree programs that have data reported in the College Scorecard using median earnings two years after graduating and the average loan disbursement among completers. We then identified the 10 percent of programs with the highest DTE ratios. We also accounted for the number of borrowers a program enrolls, so larger programs are weighted more heavily in the results than smaller programs.
The highest DTE group has an average debt of about $77,000 and average earnings of $43,200. Monthly payments on the typical loan balance for the high-DTE group using a level 10-year repayment term would be about $855, meaning borrowers would have to spend more than 40 percent of their discretionary income to support the debt. In reality, many of these borrowers will use the federal income-driven repayment (IDR) program, which could cut their monthly payments to about $200 dollars and result in large unpaid balances forgiven at the end of their repayment terms.
Programs with high debt and low earnings
Programs in the high-DTE group are heavily concentrated at private nonprofit universities. Although these institutions offer 44 percent of all master’s degree programs, they account for 75 percent of high-DTE programs. Private for-profit institutions, which have also been the subject of critical media reports, provide 15 percent of master’s degrees but account for 12 percent of the high-DTE programs, making them slightly underrepresented.
We also see the prevalence of high-DTE programs at nonprofit institutions when looking at programs by sector. About 17 percent of master’s degree programs offered at private nonprofit institutions fall in the high-DTE group, yet only 8 percent of programs at private for-profit institutions and 3 percent of programs at public institutions do.
By looking at specific program types, we see that three types of master’s degrees account for a large share of borrowers in the high-DTE category: social work (17 percent); clinical, counseling, and applied psychology degrees (15 percent); and mental and social health services (12 percent). Many other programs make up the remainder of the high-DTE category, but each account for only a small share.
These data don’t indicate that social work, applied psychology, and mental health services degrees always result in large debts relative to graduates’ earnings, as 46 percent of mental and social health services programs and 78 percent of social work programs fall outside the high-DTE group. Many of these programs with lower DTE ratios are offered at public universities, and debt burdens for students who earn these degrees at public universities are often $20,000 to $30,000 lower than those of students at private nonprofit universities, while typical earnings are nearly identical.
Notably, tuition for these degrees is much lower at public universities. Tuition for a master’s of social work at a public university is typically about half what private nonprofit institutions charge.
Policy implications and avenues for reform
Most of the debt for these degrees is issued by the federal government, and there’s no limit on how much students may borrow. Programs where graduates’ debts far exceed their incomes are not sanctioned or restricted either. Although students are largely protected from unaffordable debts with the IDR program, its cost has grown rapidly and now totals about $8 billion annually, with debt for graduate and professional degrees accounting for about two-thirds of the total.
Rising costs in IDR combined with media attention on high-debt graduate degrees could pressure policymakers to limit lending at institutions with high debts and relatively low earnings. The effects of such policies would be largely concentrated among master’s degree programs in social work, mental health, and counseling, especially those at private nonprofit institutions. For programs to remain viable under more-restrictive lending rules, these institutions will need to find ways to limit the cost of the degrees. Policymakers and university leaders can also consider how public universities could serve additional students in these fields, as they’re able to provide the credentials at substantially lower prices than their nonprofit peers.