Is there a student loan debt problem?

Master's degree edition

Dec 05, 2023

In Is there a student loan debt problem? Undergraduate edition I provided an overview of undergraduate student loan debt. In general, I found that undergraduate student loan debt was not a major issue. The debt was reasonable for the majority of students, with a few exceptions and concerns. In this piece, I'll present a breakdown of the debt incurred as a result of earning a master's degree.

A few words regarding the data from the United States Department of Education's College Scorecard. The data is compiled from the 2017–2018 and 2018–2019 academic years, and it includes students who earned a master's degree during those times. The data includes earnings after graduation, which contributes to the lag. In a later piece, I'll go over some of this. Similarly to the undergraduate data, we have median debt for each school but no information on the spread around the median. Unlike the undergraduate data I discussed, we have debt broken down by degree type for master’s degrees.

I classified the degree kinds in the graphs below by the total number of students who completed the program from all schools. Because I could only accommodate roughly 10 boxplots per graph, I determined the cutoffs based on the number of students. I provide the top 40 programs based on total student enrollment during a two-year period. Each graph includes the institution with the highest median debt as well as the total number of students enrolled in the program along the bottom. The median debt by school does not include any parent loans or student debt from undergraduate studies. It is solely the federal debt that students have accumulated as a result of their master's degree.

I'll make a few observations about each of the graphs below, but here's my general conclusion. In some circumstances, students incur significant debt that is questionable. Is this a problem? I’m going to lean on the side of no. I'm concerned about 18-year-olds incurring too much debt to attend college since they may not understand the consequences. Students entering graduate school, on the other hand, are at least 22 years old and have completed an undergraduate degree. I have less sympathy for them if they make bad financial decisions, and some of the big debt you'll see here was not necessarily a bad financial decision. I need to go further into the pay data to understand this better, and I will do so in the future.

The majority of the debt here appears to be reasonable to me. Except in a few situations, the median salary by school is less than $50,000, and in many cases, it is less than $25,000. Outliers pique my interest and demand closer examination. For example, the median debt for a student with a master's degree in social work from the University of Southern California is approximately $125,000. That makes no sense to me and does not appear to be worthwhile. At the same time, there are a number of colleges where the average student with a social work degree has around $75,000 in debt. How about a nursing degree with a debt of more than $100,000? There are several outliers in the nursing field. Why? Is it worthwhile?

The median debt of an MBA student at Roseman University of Health Sciences, on the other hand, is approximately $225,000. That seems like a lot, but if these students end up managing, say, a hospital, the debt may be justified. The Allied Health, Diagnostic, Intervention, and Treatment Professions is another category that caught my interest. The median debt per school is above $100,000, but I'm assuming they are highly specialized degrees that may or may not pay off.

Programs with between 6,500 and 13,300 students

Again, the majority of school median debt is less than $50,000. In general, the debt appears manageable, but there are certain outlier cases worth investigating. Is it really worth it to attend NYU for a master's degree in Student Counseling and Personnel Services, where the median debt is $100,000?

It is worth noting that Nova Southeastern University has been the top outlier in four of the top 20 majors by enrollment. This appears to be a dubious distinction for a non-profit university. Strayer University appears four times in the top 20 and once more below. Strayer University is a for-profit institution. Does it make a difference? Are these schools exceptionally good and worth the additional debt?

Programs with 2,800 to 6,500 students

Everything I've said thus far applies to these smaller programs. Generally speaking, it seems that as the number of students involved in a program decreases, the outliers come down. There are only a few examples where the typical school debt is about $100,000. Is this a case of supply and demand, or are certain programs less expensive for another reason? It would seem that if a lot of students are interested in a degree, then some colleges can charge more.

At this point, I have nothing new to say here. I could keep going with these graphs, but the number of students involved in the programs is getting smaller and less influential on overall student debt.

Some final thoughts

As I try to answer the question, Is there a student debt problem? in general, I'm a no. When people discuss the student loan crisis, they frequently cite two pieces of information. The first is total student debt. A quick use of google and you’ll find something like this from USA Today (11/1/2023)

The crisis of student loan debt in the U.S.
Total student debt in the U.S. has nearly tripled in the past 15 years, from more than $619 billion in quarter one of 2008 to more than $1.77 trillion in quarter one of 2023, according to the Federal Reserve.
With this debt rising as average wages have fallen, many borrowers struggle to repay their student loans and are unable to pursue other life goals, such as buying a home or starting a family. Delinquencies and defaults on student loans are also more common compared to other types of debt.

There are several issues here. First, this does not appear to be adjusted for inflation. More students have attended college in the last 15 years; hence, this figure should be expressed in terms of debt per student rather than total debt. As always, there are other factors. Also, be suspicious of assertions like "many borrowers struggle." How “many” is a lot? Are these undergraduates or graduate students?

Another thing you'll see are case studies like this one from the Guardian (10/8/2023), which is the first paragraph:

I owe $120,000 to the American government, which I accrued chasing the American dream. Yes, I am yet another person who was taken in by the predatory lending practices of student loans.

If you simply read this far, you might conclude that this person was taken advantage of. However, if you go halfway through the article, you will find the following:

I have completed my graduate studies in writing at an Ivy League. I was awarded many scholarships. I was given fellowships. I went to school on a Pell grant and at 25 I began to teach undergraduate classes at Columbia. At 27, I became a New York Times-bestselling editor at a big five publisher, which is almost unheard of. At 28, I have a novel coming out that people are “anticipating”.

This person completed graduate work at an Ivy League, possibly a Ph.D. It's difficult for me to believe that this person was the victim of predatory lending. They could have made different decisions. In a future post, we'll check into Ph.D. debt to determine if this $120,000 is reflective of graduate writing debt or not. I'll close with this Data Rule: Ask - Is the story representative of the data?

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Disagreeing and using comments

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