On a national basis, debt due to education loans has surpassed credit card debt, topping more than $1 trillion last year. With the largest portion of such debt attributable to undergraduate expenses, schools are concerned that education debt has had an effect on enrollment in graduate programs. According to experts, like Daniel Denecke of the Council of Graduate Schools, this problem has moved the discourse about student debt “out of institutional financial aid offices and into the larger discourse on graduate scchool reform.”
Today, more than ever, undergraduate students are leaving school — with and without degrees — saddled with student loan debt. At the turn of the 21st century, around half of all students graduated from college with some debt. These days, the total is much closer to 65 percent. Graduate enrollment in all programs but health sciences is down this year, for the second year in a row. Graduate school observers believe that the decline is due largely to undergraduate debt load and a reluctance among graduates to take on more education debt to attend graduate school… especially in a less-than sunny job market.
A financial services firm that manages the Section 529 plans for a number of states, TIAA-CREF, along with the Council of Graduate Schools, has announced a plan to study student debt loads. As part of the collaborative study, financial literacy programs will be implemented for students at several campuses throughout the U.S. The hope is that the organizations will be able to gather sufficient data to develop a collection of best practices, which can then be shared broadly with other institutions to help them keep their own students’ debt load at more manageable levels.
Discussing the amount of debt that graduate students may incur is a conversation that requires acknowledgement of undergraduate debt, according to A. Jerald Ainsworth, dean of University of Tennessee – Chattanooga’s graduate school. Ainsworth believes that debt-free undergraduates enter graduate programs at twice the rate of those who graduate with loan payments attached to their bachelor’s degrees.
One thing that University of Tennessee – Chattanooga is doing to try and combat the massive debts that students are accumulating is encouraging them to live more frugally (not a bad idea, eh?) through a campus-wide initiative. The 2012-2013 academic year is the second for UTC’s “Live Like a Student” initiative. Using the stereotypes of poor college students as paragons of frugal virtue, the university is encouraging its students to live within their means. The program is trying to instill a foundation of financial literacy in UTC students that will help them make decisions about borrowing; ideally it will help them borrow no more than they actually need.
Even though schools like Tennessee-Chattanooga have dedicated financial aid advisers to help graduate students with their needs, such students often must deal with financial challenges that they didn’t face as undergrads. Many graduate students, for example, are married and may have families to support; given the cost of attending graduate school and the relatively meager wages made by teaching and research assistants, many grad students use student loans to supplement their incomes for living expenses.
It is at this juncture that a problem becomes apparent. Aggregate borrowing for graduate students is capped at just under $140,000 for the length of their programs (imagine 7 years of med school…). The subsidized portions of such loans are limited to around $65,000. For older students who are trying to go to school and support a family, the math simply doesn’t work. They can’t borrow enough to cover tuition and living expenses during the course of their graduate studies.
This has led some academics to press for an increase in the borrowing limits for graduate school. But then what? The debt loads for graduate students would just be even more astronomical after completion of their studies. It’s a solution that may decrease grad school attrition rates but does little to solve the problem of student debt overall. Once again, we see a situation where the cost of attending school is outpacing all other economic factors that go into process of deciding whether to attend college, let alone a grad program.
It is possible that many students — graduate and undergrad, alike — are borrowing more than they need to and living less than frugally. This is probably a more fair assessment of students maxing out their loans at public and community colleges than private universities. However, the fact remains that the largest portion of the debt students are incurring is flowing back to the schools in the form of inflated tuition and fees.