Many Master's Programs Leave Grads Short on Earnings to Pay Off Loans

Summary

WSJ Your Money Briefing
Episode: Many Master's Programs Leave Grads Short on Earnings to Pay Off Loans
Date: July 9, 2021
Host: J.R. Whalen
Guest: Melissa Korn, Higher Education Reporter, The Wall Street Journal

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Episode Overview

This episode confronts the troubling reality that many students graduating from prestigious universities' master's programs are burdened with student debt vastly outstripping their early-career earnings. Host J.R. Whalen talks with WSJ higher education reporter Melissa Korn, drawing on a new analysis of federal student-loan data to uncover why graduate students are particularly affected, which degrees are most problematic, and what might be done to address the situation.

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Key Discussion Points and Insights

1. The Scope of the Problem (01:47–03:20)

• Growing Debt Load for Master’s Students: Whalen and Korn explore an analysis of Education Department data, revealing distressing trends among recent master’s graduates.
  • Prestigious universities that invest heavily in undergrad aid often direct grad students towards federal loans instead.

    “Graduate students at a number of master’s programs at Ivy League schools...were really struggling under the weight of the debt that they had taken on to pursue these degrees.”
    —Melissa Korn [02:53]

  • Many master’s graduates are not making progress repaying loans even two years after graduation.

2. Stark Examples of Debt vs. Earnings (03:24–04:06)

• Columbia University’s Film Program:

  • Median federal loan debt: $181,000
  • Median earnings two years after graduation: under $30,000
  • This means some students borrowed six times what they earn shortly after finishing.
  • Financial counselors recommend not borrowing more than expected starting salary—a standard being ignored here.

  "They took out roughly six times as much as they were earning early on. Debt counselors recommend that you not borrow more than you'll make at the beginning of your career, period. So they very much failed that test."
  —Melissa Korn [03:54]

3. Which Degrees Are Worst Off? (04:12–04:58)

• Fields with Highest Risk:

  • Arts, counseling, social journalism, occupational therapy, where earnings potential is low but debt is often high.
  • Some health fields (e.g., occupational therapy at Columbia) also involve higher borrowing than earning, counter to expectations.

  "Some of these, you're just really never going to be earning six figures. But these students are taking on well into the six figures in loans."
  —Melissa Korn [04:36]

4. Unlimited Borrowing for Graduate Students (05:03–05:48)

• Why Can Grad Students Borrow So Much?

  • No federal loan caps for master’s programs; students can borrow up to the “cost of attendance,” set by the school and including tuition plus living expenses.
  • This system, unlike undergrad loan limits, lets grad students dig deep holes—without school accountability for poor results.

  "You can borrow every single dollar of it. And there's no consequence to the schools if these master's graduates don't pay off the debt, but someone's left paying the bill at the end—and that's the taxpayers."
  —Melissa Korn [05:38]

5. The Taxpayer Burden (05:48–06:44)

• Loan Forgiveness and Public Cost:

  • Many grads use income-based repayment plans; low earnings mean minimal or no required payments, allowing debt (and interest) to snowball.
  • Ultimately, taxpayers may cover large amounts through loan forgiveness.
  • Example: $11.2 billion in Grad PLUS loans issued for 2019–2020 alone.

  "We're looking at many, many billions of dollars that these students likely will never repay that taxpayers are on the hook for."
  —Melissa Korn [06:35]

6. Emotional Impacts on Graduates (06:48–08:17)

• Widespread Anxiety and Regret:

  • Many grads face ballooning loans, anxiety, embarrassment, or regret over their decisions.
  • Until recently, students couldn’t access reliable outcome data for their specific programs—many "went in blind."
  • Dreaming of the American Dream ends with debt pushing adulthood milestones further away.

  "Some of these people are mortified that they ended up in this situation... This was supposed to be kind of my path to the American dream, right?... And now all of those markers of adulthood, parenthood, marriage, homeownership, just seem even further out of reach."
  —Melissa Korn [07:47]

7. University Responses (08:17–09:29)

• Limited Financial Aid and Endowment Constraints:

  • Schools assert their endowments are committed to specific purposes and can’t simply be used to boost grad aid.
  • Master's programs serve as substantial revenue sources; more scholarships would mean less income for the schools.
  • Universities say they try to inform students, but still maintain that the degrees will "likely pay off" in the long run.

  "They acknowledge that master's programs do provide a really valuable source of revenue for the institutions. So the more money they give in scholarships, the less revenue they'd be getting..."
  —Melissa Korn [08:57]

8. Potential Solutions (09:29–10:22)

• Policy Proposals:

  • Possible introduction of federal borrowing limits for graduate students (similar to undergrad limits) to control soaring debt.
  • This may force schools to reconsider high tuition rates.
  • Such measures could prevent students from getting into untenable debt, but impact on schools' revenue streams is unclear.

  "If the Department of Education said we're going to limit... how much you can borrow for graduate programs... students could only get in so much financial trouble."
  —Melissa Korn [09:42]

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Notable Quotes

• On the stark disconnect between debt and earnings:

  “They took out roughly six times as much as they were earning early on. Debt counselors recommend that you not borrow more than you'll make at the beginning of your career, period.”
  —Melissa Korn [03:54]

• On how schools are shielded from consequences:

  "There's no consequence to the schools if these master's graduates don't pay off the debt, but someone's left paying the bill at the end—and that's the taxpayers."
  —Melissa Korn [05:38]

• On the personal toll for borrowers:

  "Some of these people are mortified that they ended up in this situation... this was supposed to be my path to the American dream."
  —Melissa Korn [07:47]

• On colleges’ rationales for limited aid:

  "They acknowledge that master's programs do provide a really valuable source of revenue for the institutions."
  —Melissa Korn [08:57]

• On possible policy solutions:

  "If the Department of Education said we're going to limit and you can only borrow X amount of dollars for graduate programs... students could only get in so much financial trouble."
  —Melissa Korn [09:42]

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Key Segments & Timestamps

• [01:47] — Introduction to new data and scope of the problem
• [03:24] — Columbia film program as a case study in debt vs. earnings
• [04:12] — Discussion of degree types most affected
• [05:03] — Explanation of unlimited graduate borrowing
• [05:48] — Public/taxpayer burden highlighted
• [06:48] — The emotional impact on indebted grads
• [08:17] — University responses to the issue
• [09:29] — Policy changes and potential solutions

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This episode shines a light on a growing and little-understood crisis: for many seeking advancement through graduate school, debt is deepening rather than opening the way to economic security. While policy fixes are discussed, the solution will likely require action from both universities and government.

Transcript

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[J.R. Whalen]

Here's your money briefing for Friday, July 9th. I'm J.R. whalen for the Wall Street Journal. For many students, acceptance into a graduate program at an Ivy League or top flight school can inspire hopes realizing the American dream. But in many cases, the amount of student debt they have to take on far outweighs what they'll be earning once they enter the workforce.

[Melissa Korn]

So at some of these schools, their tuition is very high. They're in big expensive cities. So the amount of money you need to just participate in that program is very high and you can borrow every single dollar of it. And there's no consequence to the schools if these master's graduates don't pay off the debt.

[J.R. Whalen]

So how are grad students finding themselves in this situation and what can be done about it? Coming up, we'll talk with our higher education reporter Melissa Korn. That's after the break.

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[J.R. Whalen]

We've talked on the show before about the weight that debt can put on college students, but that burden is especially heavy for students in graduate programs. Universities in recent years have awarded thousands of master's degrees that don't provide graduates enough early career earnings to begin paying down their federal student loans. Our reporter Melissa corn and the WSJ's higher education team have pored through education Department data on this and she's with us to talk about it. Melissa, thanks for coming on the show.

[Melissa Korn]

Thanks for having me.

[J.R. Whalen]

So, Melissa, tell us about the Wall Street Journal's analysis of this data. How bad is it that we're talking about and what were the key findings?

[Melissa Korn]

So overall for many programs or many students in many master's programs, the situation is pretty is pretty bad. We looked at debt loads at graduation and earnings two years after graduation, as well as repayment rates. So who's actually making progress on paying down their loans two years out for master's programs around the country? And we were pretty surprised to find that these programs at very prestigious universities, very wealthy elite universities where the schools really bend over backwards to provide financial support for their undergraduate students. But once it comes to graduate students, they're just kind of pointed in the direction of federal loans. So we saw that graduate students at a number of master's programs at Ivy League schools, at usc, at Northwestern, other really top schools, were really struggling under the weight of the debt that they had taken on to pursue these degrees.

[J.R. Whalen]

Now, what kind of dollar figures are we talking about that these graduate students are racking up?

[Melissa Korn]

The most egregious example we came across is Columbia's film program. So they have a Master of Fine Arts and also a Master of Arts in Film and Media Studies. And the numbers for both of those are combined in the Education Department data. And their recent graduates who borrowed federal loans borrowed median $181,000. And two years after graduation, they were earning. The median earnings figure was under $30,000. So they took out roughly six times as much as they were earning early on. Debt counselors recommend that you not borrow more than you'll make at the beginning of your career, period. So they very much failed that test.

[J.R. Whalen]

Now, is this gap between debt and earnings true for all types of degrees, or is it worse for some in particular?

[Melissa Korn]

It's definitely worse for some degrees. Right. So master's programs in the arts, in social journalism, counseling, those sorts of fields, you know, the. The payoff, the earnings potential just isn't very high, especially at the beginning of your career. Now, some fields, you know, you take on a lot of debt, but you're going to make a lot of money, or you'll eventually make a lot of money, or that, you know, the. The ideal path. But some of these, you're just really never going to be earning six figures. But these students are taking on well into the six figures in loans. There were some surprises, too, like some health fields, occupational therapy. At Columbia, the students take on quite a bit more debt than they earn at the beginning of their careers, and their salaries rarely go up significantly after that.

[J.R. Whalen]

Okay, so stepping back for a moment, how are grad students able to borrow so much money in the first place?

[Melissa Korn]

It's a really good question. Because there are loan limits for undergraduates. You can only borrow a certain amount when you're pursuing an associate's or bachelor's degree. But when it comes to master's degrees, those limits don't exist. And you can borrow up to what's called the cost of attendance. And that number is set by the school, and it includes tuition, fees and estimated living expenses. So at some of these schools, their tuition is very high. They're in big expensive cities. So the amount of money you need to just participate in that program is very high. And you can borrow every single dollar of it. And there's no consequence to the schools if these master's graduates don't pay off the debt, but someone's left paying the bill at the end and that's the taxpayers.

[J.R. Whalen]

Well, let's talk about that. Some of this graduate student debt ends up being forgiven by the lenders, which are often the government. How much of that eventually winds up being covered by taxpayers?

[Melissa Korn]

Yeah, it depends on who you ask. There's been a bunch of different estimates regarding how much in the whole the education department or the student loan program is. The federal government had a pretty RO forecast of who will actually repay their loans and how much they'll repay. And that's not proving true. So just to give you a sense here, people borrowed $11.2 billion in the school year that ended in 2020, the year ago school year that's just in grad plus loans. So billions and billions of dollars a year are being taken out in these loans and then interest accrues as they don't pay them back. So we're looking at many, many billions of dollars that these students likely will never repay that taxpayers are on the hook for.

[J.R. Whalen]

So until that happens, what have you heard from students who are saddled with these levels of debt?

[Melissa Korn]

So a lot of these students aren't making payments on their loans right now. Payment requirements were frozen during the pandemic. But even before that, these were people who are earning so little that their income based repayment plan requires them to pay $0. So, so they're not paying down the principal. The interest continues to accrue, so the loan balance is continuing to grow. They're getting deeper in the red. There is great anxiety among these students. Even if they know that eventually the remaining debt might be forgiven, it's still just hanging over them. There's panic, there's embarrassment. Some of these people are mortified that they ended up in this situation. They feel like they did something wrong or they made some wrong decisions. One of the challenges was up until very recently, they couldn't see the outcomes for their programs. This data that we used in our analysis here is really new. You couldn't tell what share of graduates in certain master's programs were repaying their loans before this. The schools didn't always share details of the job prospects or earnings outcomes for their own graduates. So a lot of students took on this debt. Little bit blind in terms of Whether or how they'd be able to pay it off eventually. You know, I had a lot of students say, you know, this was supposed to be kind of my path to the American dream, right? Going to an Ivy League institution. And now all of those markers of adulthood, parenthood, marriage, homeownership, just seem even further out of reach.

[J.R. Whalen]

And you know, over the years there have been calls for the schools themselves to increase aid to grad students. So what's the response from schools been to this issue?

[Melissa Korn]

A lot of these schools say, you know, yes, we have a large endowment, but much of it is accounted for already. It's already been spoken for. It's earmarked for different things. We can't just pull money out of this big pot. It's not one big pot. It's lots of small endowments for various purposes. So they say just pulling more money from the endowment isn't really an option. But yes, graduate students need more financial support. They say that they're trying to figure out how to offer more of that support. But at the same time, they acknowledge that master's programs do provide a really valuable source of revenue for the institutions. So the more money they give in scholarships, the less revenue they'd be getting from these programs. It's a complicated position that they find themselves in the graduate schools. And the universities also say that they try to inform students as much as possible before they enroll, give them all the details on the loan programs, make sure they understand the financial responsibility. But ultimately, you know, this is a degree from a top flight institution and it likely will pay off.

[J.R. Whalen]

So aside from school endowments footing the bill, are there any other potential solutions on the table to deal with this debt issue?

[Melissa Korn]

So a lot of policy folks talk about limiting the amount of debt that graduate students could take on. So right now, because there is no limit, they can just keep going further and further into the red for whatever expensive program it is. And sometimes these are five, four or five year programs. So they're accruing a lot of debt. So if the department of education said we're going to limit and you can only borrow X amount of dollars for graduate programs just the same way you can for undergrad, students could only get in so much financial trouble. The thing with that is schools likely would then have to recalibrate their tuition rates so that they're not expecting students to just borrow and borrow and borrow to cover the costs. Because people don't have 70 grand in tuition per year just sitting in their pockets.

[J.R. Whalen]

All right, that's our higher education reporter Melissa Korn. Melissa, thanks for coming on the show.

[Melissa Korn]

Thank you.

[J.R. Whalen]

And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.

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