End Federal Graduate Loans | National exam

Columbia University campus in New York in 2009. (Mike Segar / Reuters)

Federal loans for high-cost, low-value graduate schools have allowed the Ivy League mastery racquet to thrive.

VSuniversity of olumbia is among the most elite schools in America. Many believe that a graduate degree from Columbia or another Ivy League school will lead to lifelong financial security. But one recent survey through the Wall Street newspaper reporters Melissa Korn and Andrea Fuller show that this perception, so avidly cultivated by universities, is fiction.

Masters students at Colombia and many other elite schools incur hundreds of thousands of dollars in student loan debt. Yet, once graduating, too many people find that the degree has not opened the doors it promises. The existence and scale of these below-average graduate programs is tied to irresponsible federal lending practices, which extend unlimited lines of credit to graduate students regardless of their repayment capacity.

Students in Columbia’s Master of Fine Arts in Film program typically accumulate $ 181,000 in federal debt, according to the report. But when they enter the workforce, their median salary is only $ 30,000, less than a sixth of the debt they have incurred. Few, if any, of these students will fully repay what they borrow from taxpayers.

“There were 55 students in my class entering Columbia’s MFA Film program,” says former student James Stoteraux. “Only 4 of us made it into a career. . . . Columbia leveraged her reputation to sell them big dreams that she could never achieve.

Fueled by federal aid, master’s programs have become profit centers for elite universities. Ivy League schools are ending their selective undergraduate programs, which earn them the top spots on the American News and World Report college rankings. They leverage that prestige to produce graduate degrees that would make many for-profit colleges blush.

The strategy paid off. During the 2019-20 academic year, Columbia raised $ 268 million in federal loans on its graduate programs. The undergraduate schools, upon which Columbia has built its reputation, provided just $ 16 million in federal loans.

Columbia officials even admitted to participating in the scheme. The school’s vice-provost for academic programs said master’s degrees “can and should be a source of income,” according to the the Wall Street newspaper report. The cost of this business model falls on the students, who are responsible for paying down the debt, and on the taxpayers, who will inevitably be saddled with part of the bill when the government cancels loans that students cannot repay.

There is only one way to solve this problem: Defund Columbia and other elite institutions guilty of this practice. End the federal graduate school loans that have kept the Ivy League mastery racket going for so long.

Congress originally created the Federal Student Loans Program to help low-income students pay for their education. But student loans turned into a welfare program for wealthy universities. Graduate loans now represent two out of five loan dollars issued by the federal government. This did not happen by chance; it is the result of deliberate policy changes.

Established in 2006, the federal Grad PLUS program allows graduate students to borrow an effectively unlimited amount from the federal government, provided they are attending an accredited college or university. After taking on the debt, students are allowed to repay it through income-based schemes, where payments on average are only $ 154 per month. Ten or 20 years after the start of a borrower’s payments, any remaining debt is canceled.

The Congressional Budget Office estimates that 60% of loans issued in 2021 and repaid in this way will be to be finally forgiven. Department of Internal Education documents suggest that more than $ 400 billion in the federal government’s loan portfolio will not be repaid. Of course, the students themselves will also be responsible for paying a lot. But colleges and universities are running away with the profits.

Congress could end this with a simple policy change: stop supporting graduate programs with federal loans.

There is a reasonable economic rationale for federal undergraduate student loans, as most have no credit history to speak of and may need government assistance to secure a loan. But this argument does not generally apply to graduate students, who are between 20 and 30 years old. The economic rationale for a federal graduate loan program is non-existent.

Indeed, there was a flourishing private market for graduate loans – one that could be hired once again – before Grad PLUS arrives on the scene. Students who needed to borrow large sums for a high-value degree, such as medical students, could almost always obtain private funding, and usually at a lower interest rate than offered by the federal government.

But programs with outrageous tuition fees and meager earnings would struggle to pocket funding from a private lender that can’t just pass the losses on to taxpayers like the federal government can. Only the presence of federal graduate loans, with their heavy implicit grants, makes costly and low-value programs possible on a large scale.

Problems are best solved by removing their root causes. Funding from Columbia and other graduate schools is the most effective way to save graduate students from unaffordable debt and taxpayers from the burden of cleaning up the mess.

Preston Cooper is a researcher at the Foundation for Research on Equal Opportunities.


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