Grad Students Bear the Big Burden

Photograph by Tim Klein/Gallery Stock

Pick a random article about the the ballooning student debt in the U.S., and there’s a good chance the borrowers profiled in the story—the ones with the largest looming balances—took out their loans to pay for graduate school. We at Bloomberg Businessweek are not immune to this journalistic phenomenon, nor are most other publications.

New data reported by the New America Foundation show that perhaps we journalists are right to focus on grad students. Policy analyst Claire McCann put out two charts showing how graduate students make up a fifth of all students who borrowed last year, but because their loans are so large, they account for more than 40 percent of all new debt. McCann’s data doesn’t say which grad students are racking up the debt, but it’s probably safe to say they’re mostly in professional programs at business, law, and medical schools, which have higher price tags and are less likely to provide funding and stipends than, say, a PhD program in sociology.

The biggest portion comes from the standard federal loans for graduate students, which can run up to $20,500 a year for almost any grad student, up to a cumulative total of $138,500. A smaller portion comes from Graduate PLUS loans, which have higher interest rates but no cap at all. Grad PLUS loans are available to almost any student who doesn’t have an adverse credit history. It’s worth noting that graduate students are much less likely to default (pdf) than undergraduate borrowers.

It’s easy to lump grad student debts in with stories about rising tuition and declining state funding for undergraduates. For example, when President Obama unveiled his big new push to tie financial aid to various performance measures, such as dropout rates, he spoke about the trillion dollars in outstanding student loans. While that total is for both undergrads and graduate students, the White House spoke almost exclusively about “colleges.” Obama’s seemingly off-handed comment that law school could be shorter may be the main exception.

These are different students bodies demographically, and their education serves different purposes, both personally and in society. Proposals to tackle the more than $1 trillion in outstanding student debt need to address the the fact that not all borrowers are the same.

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