To Curb Student Debt, Let Borrowers Declare Bankruptcy: Allison Schrager
Education can be the best investment you make, unless it's for graduate school. Students seeking advanced degrees make up only 25% of student borrowers, yet they account for nearly half of outstanding student loans.
Many Americans feel they have no choice but to keep pursuing more education after they graduate from college. There was a time when that first degree was enough to ensure a good job. But degree inflation compels many graduates to keep going, even if that second degree puts them into debt and doesn't always offer great value. Since 2000, the number of master's conferred jumped nearly 80% compared with a rise of 55% for bachelor's.
Here's one way to break that debt cycle: Allow graduate students to discharge their loans in bankruptcy.
The average debt load for master's candidates is about $70,000, almost double the $36,000 for undergrads. Getting an undergraduate degree offers no guarantees either, but the payoffs are generally better. The median salary for college graduates is almost 65% higher than for those who only complete high school.
After that, though, there are diminishing returns to education, with a masters degree lifting wages roughly just another 20%. Unlike undergraduate schooling, advanced degree programs promise to train students for work in a specific field. Many graduate degrees do pay off, especially for certain professional schools (such as business) or in STEM fields. Health and medicine graduates more than double their lifetime earnings. But that's far from the case for other programs. Some degrees can transform your career while others are just unnecessary and expensive.
Despite these different payoffs, the cost of a year of graduate school is pretty much the same no matter what's being studied. A year of tuition and fees for a Masters of Fine Arts at Columbia (a two-year degree) is about $73,000. The cost of a year of Columbia business school (also a two-year degree) is $86,000, which, considering the big lifetime earnings differential between MBAs and MFAs, is not a large difference.