Bloomberg View: It Shouldn't Be So Easy to Go to Grad School, by Megan McArdle:
Universities are milking the huge loan sums from grad students to subsidize the cost of undergraduate degrees. This system is broken.
Almost 20 years ago, when I was applying to MBA programs, the conventional wisdom was that unless you could get into a top-10 program, 1 you probably shouldn’t go. The tuition at a high-ranking program was steep (I would eventually graduate with nearly $100,000 in debt), but if you managed to get in, recruiters for six-figure jobs would swarm onto campus and practically beg you to work for them.
The tuition at lower-level schools was also very steep, but students had to frantically labor to secure a job afterwards. Some found jobs that were no better than the jobs they’d left to go to business school. The lower the ranking of the school, the less value the graduates got out of their degree, until you got down to programs that seemed to mostly be run for the benefit of the university that was collecting the tuition check.
Business schools, like law schools, are cheap to operate. No expensive labs, no distant fieldwork. Just a room, a blackboard, some chairs and a professor. And for this, students were willing to pay very handsomely. So these programs became cash cows for the universities.
There is a limit, of course, to how sorry we should feel for people who borrowed lots of money for a graduate degree, and found that it wasn’t a surefire ticket to easy prosperity. I am sympathetic to those people; indeed, I am one of those people. 2 But people with graduate degrees, even not-very-useful-ones, are more affluent, more educated and more skilled than the general population. We should not exaggerate the tragedy of their fate simply because they are more like most of the readers of this article than is an unemployed welder in Flint.
We should, however, be concerned because the cost is spreading. Having finally reached the limits of American parents to bear ever-increasing bills for undergraduate tuition, struggling colleges are now turning to graduate programs to fund their operations. Indeed, schools often encourage graduate students' naïve faith, painting a rosy picture of future employment prospects that is, to say the very least, highly selective. ...
In time, of course, prospective graduate students may wise up (as seems to have already happened at low-ranked law schools whose graduates had dismal employment prospects). But in the meantime a lot of damage can be done. And if the master’s degree simply becomes “the new BA,” then we may all end up stuck on a treadmill of degree inflation and higher tuition bills in order to get the same old jobs.
Personally, I’d like to see the government get out of the student loan business entirely; I suspect that one reason college now costs so much is simply that it can, thanks to unsecured government loans that cover the growing gap between tuition cost and parental means. But short of such radical reforms, we should consider capping graduate school loans at something close to the caps on the loans made to financially independent undergrads.