Columbia University is among America’s most elite schools. Many believe that a graduate degree from Columbia or another Ivy League school will lead to financial security for life. But a recent investigation by Wall Street Journal reporters Melissa Korn and Andrea Fuller shows that this perception, so eagerly cultivated by universities, is a fiction.
Master’s-degree students at Columbia and many other elite schools take on hundreds of thousands of dollars in student-loan debt. Yet after they graduate, too many find that the degree did not open the doors promised. The existence and scale of these subpar graduate programs is tied to irresponsible federal lending practices, which extend unlimited lines of credit to graduate students with no regard to their ability to repay.
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 labor market, their median salary is just $30,000 — less than one-sixth of the debt they took on. Few, if any, of those students will fully repay what they borrowed from taxpayers.
“There were 55 students in my incoming class at Columbia’s MFA Film program,” says former student James Stoteraux. “Only 4 of us ever managed to make a career out of it. . . . Columbia traded on its reputation to sell them big dreams that it could never deliver.”
Fueled by federal aid, master’s-degree programs have become profit centers for elite universities. Ivy League schools coast off their selective undergraduate programs, which earn the schools top spots on the U.S. News & World Report college rankings. They leverage this prestige to churn out graduate degrees that would make many for-profit colleges blush.
The strategy has paid off. During the 2019-20 academic year, Columbia collected $268 million in federal loans on its graduate programs. The undergraduate schools, on which Columbia built its reputation, only supplied $16 million in federal loans.
Columbia officials have even admitted to the scheme. The school’s vice provost for academic programs says that master’s degrees “can and should be a revenue source,” according to the Wall Street Journal report. The cost of that business model falls on students, who are responsible for paying off the debt, and taxpayers, who inevitably will be stuck with part of the bill when the government forgives the loans that students can’t pay.
There’s only one way to solve this problem: Defund Columbia and other elite institutions guilty of this practice. End the federal loans for graduate schools that have enabled the Ivy League master’s-degree racket to go on for so long.
Congress originally created the federal student-loan program to help low-income students afford college. But student loans have transformed into a welfare program for rich universities. Graduate loans now account for two in five loan dollars issued by the federal government. That has not happened by chance; it is the result of deliberate policy changes.
Created in 2006, the federal Grad PLUS program allows graduate students to borrow an effectively unlimited amount from the federal government, provided they attend an accredited college or university. After taking on the debt, students are allowed to pay it back through income-based plans, where payments average just $154 per month. Ten or 20 years after a borrower starts payments, any remaining debt is canceled.
The Congressional Budget Office estimates that 60 percent of the loans issued in 2021 and repaid in this manner will eventually be forgiven. Internal Education Department documents suggest that over $400 billion of the federal government’s loan portfolio will not be repaid. To be sure, students themselves will be responsible for paying a lot as well. But colleges and universities are running away with the profits.
Congress could put an end to this with one simple policy change: Stop supporting graduate programs with federal loan dollars.
There’s a reasonable economic justification for federal lending to undergraduate students, since most have no credit history to speak of and might need government help to get a loan. But that argument generally does not apply to graduate students, who are in their 20s and 30s. The economic rationale for a federal graduate-loan program is nonexistent.
Indeed, there was a thriving private market for graduate loans — one that could be engaged once more — before Grad PLUS arrived on the scene. Students who needed to borrow large amounts for a high-value degree, such as medical students, could almost always secure private funding, and usually at a lower interest rate than the federal government offered.
But programs with outrageous tuition costs and meager earnings payoffs would have a hard time pocketing funding from a private lender that cannot simply pass losses on to taxpayers, as the federal government can. Only the presence of federal graduate loans, with their heavy implicit subsidies, makes high-cost, low-value programs possible on a large scale.
Problems are best solved by removing their root causes. Defunding Columbia and other graduate schools is the most effective way to rescue graduate students from unaffordable debt and taxpayers from the burden of cleaning up the mess.