Phi Beta Cons

What Caused the Grad School Debt Crisis?

Per Jane’s post below, it’s hard to avoid the conclusion that bad policy created the increase in graduate school debt found in the new NAF (New America Foundation) report.

First, most of the increase occurred between 2008 and 2012, after a 2006 law eliminated the cap on borrowing from the federal government for grad students. It looks like the Bennett hypothesis is at work here: the government’s decision to offer more money to student borrowers was quickly followed by a massive spike in student debt.

What’s more, income-based repayment and student loan forgiveness policies can encourage students to take on additional debt by providing an opportunity to avoid paying it back. Jason Delisle, one of the NAF study’s authors, wrote about a program by which Georgetown Law quite explicitly takes advantage of federal loans and income-based repayment to educate students on the taxpayer’s dime. As more graduate and professional schools get wise to this loophole, the problem is likely to get worse.


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