Is Graduate School Worth the Price? – The Journal. – WSJ Podcasts

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This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Ryan Knutson: Matt Black grew up in Oklahoma, in a low-income family with parents who hadn’t gotten to college.

Matt Black : We grew up believing that education was inherently good. Getting an advanced degree was a respectable achievement. I didn’t know anybody in my entire extended family or friend group, or family, friends, or anyone who had gone to an Ivy league school. It was a like, sort of being an astronaut or something.

Ryan Knutson: But when he got accepted to Columbia University’s Master’s program for film, he jumped at it.

Matt Black : It’s just kind of the cliche of like wanting to do better than your parents did, wanting to make them proud, wanting to make something of yourself.

Ryan Knutson: And Matt says his dad was really excited for him.

Matt Black : And yeah, I remember asking my dad and he’s like, “you should do it. This is your dream. This is your dream school. You’ll figure it out, the financial part of it, out over the years go for it.”

Ryan Knutson: Uh huh.

Matt Black : So.

Ryan Knutson: So how much debt do you have now?

Matt Black : I have around $330,000.

Ryan Knutson: $330,000. That’s what Matt owes for his Master’s degree. He graduated in 2015. Today he lives in Los Angeles and he works in film. The industry he’s always dreamed about.

Matt Black : I’ve been lucky enough, for the last four or five years to subsist solely on writing and producing and that sort of thing, but just barely, it’s like a very month to month, year to year kind of scraping by.

Ryan Knutson: What’s happening with your debt right now? Have you been able to pay any of it off?

Matt Black : No. The principal is all still there plus a $100,000 in interest. So it’s been just ballooning. The idea of trying to pay the loans off. Feels like it, feels as much like being an astronaut as going to Columbia felt like in the first place, you know what I mean? It feels that, that of impossible.

Ryan Knutson: For Matt and other graduate students like him. The thinking has always been that if you get an advanced degree, you can get a higher paying job. But newly released data from the department of education shows that for a lot of graduates, that’s not actually happening. And yet many universities are still charging grad students more and more each year, leaving students with a massive bill.

Melissa Korn: Schools make decisions on where they put their money, what they invest in, who they give financial aid to, where they assign scholarships, and those choices have consequences. And here it seems that a lot of schools, a lot of very prestigious, wealthy schools, those consequences can be financial ruin for a lot of their graduates students.

Ryan Knutson: Welcome to the Journal, our show about money, business and power. I’m Ryan Knutson, it’s Thursday, July 15th. Coming up on the show, the rise of expensive master’s degrees that don’t pay off.
There’s a lot of talk about student debt, but one area that doesn’t get a lot of attention is graduate student debt.

Melissa Korn: For grad students that debt can easily creep well into the six figures, and they’re not even able to pay down a dollar of their loans and the loans just continue to grow.

Ryan Knutson: Melissa Korn covers higher education at the Wall Street Journal. And recently she and her colleague, Andrea Fuller started looking into a whole bunch of new data from the federal government. The data allowed Melissa and Andrea to calculate one specific number called the debt to earnings ratio, which compares how much debt a student has to how much money they’re making two years after they graduate.

Melissa Korn: If your not Paying down your loans. Two years out, some experts say you’re probably not going to be making progress, paying them down ever.

Ryan Knutson: Then they were able to sort the data by schools and even individual programs. And for some students, their degree did lead to higher earnings.

Melissa Korn: If you’re an anesthesiologist, it’s very expensive to go to med school, but you will make progress on your loans. You will eventually be able to pay them off because you’re going into a very lucrative career, but there’s all these other master’s degree programs out there in architecture and urban planning and film and creative writing and journalism and the payoff just isn’t there. And these are incredibly expensive programs.

Ryan Knutson: For some of those other programs. It seemed like the debt to earnings ratio was really off

Melissa Korn: I spoke with a number of students and they have 200, 300, $400,000 in debt. And they’re earning 40 grand a year.

Ryan Knutson: This situation has been getting noticeably worse.

Melissa Korn: Yeah. It’s not always been this bad in part because there used to be more limits on how much people could borrow.

Ryan Knutson: It used to be that when graduate students took out loans from the federal government, they can only take out so much. There was a cap on that debt, which by the way, is still how undergraduate debt works, but the rules changed in 2005. When Congress created the grad plus loan system, it was originally intended to make grad school more accessible.

Melissa Korn: It wasn’t just you can borrow 10 or 20 or $50,000 a year. It was, you can borrow whatever the school determines is tuition plus fees, plus living expenses. The general assumption was there shouldn’t be limits on these loans because the graduate degree will ultimately be a good thing for the students. They will lead to successful careers, good jobs, and these people will be able to pay off their loans.

Ryan Knutson: Out of this grad plus loan program came an unintended consequence. Not only were master’s students getting deeper in debt, but universities had no restrictions on how much they could charge turning these degrees into potential cash cows.

Melissa Korn: So over the past few decades, grad schools have increased the types of degrees they offer the number of spots in these programs. They’ve expanded significantly and tuition has increased significantly as well.

Ryan Knutson: And as tuition has gone up, students have been borrowing more and more money from the federal government. Sometimes six figures a year. With this new data, Melissa and Andrea started digging into which schools had the worst debt to earnings ratios.

Melissa Korn: We looked at what degree programs graduated students with just eye-popping numbers. So who was taking on a ton of loans, but not earning enough to really pay them back.

Ryan Knutson: And shen they ranked schools by this ratio, they noticed that the problems seem to be worse at more elite schools. And there was one masters program at one university that really stood out.

Melissa Korn: We found that Columbia’s master’s programs in film had literally the worst debt to earnings ratio of any major university in the country. So it’s the worst masters in terms of that calculation, that measure.

Ryan Knutson: For Columbia’s master in fine arts and film, the median debt is around $180,000 and the median annual earnings is less than $30,000. Columbia University is one of only eight Ivy league schools in the country. And when people think of Columbia, their first thought usually isn’t debt. It’s usually that it’s a place of elite scholarship.

Melissa Korn: It has a beautiful campus in Upper Manhattan, and it has renowned medical school and law school and business school, journalism school, all of that.

Ryan Knutson: And with the Columbia name on their diplomas, some students hope that this price tag will ultimately lead to professional success and Columbia markets this message, like in promotional videos for its film MFA.

Speaker 4: If you are interested in making television and you come to Columbia, you’re going to get a lot of help and you’ll come out with pilot scripts, with an actual portfolio, that’s ready to get your work in television. And there are jobs in TV.

Melissa Korn: Yeah. They don’t use words like guarantee. They know better than that. They recognize that there’s no such thing as a guarantee, but we will expose you to experts and we will make those connections for you. And we will give you exposure to the decision makers in the field, and we will give you all of the tools you need. And that’s a pretty good pitch.

Ryan Knutson: The problem is that the data shows that for some Columbia graduates, they don’t actually make more money than those who went to less expensive…

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