Last month the Center for American Progress (CAP) reported that a short list of 20 graduate schools were responsible for 25 percent of all federal student loan borrowing. The list was dominated by for-profit colleges, with Walden University at the top and the University of Phoenix, Capella, Strayer, Grand Canyon, and Kaplan all making the cut. As many realize that graduate school debt is a big culprit in the run-up of student debt in recent years, the CAP report may lead some to believe that for-profit colleges are the problem. In reality, for-profits account for a relatively small portion of the skyrocketing levels of graduate school debt.
Consider the table below which shows various levels of federal debt incurred at graduate and professional school for students who finished a credential in 2012. The vast majority of federal student loans issued to students attending graduate and professional schools still occurs at public and private nonprofit schools.
For example, of borrowers who leave graduate school with between $50,000 and $99,999 in federal student debt, 88 percent earned their credentials at public and private nonprofit schools. To be sure, for-profit schools are significantly over-represented in one debt category in the table below. They graduate about 8 percent of graduate and professional students, but account for 16 percent of students who have between $25,000 and $50,000 in federal loans used to finance those credentials. That over-representation fades as the debt levels exceed $50,000.
CAP’s list of the top recipients of federal student loans for graduate school was important for the ongoing debates about student debt. Namely that graduate school debt is driving the big numbers. We published that finding back in 2014 and have continued to warn policymakers that Income-Based Repayment for federal loans and Public Service Loan Forgiveness mean that taxpayers are unwittingly providing large subsidies for this sector. Even if lawmakers expunge the system of unscrupulous for-profit colleges, those trends won’t change. Congress needs to take a hard look at the policies that helped lead to this explosion. A lack of loan limits paired with generous income-based repayment and forgiveness terms seems like a good place to start.