2 Reasons Graduate Student Debt Will Decline

Prediction: Graduate student debt will begin to decline.

The inspiration for this prediction is a Dean Dad post on a Vox article in which the author, Dylan Matthews, explains why he got inflation wrong. (This article is fantastic).

Matt Reed’s message (should we still call you Dean Dad?) isn’t really about inflation. Instead, he calls for more “epistemic humility” in expert predictions.

Riffing on Matt, I want to make a prediction that can be proven unambiguously wrong.

Where is college debt today?

About six out of ten master’s students will take out student loans to pay for their education. Graduate student loans account for half of all student debt ($1.75 trillion), while only a quarter of those who owe money on student loans have gone to graduate school.

A 4/12/22 article in nerdwallet gives the following numbers.

  • Undergraduate debt – $28,950
  • Graduate Student Loan Debt – $71,000
  • Law School Debt – $145,500
  • MBA student debt – $66,300
  • Medical School Debt – $201,490
  • Debt from dental school – $292,169
  • Pharmacy School Loan Debt – $179,514
  • Master of Science in Nursing (MSN) Debt – $47,321
  • Veterinary school debt – $183,302

These numbers represent (I think) the combined undergraduate and graduate debt. If you know where to find graduate debt figures only, please let us know.

Why predict that the average amount of graduate student debt will decrease?

First, I’m really thinking about higher education costs, not debt. According to EducationData.org, the average cost to earn a master’s degree is $66,340 and can range between $30,000 and $120,000.

What I really predict is that higher education will become more affordable. Over time, cheaper graduate schools will reduce student debt. But this process will take years to unfold.

Today, the largest holders of student debt are in the 35-49 age group (14.4 million owe $622 billion). Graduate school becoming cheaper in the future will not help these people.

Still, cheaper higher education is a good thing. Here are the two reasons I think this is going to start happening:

1. Online learning:

Six out of ten master’s students are now enrolled in online or hybrid programs. While there will always be a place for full-time residential masters, these will increasingly be limited to a handful of globally branded programs.

There are only a few master’s programs where it makes sense to quit your job and move to a campus for two years. It will make more sense for almost all other masters students to continue working and earning the degree online.

This transition from residential master’s programs to online/hybrid master’s programs will reduce the overall cost of the degree – and possibly student debt. In some cases, employers will help defer the costs of a degree. It is easier to pay tuition with a salary that comes in.

2. The Rise of Affordable Online Degrees:

The most important higher education story unfolding right now is the rise of the affordable scale online degree. How come we don’t spend more time talking about the following study programs?

These are just a few low-cost fully online degrees from top schools. This list grows every month.

There is a whole community dedicated to creating low cost/high quality degrees.

I am very interested in the organizational investments Boston University is making to fuel the conversation about large-scale online graduate programs.

How much could graduate student debt decrease by, say, 2030?

What will the growth of low-cost online degrees mean for traditional (and expensive) residential, hybrid and fully online programs?

Where can I have blind spots in my projections that pricing (and possibly debt) around graduate degrees will start to come down?

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