Debt for Master of Arts Degree Increases by Double the National Average

Percentage Increase of Grad Student Borrowing by Program (2004-2012)

What on earth could possess a person to borrow $43,000 for a Master of Arts degree? There is no possible way that could be a good idea. Financially speaking, an MA is worth little, if anything, more than a bachelor’s degree. Borrowing $43,000 for a Master of Arts degree is insane.

This $43,000 figure comes from a piece by Jordan Weissmann over at Slate in which he breaks down recent findings from the New America Foundation on the student loan borrowing habits of graduate students. Weissmann’s piece is accompanied by some nifty graphics that illustrate graduate student borrowing trends and percentages of federal student loan disbursements.

My favorite graphic from the piece, entitled “How Much Do Students Borrow During Grad School?,” compares average grad student loan borrowing rates in 2004 to average grad student loan borrowing rates in 2012.

Not surprisingly, those borrowing rates have increased across the board for all graduate programs. That makes sense. Tuition prices have also increased dramatically in those eight years. Seems fairly innocuous until I figured out the percentages of increase for each of those programs.

By comparing borrowing rates across programs for the past eight years, I found an interesting new statistic about different graduate students’ willingness to borrow. The percentages of increase tell another–even more amazing–story for those of us in the humanities.

As you can see from the chart, graduate students pursuing a Master of Arts degree raised their debt load by far more than students from any other graduate program: 35% versus the average of 17.9%. Hard to believe, considering these degrees notoriously leave graduates with no defined career track and often require additional school or training before leading to jobs.

And students pursuing the graduate degrees that actually lead to gainful employment post-graduation increased their borrowing rates by the lowest percentages. Business administration students and Master of Science students both kept their increase under 10%.

Why are MA students now so much more likely to assume crazy amounts of debt in order to obtain their degrees? Who knows. I can only speak from my own experience as a holder of one of those MAs in English.

I borrowed $19,000 in student loans and another $8000 on a credit card to get my master’s degree. It was an incredibly stupid idea. I could have easily cash-flowed my degree if I had just gone a bit slower and been less willing to take on debt.

Part of the problem was a kind of naive idealism with which I and many of my fellow humanists are plagued. We have a tendency to ignore red flags and hope for the best. I managed to convince myself that my new degree would lead to a steady job after graduation and that I could pay my debt back in no time.

Three years later, I still haven’t found that steady job, whatever that means. I have managed to piece together an income from many different places, and I’ve gotten my debt down to $12,000 from the $27,000 I started with after graduation. Still a long way to go. If I had known how much it would suck to have this debt hanging over me (and how much interest I would pay), I would never have borrowed the money.

I can’t even imagine what it’s like to start with the average Master of Arts student’s debt load of $43,000. It would be crippling. Especially for graduates with no career prospects other than adjuncting.

A student who begins with that much debt will pay $16,381 in interest over the life of the loan. That master’s degree will end up costing $59,381 when it’s all said and done. It damn well better be worth it, but it almost certainly isn’t.

Be smart people. Say no to dumb debt.

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*With the exception of law, which is not represented here.

See Also: English Professors Are Among the Lowest Paid Professors

Conspicuous Consumption in Education

Conspicuous Consumption

As consumers, we’re often willing to pay more for something due to its perceived value than we are for its tangible value. The value this purchase confers upon us as the consumer, in this case, is greater than the value of the currency used to purchase it. In this type of exchange, often referred to as conspicuous consumption, the consumer makes a valuation decision for which there is no logical economic basis. We set an arbitrary value of the social capital we expect to gain from this acquisition that usually far exceeds any practical value of it in the open market. This kind of impractical economic transaction is common for luxury items, but conspicuous consumption becomes even more, uh, conspicuous when it becomes prerequisite to competition for social commodities, like education.

When economist Thorstein Veblen coined the term conspicuous consumption in 1899, he was referring to a practice that existed almost exclusively in the upper classes–those who could actually afford to speculate and play with their money. After all his book is called The Theory of the Leisure Class. This consumption was a way of flexing social muscles or flaunting one’s economic status. Extravagant? Yes. Stupid? Probably. Dangerous? Not really. If they want to throw money around for luxury items just so they can look good to their friends, so be it. It’s their money, I guess.

But what happens when someone who can’t afford to consume conspicuously attempts to compete in this social environment of the elite? Well, more than likely, they end up broke and worse off–financially and socially–than they were to begin with. Conspicuous consumption is essentially a game of the rich. The poor have very little hope of winning in this market because their economic starting point is so disparate to begin with.

Think about it is this way: If a person from a low socioeconomic background buys a brand new luxury car, he is attempting to signify his status as a member of a social class above his own. By driving a $50,000 car, he is representing himself as one who can afford a $50,000 car. Of course, the fact that he borrowed the money to buy this car proves that he cannot, in fact, afford a $50,000 car, despite what his act of conspicuous consumption signifies.

In this scenario, the conspicuous consumer has likely made a poor financial decision to go deeply into debt in order to signify his social status. The car’s value will be worth half his investment in a year, yet his debt will remain. Besides, there’s no practical reason why this guy needs to drive a $50,000 car. He could get essentially the same thing for $10,000, only without the brand name.

Conspicuous Consumption in Education

Okay, now let’s take this a step further. What if the item in question is not a superfluous and flashy vehicle, but instead is what essentially amounts to an inescapable commodity of modern life? What if it’s something that everyone must have in order to succeed in contemporary America? What if signifying as a participant in this cultural mandate is the only way anyone can enter the workforce and compete in the economic structure?

I’m talking, of course, about the college degree. In America, possessing a college degree is the ultimate form of signifying one’s status as a member of mainstream culture. Without one, there’s basically no hope of social mobility or even of financial security (with the exception of very few notable anomalies).

Some might argue that earning a college degree is much different than, say, buying a Warhol. But is it really? To what exactly do your tuition dollars entitle you? Maybe the better question is to what exactly do they entitle you to that you can’t get on your own? Sure, we can go back and forth about the networking benefits of the college experience, the professional training, and discipline that we might gain from actually participating in the college experience. Ultimately, though, what we’re really getting from our tuition dollars is a degree that says we completed our social signification and that it was validated by an accrediting body.

In other words, we are buying something in order to display or gain social status, which is pretty much the definition of conspicuous consumption. What used to be a frivolous economic distraction of the rich has now become a necessity for all people of any socioeconomic status if they want to have any hope of living a comfortable life. The real problem here is a college degree is now so expensive that it’s no longer a rational purchase. Instead it’s a speculation, a gamble, in order to signify membership. And, like any gamble, it may or may not pay off. Which is fine for the rich, but not so fine for the poor.

Taking a conspicuous consumption gamble on education could very easily leave a non-rich person in a landslide of debt and still with no job, despite the fact he or she has properly signified. At least a Warhol will hold its value for the foreseeable future.

Now that the DIY movement has begun to enter the lexicon of higher education reform, I’m seeing fewer and fewer reasons for anyone to take a gamble on conspicuous consumption with her education. We still have that one stumbling block in our way, which is the stronghold of accreditation and the perceived value it confers on degree holders in the marketplace. But I think its grip is loosening. If higher ed doesn’t figure out a way to make the process of earning a degree less of a gamble, less an act of conspicuous consumption and more of an equitable transaction for students, people might just reassess its value and decide to stop paying for the “brand name.”

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Master’s is the new Bachelor’s

Degree Inflation

If everyone knows a secret, it’s not a secret. If everyone holds the same competitive advantage, it’s not a competitive advantage. If everyone has a bachelor’s degree to distinguish them in the job market, it’s not a distinguishment. And that’s a phenomenon economists now call “degree inflation.”

Everyone is supposed to go to college these days. It doesn’t matter what you want to be when you grow up–you must earn a college degree. My question is does that really make sense? Do we all need college degrees? Is it at all possible that we’re causing more damage than good with this mindset?

For one, think about the amount of debt we’re asking people to take on in this culture of degree inflation. Some people are borrowing $50,000 or more during college when all they actually want to do is be a landscaper or a carpenter or an electrician or even an administrative assistant. What in the world is the point of borrowing that much money for a degree that isn’t even relevant to one’s career aspirations?

Let me just clearly state that I have no problem with a landscaper or carpenter or administrative assistant attending college. If he or she wants to go to school for the sake of learning, then by all means, please do so. I’m a college professor, after all. I spent a lot of time in college and it was absolutely beneficial to me as a person.

My big issue, though, is when we create this culture of degree inflation by requiring all people to go to college–even those who don’t want to and don’t need to. That doesn’t really do anybody any good. It results in students who are unmotivated, teachers who are frustrated, universities with higher attrition rates, and lots of wasted time and money for everyone involved. Not to mention the resulting degree inflation, which also affects the students who really did everything they were told to do and still suffer because the job market gets flooded with degrees.

This degree flooding has created what the New York Times recently referred to as a “buyer’s market.” The only group that wins from degree inflation I guess is the companies who are hiring. They’re able to be extremely picky about who they hire and they can set very high standards for their new employees. Great, more power for corporations. Just what we need.

That same NYT article discusses a firm in Atlanta that’s now requiring every single employee to hold a bachelor’s degree. Even filing clerks and office runners who make $10/hour.

It’s created a scenario where hiring companies can basically hint that there are thousands of others who would be happy to take your job, so you better toe the line and take what you’re given. Cool, a culture of fear. Great way to motivate people to do their best.

Requiring extensive job qualifications as terms of employment and then paying those employees the bare minimum is not a good way to maximize potential. Do I even need to say that?

Degree Inflation in Higher Education

Of course, this same principle applies to higher education and adjunct hiring practices. Colleges require a graduate degree as a barrier to entry, but because the college teaching market is now also flooded with graduate degree holders (possibly as an upward side effect of bachelor’s degree inflation), it’s a “buyer’s market” for colleges hiring adjuncts.

Just like the Atlanta firm, colleges can maintain a high barrier to entry and still only offer a bare minimum remuneration. This will never change until adjuncts either stop working for these salaries or until people stop going to graduate school to become professors, thereby letting the air out of degree inflation.

Returning to my earlier point, requiring everyone to get a bachelor’s degree removes any competitive advantage associated with earning that degree. Thus, more and more people are now earning graduate degrees in order to set themselves apart. In other words, the master’s is the new bachelor’s.

 

*You might also like The Cascading Labor Market of Underemployment.

$10,000 Degree the “Right” Way

$10,000 Degree

The $10,000 degree has been getting a lot of attention lately. Not surprisingly, that attention has been coming from key conservative leaders like Governors Rick Scott of Florida, Rick Perry of Texas, and Scott Walker of Wisconsin. It’s not a coincidence that this platform has become an educational battle cry of the far right.

Would these governors actually like to see a $10,000 college degree in each of their states? Well, I’m sure they would. It’d make them look good, for one. But the real reason these three goobernors are raising such hell about the $10,000 degree also involves an entirely different agenda–the attack on what they would refer to as “liberal indoctrination” that students are getting hit with in college. Because we all know that college professors are mostly focused on teaching their students to be Democrats.

The $10,000 degree is less about actually creating something for students than it is about tearing down the great bastions of liberal thought–American universities. Think about it. No college could actually create a sustainable program that awarded bachelor’s degrees for that sum. What is this–the 90’s?

Nope, the only way a $10,000 degree could actually become a reality would be if traditional colleges were dissolved and rebuilt in some radical new incarnation. Or, of course, if the government started seriously subsidizing tuition costs, but I doubt the guvners would care much for that plan either.

Yes, the conservative push for a cheap college degree is primarily rooted in the desire to unmake the university, to undermine it even.

Thomas Lindsay, Director of the Texas Public Policy Foundation, claims that “the public has come to realize that the degrees that cost far more than $10,000 aren’t delivering.”

Or is it just that he and his people repeat this mantra so much that it enters mainstream consciousness? In case anyone was wondering, the Texas Public Policy Foundation is chaired by Dr. Wendy Lee Gramm, who was on the board of Enron and whom Ronald Reagan allegedly said was his “favorite economist.” Conservative special interest group anyone?

But, Hey, the $10,000 Degree Actually is a Good Idea

Now, does this mean the $10,000 degree is a bad idea? Not at all. In fact, it’s a great idea. As long as we’re clear about our objectives and motives. And as long as we don’t drop the tuition by taking it out of the hides of the teachers who actually make things work. As long as we don’t increase class sizes and/or automate everything that breathes. As long as we don’t dramatically cut labor while dramatically increasing workload, which is pretty much the conservative answer to everything.

We could do this responsibly, though. If we consult with teachers on curriculum development and cut administrative departments that exist only to feed the beast of the university system. That’s where a lot of the waste is on campuses.

Frankly, I’d love to see a $10,000 degree. Who the hell wouldn’t? That’s what my college degree costed and it wasn’t all that long ago. College tuition is absolutely out of control and we do need to get a grip on it. The question is how?

For-Profit Colleges as Used Car Lots

Used Car Salesman

Houston, we have a problem. We’re giving away degrees like the pieces of paper they are. Anyone who can sign his name can pay tuition, and is therefore somehow eligible to be a college student. Admissions officers–especially those at for-profit colleges–are becoming used car salesmen and naive consumers their prey.

“Just wait til I get you into this classroom–you’re gonna love the way it feels. And what a way to impress your neighbors. Just sign right here and you’ll automatically raise your standard of living. What? Monthly payments? Oh, don’t worry about that. 48 months same as cash. And don’t worry, you’re on the 30 year plan, which means your payments will be dirt cheap. Put all that stuff out of you mind. Now, here’s my pen . . .”

According to a report released Friday from the Department of Education, 23 percent of all students who borrow money to finance educations at for-profit colleges default on that loan within three years. 1 out of every 4! That’s totally insane. Clearly there is no proper vetting procedure in place to determine whether or not these students will use tax payers’ money wisely. Nor is there any kind of educating process by which these students are taught to properly manage their money. Even used car lots are smarter than that. If someone is a high risk borrower, the car lot loan sharks take precautions to ensure they will be recouped for the money lost.

For-Profit Colleges Have Nothing to Lose

The problem here is these for-profit colleges have nothing to lose when students default. What do they care? They already got the money. It’s the federal government’s problem now to collect from the delinquent borrowers. That’s why President Obama is rightfully putting in place restrictions on these for-profit colleges who have just been capitalizing on both uneducated and naive consumers and also on the tax payers’ willingness to help their fellow citizens. It’s becoming a real mess. These institutions are just fast-talking their victims, collecting the check, and then washing their hands, without giving any real support to the borrower and without having any kind of process in place to guarantee repayment. And, as a result, we end up with a bunch of people who have unfinished degrees and thousands of dollars in crushing debt. What do you expect these people to do? It’s no wonder that 25% of them default. I’m surprised more don’t. As the “buy here, pay here” lots all recognize, that’s just the cost of doing business. That’s why they charge their customers 20% interest.

As The New York Times points out,

With tuition rising steadily, and family income falling, the number of borrowers with federally guaranteed student loans has increased by about a third in the last five years, to more than 37 million. The number of borrowers in default has risen to about 5.9 million, and together they owe a total of $76 billion on loans.

In other words, college is getting priced out of the reach of most families, so borrowing is becoming more and more necessary, regardless of the financial and societal costs. We have got to get smarter about the way we handle higher education in America. The bubble is about to pop. We can’t just sign up anyone who can breathe and then turn him loose to figure out college on his own. As these stats have proven, that strategy ends in disaster. Even the default rate of traditional college borrowers has now climbed to 13.4 percent, the highest ever on record. Something has to give. We need a new plan. I don’t know what it is yet, but one part of it definitely needs to include getting smarter about how we finance our education. I do blame the careless practices of the lenders, but I also blame us as consumers. Just because someone offers a $30,000 loan, doesn’t mean we have to accept it. I learned this the hard way, which is probably why I’m so sensitive to it.

These new statistics prove the urgency of the problem. Something needs to change. Maybe these for-profit colleges should just go ahead and go full-on used car lot. If they had their own lending process, they would feel the pinch much worse when students default, which would force them to alter the admissions and financing processes. If they embraced the “buy here, pay here” mentality, it might solve a lot of these problems. Maybe we’ve been going about it all wrong by trying to regulate them, and we should instead just push them into the free market economy they so love. Hmmm . . .