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STUDY: Grad student loan debt on the rise

While undergraduates at schools such as Boston University account for much of America’s student loan debt, a report released Tuesday suggests that graduate student debt has seen significant increases between 2004 and 2012.

“It is important that people consider the costs of their education before they start, particularly a graduate degree,” said Randall Ellis, a professor of economics at BU’s College of Arts and Sciences. “… It used to be that graduate degrees would almost automatically lead to finding a job. That seems less true today, given stiffer international competition.”

The report, which was issued by the New America Foundation, used data from the National Postsecondary Student Aid Study to get a broader sense of how much debt students pursuing master’s degrees and other professional degrees have accrued.

“The context for focusing on student loans and debt is because of the outstanding student loans in America that have hit $3 trillion,” said Jason Delisle, director of the New America Federal Education Budget Project and author of the report.

The average combined undergraduate and graduate debt in 2012 was $57,600, $99,614 at the 75th percentile, and $153,000 at the 90th percentile, according to the report. The figures were adjusted to inflation in 2012.

“The underlying issue is that there is not a coincidence that the biggest change came when the government changed its policies on student debt,” Delisle said. “Beginning in 2006, students could borrow whatever amount of charges. Before that, there was a cap on that amount.”

Because student loans have barriers that increase their costs, such as high interest and repayment rates, it is more difficult for graduate students to pay off their debt while receiving an advanced education, Ellis said.

“There should be government subsidies to the interest rates to promote investments in education,” he said. “There is individual risk that one student may not pay off their loans, but collectively it is an excellent investment for the country. [Student loans] have very high repayment rates. You cannot avoid them by declaring bankruptcy like you can credit card, mortgage or car debts.”

Michael Manove, a professor of economics in CAS, said from an economic perspective, the investment in higher education could be worth the debt for the future return.

“Second interest rates are very important,” Manove said. “Students who borrow at 8 percent will have much larger loan payments than student who borrow at 4 percent. The median debt of borrowers is about $58,000, but if you buy a modest house in the Boston area, your mortgage debt is likely to be on the order of $400,000,” he said. “Higher education tends to generate quite a bit of income. Home ownership does not.”

Several students said that finding a job is necessary to help pay off the debt from their education.

Marleena Eyre, a second-year graduate student in BU’s Metropolitan College, said while student debt did not concern her as an undergraduate, paying her loans has become more of a burden during her graduate education.

“I was a student athlete and got full scholarships, but I understand the situation with debt now,” she said. “I work part-time to help pay to support myself, but it is hard to find those type of jobs in my field.”

Samuel Needham, a second-year graduate student in BU’s School of Theology, said earning a graduate degree is worth incurring debt if the possibility of getting a lucrative job is high.

“If you’re going to graduate school because you don’t know what you want to do or you are just good at school, I’d advise against that unless your education is funded,” he said. “Earning a law degree with reason to expect to be hired is smart, but for the humanities not so much.”

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