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debt and graduate school – why it’s a bad idea

Last Friday, we had a good discussion on how to pick a graduate program. One issue that came up was debt. I strongly recommended that people only go to graduate programs that provide ample funding. People disagreed (a little) so I wanted to take a moment to explain the underlying logic:

  • First, about 50% of doctoral students will not earn a PhD. So it makes no sense to pile up debt for a degree you may not get.
  • Second, about 50% of doctoral degree recipients will not work in academia or a tenure track position. It makes little sense to take debt for a job you may not get.
  • Third, tenure track jobs have modest salaries. Professors aren’t poor, but we make a middle class salary, not MD salaries.

In financial terms, the academic career is high risk and low pay off. The pay off is mostly in non-financial terms. Once you understand that money is not the guiding principle of the typical academic career, then it makes little sense to invest money in it.

Of course, there are exceptions. For example, you may take out debt as “bridge funding,” to help you get through a particularly rough time. But that’s the point – the default rule for graduate school is “no debt.” You shouldn’t start off by taking huge loans. Only take them as a last resort and only in modest amounts. If you are a first or second year student, and you are covering tuition through loans, something has gone wrong – very wrong.

Personally, my graduate program did not fund me well but I was able to avoid much debt through a combination of family support, a tuition waver, external fellowships, teaching, and odd jobs. Only at the very end did I take out a small loan to cover me in the last year. The result is that my student loans are easy to service and I can concentrate on being an academic, the way it should be.

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Written by fabiorojas

March 19, 2013 at 12:31 am

Posted in uncategorized

20 Responses

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  1. I mostly agree.

    However, just because you don’t get a tenure-track job doesn’t mean you end up with NO job. For example, if you’ve got some statistical skills and demographic training and leave grad school with only an MA then paying off $20k in loans would be doable with the salary you’re likely to get in an applied job.

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    Philip N. Cohen

    March 19, 2013 at 1:04 am

  2. Even qualitative methods can get you a private sector job, if you train and market yourself in the correct manner: http://www.theatlantic.com/magazine/archive/2013/03/anthropology-inc/309218/

    I think the reason why business schools hire so many sociologists who use qualitative methods is because businesses find the resulting information and insights valuable

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    andrew lee

    March 19, 2013 at 2:29 am

  3. The second and third points there assume that people in grad school are doing so to get a tenure track job. Thus the premise is denying (as academics are apt to do) that there are people in grad school for whom that isn’t, nor was it ever, a goal.

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    jimi adams

    March 19, 2013 at 2:33 am

  4. @jimi: Graduate school is the professional school for academia, with a few exceptions. To deny that is folly. Do we encourage people to sign up for medical school if they don’t want to become doctors?

    If you don’t want an academic career, then the PhD is a huge mistake. Outside the academy, there are very few jobs that require PhD training. And if they do, then either (a) the employer should pay the training cost or (b) there should be a huge pay increase to compensate for tuition and lost wages.

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    fabiorojas

    March 19, 2013 at 2:36 am

  5. I didn’t disagree that funding was important. Students should only go to a program that offers a full tuition waiver, a stipend, and decent health care. Travel and research support are also worth considering as they can make a big difference when you’re living off a graduate stipend. This is different than graduating debt-free.

    Once again, I agree with Philip. Not getting an academic job – or a tenure track job – doesn’t mean that you have no job. In fact, your income could easily be higher if you opt out of academia.

    Also, your example assumes a particular type of student and not everyone fits that mold. It can be more difficult for first-generation college students, people with families they need to support, and/or those who are carrying debt from before graduate school to finish debt-free. Those students might see pursuing the mobility that graduate school offers as worth the financial burden. I certainly did (and still do).

    I am envious of people who are able to finish with no (or very little) debt. I simply couldn’t have. Making it through graduate school with a child is hard enough, but as a single mother of a toddler it was brutal. There was no time for odd jobs and living on ramen wasn’t an option. I was willing to buy clothes and toys at Goodwill, but wouldn’t scrimp on childcare or food.

    I wouldn’t recommend that everyone make the decision that I did. Like I said, I was confident that I would finish and get a job somewhere and, like I said the other day, perhaps a bit naive in that respect. But I do think that individuals need to weight the pros and cons and what works best for them. To preach being debt-free seems like a one-size-fits-all approach that may lead those without family support or outside fellowships, etc. to self-select out of a profession and discipline they could make real contributions to..

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    jessica

    March 19, 2013 at 2:53 am

  6. Jessica: The reason that I am anti-debt is that college debt can be seriously detrimental to one’s personal well being later in life. If your level of debt allows you to live well (and I know it does because your kid can afford that sweet trombone) then great. But there comes a point when debt becomes onerous.

    As a private school faculty, you know that a student can easily sign up for $100,000+ debt if they aren’t careful. If you are a prof at a small liberal arts college, then that $500/month payment means that you aren’t taking a vacation, or saving for a home, or saving for retirement.

    So yes, I agree that the debt-free philosophy initially sounds like a poorly conceived one-size-fits-all strategy. But I think there is a strong argument to be made that debt is a last resort. Maybe not one size fits all, but almost.

    Finally, let me talk about social mobility and debt. My anecdotal experience is that low SES undergrads and grad students are the ones most likely to take on highly onerous debt. Ironically, low SES students are often the ones that don’t know about fellowships and are the ones least likely to know how to game the academic system.

    For that reason, I am strong on the no-debt mantra. If all of us faculty get together and make it our policy that graduate school should be no-debt process, then it will be easier for low SES students embark in serious academic careers. We can prevent future students from taking crushing debt and increase mobility.

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    fabiorojas

    March 19, 2013 at 3:08 am

  7. Ok, I’m curious how you reconcile your statement that “Second, about 50% of doctoral degree recipients will not work in academia or a tenure track position” (which I’m not claiming is inaccurate, though I was surprised to see the trend here – http://www.nsf.gov/statistics/sed/2011/pdf/tab46.pdf) with your claim that “Graduate school is the professional school for academia, with a few exceptions.” Do we just chalk those 40-50% up to acceptable losses?

    Maybe I’m skewed by having lived/worked in state/nation capitals since entering grad school, but there are quite a few people who work in gov’t and related fields that have PhDs, many of which were requirements for their positions. I know that the modal ideal model within grad school is for training others within that system (and am not trying to change that). But I have a much harder time accepting that’s the only acceptable model for prospective students (especially when we know that 40-50% of those completing the degree won’t be going into academia).

    (And, as Jessica notes, people who do opt to leave academia, often are compensated better – http://www.nsf.gov/statistics/sed/digest/2011/theme5.cfm#4)

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    jimi adams

    March 19, 2013 at 3:17 am

  8. @jimi:

    First, can you tell me which jobs outside of academia have a PhD as a requirement? And by requirement, I mean either (a) mandated by law or professional association or (b) the de facto standard in the professions. I can think of a few, but not many.

    Second, there are huge chunks of academia where there are virtually NO jobs for PhD outside academia. Think of most of the humanities, very theoretical sciences (e.g., how many topologists are not professors?) and some social sciences.

    Third, these are not “acceptable losses.” I would prefer that PhD programs mimic medical schools in this respect. Most are aiming for academia, while a small group goes for non-academic jobs. This situation of where half the cohort leave strikes me as bad.

    Fourth, even if people made more money, have we considered the cost? For example, working as a TA is $18,000 per year. Their regular job would start at maybe $35 or $40k. So for the six year PhD, you give up $20k x 6= $120k. Does the salary boost for a PhD compensate that much?

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    fabiorojas

    March 19, 2013 at 3:25 am

  9. Now I think we’re talking about two different issues. You’ve switched from grad school to college in general. I worked my way through a public college with very little debt, in part thanks to AmeriCorps and a husband and that baby came later, but it was totally do-able.

    In graduate school, on the other hand, I was taught that if you wanted to be successful, you couldn’t take on additional jobs or commitments. In other words, taking the loan out so you could work on research all summer (or weekend or evening) was preferable to just working to make extra money during that same time. It increased your chances of success later. In the same way that I was less productive with a child, I would have been less productive with a job outside of my program.

    Loans are certainly more likely among the low-SES students – at both levels – but is it better to set a low-SES student up to fail because they were unable to get the research and networking done in grad school to be successful because they were too busy working an extra-job to make it through school debt-free than it is to have them take on debt to make it through and experience mobility?

    I’m down will abolishing student debt. I just don’t think that’s realistic now.

    Like

    jessica

    March 19, 2013 at 3:31 am

  10. US gov’t research jobs (at GS-11/12) are very frequently written as requiring a “PhD or equivalent doctoral degree Or 3 full years of progressively higher level graduate education leading to such a degree” which seems intentionally written to be something beyond an MA/MS (if not the actual PhD). https://www.opm.gov/policy-data-oversight/classification-qualifications/general-schedule-qualification-standards/#url=GS-PROF

    Like

    jimi adams

    March 19, 2013 at 3:41 am

  11. @jessica:

    A few points:

    – You asked: “better to set a low-SES student up to fail because they were unable to get the research and networking done in grad school to be successful because they were too busy working an extra-job to make it through school debt-free than it is to have them take on debt to make it through and experience mobility?”

    Here’s how I would respond. First, I would try to promote conditions where students are not in this position to start with. For example, a number of leading soc programs accept many students without funding. I was in such a program. That is bad policy and leads to the problems you describe..

    Second, if a student were in this situation (bad funding), I’d counsel them to be very, very careful about debt and thoughtfully plan things. For example, I’d only encourage debt during the later phases of the program when you need lots of unstructured time to write a dissertation. I would argue against debt to pay private school tuition. If you have to get debt for $40k tuition a year for an English PhD, you need a new plan.

    Third, I would be very careful in promoting debt because lots of student take debt and still don’t get the degree. The choice isn’t between debt/success and no debt/failure. Rather, the average outcome in academia is failure, so a lot of people may take debt and still not get mobility. While Jessica may have a fabulous career, a lot of people take out big loans for PhD’s that never appear. It is unwise to ignore this very real possibility.

    – Yes, I did raise the issue of college debt, but the issue is the same: lots of people take big debt for a degree which may (or may not) appear and which may (or may not) lead to more income.

    – “I’m down will abolishing student debt. I just don’t think that’s realistic now.”

    I think you are mistaken. We can’t magically make college debt go away, but we can actively promote policies that reduce the number of people who have these problems.

    For example, the next time you are on graduate admissions committee, only accept people who can be funded for 4 years. If you counsel college seniors, tell them to decline unfunded offers and reapply to places until they get funding.

    When you become dean, insist on budgets that fund graduate students. Punish programs that treat students poorly. This has already happened at many schools.

    Be part of the movement of scholars who actively say “enough is enough.” Don’t accept the status quo.

    – Finally, having a dependent in graduate school is extremely tough, much tougher than most people could ever imagine. The advice I have given to students in that situation is to treat debt like extra teaching. Do it if you must to succeed, but graduate post-haste so you can limit it.

    Like

    fabiorojas

    March 19, 2013 at 4:05 am

  12. Jimi: Ok, what % of PhD entrants get these jobs? and in what disciplines?

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    fabiorojas

    March 19, 2013 at 4:06 am

  13. Fabio, don’t you think the level of selection is higher at Ph.D programs and thus presents a different risk profile than at the undergrad level? If you’re in a top 10-15 graduate program in any discipline, chances are good that you’re pretty damn capable at something, so that if you rack up 10-20K in debt in grad school (which is the amount most people I know carry), your odds of being able to pay it off are good. How is this at all comparable to the average private grad grad carrying $100K-$200K debt?

    Like

    chacotaco@beachfood.com

    March 19, 2013 at 4:14 am

  14. If you want to run a consultant firm it is very helpful to have / hire someone who has a PhD – whether it’s economics, business or even some of the humanities (anthropology, e.g.). So, of course a PhD can be very valuable outside of academia – depends on your field, what you want to do, and what you focused on during your PhD. This applies to Northern Europe. I can’t be certain that USA constitutes an opposite situation, but I see no reason why the mechanisms would be different.
    This is not an argument for debt – just that it makes no sense at all to argue that a PhD isn’t worth anything outside academia. I know quite a few people who took the PhD (funded) in order to get job out of academia, and succeeded.

    Like

    Anonymous

    March 19, 2013 at 7:33 am

  15. Fabio: You and I are in way more agreement than you think – or at least than your responses suggest.

    I would, however, put more onus on the student to be in constant dialogue about the best decision for them. This is true through graduate school where inertia is strong. Cutting your losses with an MA and 20k in loans is better than persisting in a program you’re floundering in or don’t love. My sister and her partner both started with higher paying jobs with MAs in social sciences than I did with my PhD. Unfortunately, most floundering students just continue and when they’re also continuing to carry more debt, that’s a problem.

    Like

    jessica

    March 19, 2013 at 10:38 am

  16. I don’t think Fabio is arguing that people don’t find jobs outside academia. He’s saying that doctoral programs don’t (and shouldn’t have to) train students for those jobs.

    Like

    Big Z

    March 19, 2013 at 3:46 pm

  17. With degree inflation more jobs (at least for upper level positions) are asking for PhDs. As someone who recently completed the PhD and is now seeking work outside the academy for a variety of reasons, I find the challenge is finding an entry-level job with a PhD. I definitely agree that students should do anything possible not to take on debt. I thank god that I don’t have any debt to worry about while I go through this process or I would really be in trouble.

    As jobs in the academy get harder to come by, and departments respond by producing more PhDs and creating more PhD programs (Rice, etc.) faculty will have to accept that many of their students won’t end up as faculty. Maybe there is a responsibility to train students appropriately?

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    Agree and Disagree

    March 19, 2013 at 9:17 pm

  18. Aside from the rare case of total and permanent disability (proven through an MD’s assessment and three years of income below the poverty line) student loan principal and interest is permanent until paid off in full. Student loans are very easy to acquire and for some, completely impossible to eliminate. Unless a prospective student has a clear and reasonable game plan for repayment of their loans, an unfunded graduate education – regardless of employment outcomes – could severely hamper the financial security of his or her future self and family.

    Like

    Eric S

    March 19, 2013 at 9:41 pm

  19. Just out of curiosity, how many top 20 programs are still admitting in students without at least 4 guaranteed years of tuition and a reasonable stipend? I just saw an admit offer from a top 20 program in a low cost-of-living area for 5 years tuition + stipend at about 24K/AY + summer funding + health insurance, so call it at least $30K/year total. (Can a BA in sociology do much better in today’s economy?)

    Maybe Chicago has changed its funding since Fabio was there, but if they haven’t, they need to soon. High but declining rankings + uncompetitive funding packages does not scream out “healthy future.”

    Like

    krippendorf

    March 19, 2013 at 10:14 pm

  20. Narrative in IR is a long way coming; I’m looking forward to seeing more.

    Like

    Nicholas

    March 22, 2013 at 1:17 am


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