Almost 20 years ago, when I was applying to MBA programs, the conventional wisdom was that unless you could get into a top-10 program, you probably shouldn’t go. The tuition at a high-ranking program was steep (I would eventually graduate with nearly $100,000 in debt), but if you managed to get in, recruiters for six-figure jobs would swarm onto campus and practically beg you to work for them.
The tuition at lower-level schools was also very steep, but students had to frantically labor to secure a job afterwards. Some found jobs that were no better than the jobs they’d left to go to business school. The lower the ranking of the school, the less value the graduates got out of their degree, until you got down to programs that seemed to mostly be run for the benefit of the university that was collecting the tuition check.
Business schools, like law schools, are cheap to operate. No expensive labs, no distant fieldwork. Just a room, a blackboard, some chairs and a professor. And for this, students were willing to pay very handsomely. So, these programs became cash cows for the universities.
There is a limit, of course, to how sorry we should feel for people who borrowed lots of money for a graduate degree, and found that it wasn’t a surefire ticket to easy prosperity.
We should, however, be concerned because the cost is spreading. Having finally reached the limits of American parents to bear ever-increasing bills for undergraduate tuition, struggling colleges are now turning to graduate programs to fund their operations. Indeed, schools often encourage graduate students’ naïve faith, painting a rosy picture of future employment prospects that is, to say the very least, highly selective.
It’s bad enough that schools do this; it’s worse still that the American taxpayer is helping them. The government caps the amount that undergraduates can borrow, but offers graduate students considerably more rope with which to hang themselves.
Most of the eye-popping figures that you hear about student debt are in fact averages that include graduate programs. Once you separate those figures, you see that most people with bachelor’s degrees actually took on modest sums that look more like a car loan than a mortgage.
In time, of course, prospective graduate students may wise up (as seems to have already happened at low-ranked law schools whose graduates had dismal employment prospects). But in the meantime, a lot of damage can be done. And if the master’s degree simply becomes “the new BA,” then we may all end up stuck on a treadmill of degree inflation and higher tuition bills in order to get the same old jobs.
We should consider capping graduate school loans at something close to the caps on the loans made to financially independent undergrads.
There are, of course, reasons besides a paycheck to get an advanced degree, and I support anyone who wants to do so. But I would never advise them to go into debt for that education.
Of course, that still leaves the question of what struggling schools would do without their cash cows. That’s a hard problem. But I’d rather see schools struggling with their finances than thousands of grad-school grads struggling with theirs.
Megan McArdle is a Bloomberg View columnist.
