INSIDER FEATURED ARTICLE
Millennials and Gen Zers are getting swindled by the biggest scam in higher education
By
James S. Murphy
It's graduation season. Over the past couple of weeks, some 2 million college students have earned their bachelor's degrees and headed off to the next stage of their lives. For many, that next stage will be … back on campus, in a grad program, most likely gunning for a master's degree. And for a sizable chunk of them, that decision will turn out to be a catastrophic error.
Millennials and Gen Zers have been told a master's degree is the new bachelor's — meaning the minimum level of education needed to land a prestigious, well-paying job. But new research indicates that this advice is misleading at best and cynical at worst. Many master's degrees not only fail to deliver on the promise of better employment, but they also leave their overeducated recipients saddled with crippling, lifelong debt.
More than 3 million students were enrolled in a graduate program in 2020. That's a million more than there were in 2000. Over those two decades, the number of master's degrees awarded almost doubled. And as the number of master's students has soared, so has their share of student-loan debt. Though master's students account for only 12% of all college-goers, the higher price tags on their degrees mean they're burdened with 26% of all student debt. Bachelor's students with federal loans owe an average of $32,000 upon graduation. Master's students owe $65,000.
This towering debt, combined with the often modest earnings potential that many advanced degrees deliver, means that many master's programs make no financial sense. Despite the fancy degree, you wind up owing more without earning more. So why do so many people keep wasting their money on these worthless pieces of paper?
Winners and losers
A look at the earnings data makes it easy to see why so many millennials and Gen Zers are drawn to graduate school. If you get a medical or dental degree, you make 45% more, on average, than you would with only a bachelor's. Same for law degrees (though that's more likely to be true if you attend a highly selective law school). Ph.D.s, too, generally lead to significantly higher salaries, though there are large differences depending on the field.
The problem is that most grad students aren't getting MDs, JDs, or Ph.D.s. They're getting master's degrees.
Sure, people with a master's earn more, on average, than those with just a bachelor's degree — but only by 18%. And when you look at the numbers by individual graduate programs, the payoff potential plunges even further. Preston Cooper, a researcher at the Foundation for Research on Equal Opportunity, recently measured the return on investment of nearly 14,000 grad programs. He found plenty of evidence that medical school, law school, and dental school were worth it and that master's degrees in computer science, engineering, and nursing tended to pay off. But he also found that 40% of master's degrees had no return at all on lifetime earnings — none.
What are the most financially worthless degrees? That honor goes to master's in the arts, humanities, and theology: Cooper estimated that 85% of those degrees had a negative return on investment. You could make an argument about the inherent value of knowledge, of course, but that's not likely to impress whatever credit agency comes knocking to collect your student-loan debt. It doesn't take a master's degree in the arts to see that a master's degree in the arts will leave you worse off, financially, over your lifetime.
Even more surprising, Cooper found that 62% of MBAs — the most popular of all master's degrees — provided no return on investment. The payoff was also pretty lousy for a master's in education, the second-most-popular degree: Cooper estimated that 32% of such programs had a negative return on investment.
The financial picture is even bleaker than those numbers suggest. Cooper didn't include student-loan debt in his calculations because the higher price of master's degrees would've skewed the data. But debt ultimately plays a huge role in determining the financial value of a degree because it delays the accumulation of wealth. Students who spend years or decades servicing $70,000 in master's debt — often on top of undergraduate debt — are unable to buy a home or save for retirement until later in life, if ever. One borrower I spoke with sardonically calls her student-loan debt "my home," since she knows it will be decades before she can purchase real estate.
The bottom line: An appalling percentage of people who enroll in master's programs every year would be much better off if they had just kept working and never gone back to school.
What's driving the scam
So why should we care? After all, no one is forcing anyone to get a master's degree in Happiness Studies (tuition and fees: $17,700), Applied Positive Psychology (tuition and fees: $71,784), or Conflict Resolution (tuition and fees: $80,227). If students want to get a degree that will leave them deep in debt and unable to save for retirement, who's to stop them? The heart wants what the heart wants, and no amount of cold, hard data will change that for many people, as Cooper's own doctorate in economics from George Mason University — return on investment: negative $440,000 — demonstrates.
But there's more going on here than benevolent temples of higher education offering the virtue of erudition to knowledge-hungry acolytes. For one thing, there simply isn't much information available to students who want to weigh the cost-benefit analysis of an advanced degree — in part because schools know the data doesn't serve their interests. "A lot of students don't know that these master's degrees are not going to pay off for them," Cooper told me. He hopes that as studies like his become better known, students will "look at these master's degree programs with a much more skeptical eye."
The increasing credentialization of work is another major driver of the "master's degree industrial complex," as the University of Michigan professor Charles Davis calls it. Jobs that once upon a time didn't require a college degree now do, and jobs that once asked for only a bachelor's degree now require a master's or more. Davis puts the onus squarely on what he calls the "mutually beneficial relationship between industry and higher education," in which corporate America demands credentials that universities are happy to provide.
Some master's programs, such as nursing or engineering, provide targeted training that employers want and legitimately need. But to work in a college admissions office and earn $48,000 a year, do you really need a master's in student affairs? Unless the classes are being taught by Charli D'Amelio and Doja Cat, why would any social-media manager need a master's in digital social media from USC? They don't, and employers know it. But in a competitive job market, companies ask for master's degrees simply because they can. In less competitive markets, research has shown that demand for credentials goes down.
The credentialization of the labor market hits Black people and, on average, women of all races especially hard. (Sixty percent of grad students are women.) Advanced degrees hold out the promise of overcoming racial and gender discrimination in the workplace. Get a master's, the thinking goes, and your boss will be more likely to pay you more. "Black women, caught in a bind where they face labor-market discrimination after earning a bachelor's degree, frequently feel that their primary option to get any economic stability is to earn a graduate degree," Dominique Baker, a professor of education policy at Southern Methodist University, told me. "Institutions are then able to saddle these students with debt on the promise of a better future."
Master's degrees are big business. Over the past decade, colleges and universities have created more than 9,000 new master's programs, and revenue is often a major driver. University administrators are not shy about saying as much, even at Ivy League institutions. Last year, a vice provost at Columbia University responded to a story about a film-school student who graduated with $360,000 in debt by arguing that master's degrees "can and should be a revenue source" that subsidize other parts of the university. This from a university whose $14 billion endowment grew by nearly $8.5 million a day last year.
The federal government also plays a major role driving the master's boom, because it provides colleges and universities with a powerful incentive to bilk grad students. Unlike federal undergraduate loans, which are capped at $31,000, federal Grad PLUS loans are virtually limitless. That means colleges and universities can encourage students to pile on the debt, with the federal government as their sugar daddy.
How to stop the swindle
When it comes down to it, millennials and Gen Zers have been conned. First, they were bombarded with the message that they had to go to college — and go deep into debt — if they wanted to get a good job. Never mind that their parents and grandparents went to college for a fraction of the cost, or made a good living without any degree at all. Millennials and Gen Zers did what they were told: They flocked to college right out of high school at significantly higher rates than previous generations did.
Then, when college didn't lead to the kinds of middle-class jobs their parents and grandparents enjoyed without a college degree, millennials went on to graduate school at higher rates than any generation in history. The swindle left them impoverished for life: Baby boomers accumulated seven times the total net worth in their 30s that millennials had by the same age.
Many academics who study higher education are urging President Joe Biden to include grad debt in the student-loan forgiveness he has indicated he's likely to grant. Opponents argue that forgiving the student debt of future doctors and lawyers "will send the most dollars to high-income earners and those with graduate degrees." But the government can simply exempt loans for professional degrees with the highest return on investment from the forgiveness program. Most doctors and dentists, after all, will comfortably pay off their loans and go on to make millions during their careers.
In the long run, the only way to solve the student-debt crisis is to enable students to borrow less — and the only way to do that is to make it less necessary for them to borrow. Graduate loans for master's programs and doctorates should be capped, just as undergraduate loans are. That would give universities less of an incentive to chase profits by offering worthless degrees to grad students.
But employers need to take responsibility too. Companies hiring for positions that don't really require a specialized education should stop saying "master's degree preferred" in their job descriptions. This goes double for nonprofits, which are among the worst offenders when it comes to asking for unnecessary credentials. Universities may be profiting from pointless master's degrees, but corporate America is the one fueling the demand — and condemning millions of young Americans to a lifetime of financial insecurity.
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