Is it irresponsible to take out loans to complete a Masters/PhD?

Posted by Rob Walsh, community karma 1466

I was on the train recently with some friends and the Occupy Wall Street protests came up in conversation. A pair of friends began talking about the protestors who demanded debt forgiveness for student loans. These two friends of mine were of the opinion that debt forgiveness is stupid, in part because, 'they should know better than to get a degree in Medieval History.'

I'm sure we all know plenty of people who have gone to grad school and have had to take out loans to survive. Do you all find that fiscally irresponsible? Or perhaps just in the case of certain disciplines?

Full Disclosure: I took on a significant amount of debt to do Political Philosophy at University of Chicago and despite the fiscal part of it, I totally felt it was worth it. However, don't let that keep you from being critical about my possible financial irresponsibility :)

over 12 years ago


John Preston, community karma 67

I'm not sure of the US mechanism of paying back a student loan, however here in the UK paying back is a percentage of what you earn once you earn over £15,000, something like 7 or 8% I think. Repayments stop if you are out of work, retire at the state pension age of 65 (or soon to go up to 67!), or die. While this is quite a chunk of the monthly wage, it's not been too bad for most I don't think, certainly not in my own case.

However, tuition fees have recently been increased in most English universities from around £3,000 per year for an undergraduate course, to in some cases £9,000, and in most cases at least £7,500. The government state that this isn't to be paid up front, but will be added to the normal student loan and you start repaying it once you begin earning above £21,000 a year. Again, not terrible sounding but this will take a huge chunk more out of a monthly wage than what is already being paid on the normal student loan. It's a huge figure to face for an 18 year old faced with choosing a university course, and many now seem to be either applying for courses that 'guarantee' a high paying job at the end of it, or not applying to university at all.

The government justified allowing universities to charge much higher tuition fees on the basis that "graduates on the whole earn more". Certainly this tends to be true in cases of graduates from legal and business degrees, as well as scientific and engineering degrees and others similar. However, those in the arts and media side of education are, generally, not likely to earn as much per year as "hard" subjects . There is a real risk that these subjects will be seen as not financially viable and abandoned, or at least only filled by students whose families are able to support them through university. 

Higher education in the UK is sliding towards people only studying course that there is a 'financial case' to do, i.e. they'll get return from it. In my opinion, education should not be about that at all, and people should do what they're both good at, and want to do, regardless of cost. Every act in society now seems to be proceeded by the question "Is there a business case for it?", including now education. Why not ask the question "Is there a moral/cultural/romantic case for it?". That is the question that should be answered for a student considering studying for an arts degree. Not whether they'll make money out of it afterwards, but whether they'll love it or not.

Financially irresponsible to take a student loan out: yes. Morally irresponsible: not at all.

over 12 years ago
I would say that the US system has become a 'study a profitable field' culture - which I'm saying in reference to what you've stated that the UK is moving toward. For instance, the governor of Florida has gone on the record about the uselessness of fields such as Anthropology ( Anecdotally, it's very regular in the US to hear someone say what they're studying and for someone to ask 'well, what are you going to do with that?' Like Lawrence said earlier, you can't even get rid of student loans during bankruptcy. I wonder if it's similar in the UK?
Rob Walsh – over 12 years ago
It's starting to become that way here too. Over the past 12 years or so, when the Labour government under Tony Blair massively promoted higher education (famously stated that he wanted 50% of all 18 year olds to go to university, and it was almost achieved too), there were many courses run from various universities that seemed to not have any 'point' to them. However it was the easy availability and low-cost of a student loan, plus also tuition fees being affordable at the time (I started university in 2001 and paid only 1,100 pounds per year tuition, an absolute steal compared to prices now) that allowed people to take these courses, and as a result we'll hopefully have a generation of people much more broadly educated, and have the capacity to think on a 'degree-level' than previous generations. But that's under threat now due to the much increased cost of student loans and tuition fees, leading inevitably more to the question as you state "What are you going to do with that?". And here too, you can't declare a student loan in any bankruptcy order. However, if you found yourself heading down the line in bankruptcy, you're likely to be unemployed or on such a low wage that student loan repayments would be minimal or not occurring at the time, so I wouldn't see that as a major problem!
John Preston – over 12 years ago
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Lawrence Bowdish, community karma 347

I am currently working on some research that looks at the student loan system (both in the U.S. and abroad), and especially how it fits into the more general trends that set the sticker price for colleges and how students pay for them (loans, grants, scholarships, parents, jobs, etc.)  I'll keep my discussion here based on graduate level loans and experiences.

One of the main points I'm having to make, especially in such a charged topic as this, is to be careful in separating the spectra of "responsible vs. irresponsible" and "right vs. wrong --or-- good vs. bad."

Part of the problem is that student loans, for a very long time, lets say, at least until 1988, but probably 1998, were unquestionably a good idea.  The benefits of a graduate education, and experience, were great, and the loan terms (repayment, interest, government assistance) were amazing.  There was at least one cadre of graduate students in poli-sci and economics the 1970s and 1980s that took out student loans, invested them, and turned a tidy profit before they had to be repaid (back when you could just return the entire balance after graduate and not incur fees or interest).  A difficult proposition at this point, to say the least.

But, in the 1990s, repayment of loans changed.  Legal changes made holding student loan debt a massive liability.  It is nearly impossible to discharge student loan debt in a bankruptcy.  And, unlike credit cards or any other loan which has a statute of limitations of 7 or less years (if you do not make a single payment on your credit card for 7 years, the debt goes away), student loans can follow you forever, and if you are REALLY irresponsible they can follow your parents or your children based on how long you live.  In most states, two crimes have no statute of limitations--1st degree murder and not paying back your student loans.

So, student loans on their face are a tough loan to take.  Put in the issues of graduate school, and the decision gets even harder.  What if you don't finish?  What if you take more than the advertised amount of time?  What if some sort of emergency or life change requires you to take a year of leave--and the loan repayment kicks in?  And these are just what might happen before you graduate.

At its heart, a student loan is a bet on what type of job you'll secure, and more importanly, how quickly you'll secure it.  In some graduate disciplines, this is a easier choice than others.

So, my answer is that "is it fiscally irresponsible?"  Absolutely.  It is a loan on bad terms where you'll never have the legal upper hand, to secure an education that too often will take too long to pay off, if it ever does. This is particularly true for my colleagues who get paid stipends in graduate programs that could easily pay for living expenses in their cities, but take out more loans anyway because they want an extra bedroom or don't want a roommate, or have...habits...they need to feed.

However, "is it the wrong choice?"  Probably not.  "You got to pay the cost to be the boss."  Besides, policies change all the time, and maybe things will get easier.  It would be nearly impossible for them to get harder on those holding student loans. 

I've gone swimming in the ocean during a hurricane.  Irresponsible?  Totally.  Worth it?  Without a doubt.


over 12 years ago
I hope your research is called something like, 'On the Genealogy of Student Loans.' I really appreciate the history that you use to justify the premise that student loans are indeed fiscally irresponsible - while still saying that you think that they're the right choice. Really helpful.
Rob Walsh – over 12 years ago
I live but to serve. Right now the project is called "The Kids Aren't Alright"
Lawrence Bowdish – over 12 years ago
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Joseph Annaruma, community karma 37

This question really hits home for me. I am currently in a Graduate program, and I am up to my eyeballs in debt. Am I being irresponsible? There is a good possiblity that I am. I am studying for a Masters of Library and Information Science (MLIS), and as many can plainly see, the job market for librarians is not what it used to be.  I am also enrolled in an expensive private institution; I could have enrolled into a state school for the same program, but I would have to move to a different city. To be brief, I am glad that I am working on this degree, and taking out loans was the only way for me to do it. I realize that I will be paying until I die (I am not a young man), but it is worth it to me, simply because I desired a better education, and I am receiving it.

      As Mr. Bowdish has stated above, policies change, and President Obama has just announced a major change recently. The Loan Forgiveness Plan that will take effect next year is designed to lessen monthly payments substantially. By hundreds of dollars in some cases. From what I have read, I am a little less frightened by a future of exorbitant monthly payments. Ten percent of my salary may sound like a large amount, but I assure you, the old plan would have had me paying considerably more.  I suggest that anyone who has student loan debt research this new development.

    To conclude, I believe that if you are studying a subject that you are passionate about,  I say take out the loans if you must. I would add one caveat however; it is wise to take only what you need. Grad school is not a country club for most of us, and you will need to live frugally for the duration of the program. I know that I am.

    I personally do not think that I am being irresponsible; I am bettering my life and enhancing my future as far as I am concerned. Paying ten percent of my salary for the next 20 years is worth it to me. I feel that even if I do not make more a year than I do now, I will at least be working within a field that I love.


over 12 years ago
I didn't know about the Forgiveness Plan. Thanks for that!
Rob Walsh – over 12 years ago
Labors of love. FYI, if you have the "right" loan, the Income Based Repayment (IBR) plan is already available.
Lawrence Bowdish – over 12 years ago
There's a Chicago startup that helps people pick the best student loans: Might be of interest to someone who pokes through this thread at some point.
Rob Walsh – over 12 years ago
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Huong Le, community karma 241

I would think that's it's only "fiscally irresponsible" if you have no plan. Just like going to college to get a BA/BS. WHY are you going to grad school? Can you do job XXXX without a MA/MS/PhD? If so, what are the costs/benefits of a graduate degree? Some jobs, say, professor at a univeristy, require a PhD. You would then have to decide for yourself if potential debt is worth the later outcome.

For many (most?) people taking out loans is CRUCIAL to attending institutions of higher education. I also have had to take out loans to go to college/grad school and I thought of it this way: Do you want to go to school? Yes. Can you afford the full costs without assistance? No. ---> Take Out Loans. But only what you need.

Granted, some people are not responsible at all when they borrow money (believe me, I used to work in Financial Aid) but I wouldn't blame that on lending as a whole. Do I think more grants/scholarships need to be available? Yes.

over 12 years ago
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Elaine Santucci, community karma 63

I think the answer to this question is "it depends." I wouldn't say it's fiscally irresponsible overall without more information. Regardless of ability to make a gazillion dollars following the program, if an individual is happy or comfortable with job prospects, regardless of the potential paycheck, for a particular program, then go for it if he or she is happy paying back the loans. 

I do think that the cost of education is sky rocketing at an insanely fast clip. Even people engaging in "fiscally responsible" programs for undergraduate or masters degrees are facing steeper and steeper loans. We're not going to say that all college is fiscally irresponsible ever so to declare a masters or PhD program fiscally irresponsible is somewhat broad. 

On the flip side, if the currently indebted are going to be expected to make up the spending difference when the baby boomers retire and start living on a fixed income, somethings have got to improve ASAP. Otherwise things are probably going to be pretty terrible for quite some time.

over 11 years ago
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Raymond Firmalino, community karma 27

I understand the tension that comes with taking out loans for grad school. I  m about to start a 2-year management program at an elite private university and will be taking out 100k in loans. Yet,  after completing this program, I'll command a starting salary of 50k/year (I'm being very conservative in order to make a point). I've heard of alumni of my program making 60k right out of school because of the management positiions they secure. Let's say I work for 30 years. If I make 50k/year for the next 30 years (again, not counting raises to keep it simple), I will have made 1.5 million dollars (not counting taxes, etc). I'm taking 100k of loans for my program which will of course, accrue interest.  Here's the point (and you may see it already): Incurring 100k of debt in order to receive the education and training that will enable me to earn 1.4 million over the next 30 years--versus substantially LESS if I don't do my program--is wise to me. I'm not factoring in nflation, purchasing a home, etc.,  but overall, I hope you can see how advancing my education and income potential will be more lucrative  for me than if I were not to stay where I am and not get my degree.  Most importantly, I'll get to do what I love, continually challenge myself, and grow  personally as a result. By doing the above analysis, I overcame lot of my misgivings about the financial aspect of grad school.  For me, going can pay all kinds of dividends for a lifetime.  

about 11 years ago
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