November 10, 2020
Where does all that student debt come from?
Americans owe more than $1.5 trillion in student loans. Many struggle under the burden of those loans. But not all student loan borrowers struggle. Indeed, many thrive because of the education financed with their loans.
Individuals who owe student debt are an incredibly diverse group, spanning highly educated professionals to first-year dropouts. Some borrowers earn six-figure salaries their first year out of school, and some earn less than a high-school graduate.
One factor differentiating those who struggle with those who thrive is the program in which they studied. Updated data from the Department of Education’s College Scorecard, a unique source with data by institution and by field of study, reveal which programs Americans have borrowed to attend and how borrowers from those programs fare in the workforce after graduation. In short, it shows for whom student loans are a good investment and for whom they are not. This evidence is important as policymakers examine ways to reduce the burden of student debt on those who struggle.
The data show, for instance, that if you have a student loan, you’re more likely to be a well-paid professional. Table 1 lists the 20 programs that account for the largest amounts of student debt of graduates in the (combined) 2015 and 2016 academic years. (These data pertain only to graduates and exclude debts of people who failed to complete their degree.) The five degrees responsible for the most student debt are: MBA, JD, BA in business, BS in nursing, and MD. That’s one reason why the top 20 percent of earners owe 35 percent of the debt, and why most debt is owed by well-educated individuals.
The largest individual source of student loan debt is MBA programs, whose graduates owed 4.3 percent of all student debt in those two graduating years even though those borrowers represented only 2.6 percent of all borrowers. That’s because of the high cost of MBA programs and higher-than-average borrowing amount. In the year after graduation, the median MBA graduate earned $73,868. (For comparison, the average American full-time, full-year worker earned about $47,400.)