Taxpayers on the Hook for Overpriced Master’s Degrees

“Columbia and other wealthy universities steer master’s students to federal loans that can exceed $250,000. After graduation, many learn the debt is well beyond their means,” notes the Wall Street Journal.

The Journal reports on Columbia University’s Master of Fine Arts Film program, one of the worst examples, in an article titled “Financially Hobbled for Life: The Elite Master’s Degrees That Don’t Pay Off”:

Recent film program graduates of Columbia University who took out federal student loans had a median debt of $181,000.

Yet two years after earning their master’s degrees, half of the borrowers were making less than $30,000 a year.

The Columbia program offers the most extreme example of how elite universities in recent years have awarded thousands of master’s degrees that don’t provide graduates enough early career earnings to begin paying down their federal student loans. … Recent Columbia film alumni had the highest debt compared with earnings among graduates of any major university master’s program in the U.S.

Columbia is one of America’s most progressive universities, and one of the richest: “Its $11.3 billion endowment ranks it the nation’s eighth wealthiest private school.”

It is now graduate students, not undergraduates, “who are accruing the most onerous debt loads.” That’s because “the federal Grad Plus loan program has no fixed limit on how much grad students can borrow.” Its “no-limit loans make master’s degrees a gold mine for universities, which have expanded graduate-school offerings since Congress created Grad Plus in 2005.” As a result:

Highly selective universities have benefited from free-flowing federal loan money, and with demand for spots far exceeding supply, the schools have been able to raise tuition largely unchecked. … Universities, which receive their tuition up front, have an economic incentive to expand graduate degree programs and face no consequences if students can’t afford to pay the federal loans after they leave.

As Columbia graduate student James Stoteraux notes, “There were 55 students in my incoming class at Columbia’s MFA Film program. Only 4 of us ever managed to make a career out of it. And of those 4, one guy dropped out the first semester. Funny enough he’s the most successful one having co-directed Avengers Endgame.”

But as Ian Lamont of Lean Media observes in a tweet, “a graduate financing program enabled by Congress ~15 years ago basically lets Columbia charge whatever it wants and get paid up front. Students are on the hook for hundreds of thousands; if they can’t pay it off taxpayers are on the hook.”

Even students who can find jobs after graduating often dump much of their massive student-loan debt on taxpayers. Once out of school, the students enroll in an income-based repayment program, in which the federal government forgives all loans after 10 or 20 years. This “Pay as You Earn” program allows eligible student-loan borrowers to cap monthly payments at 10 percent of their discretionary income, and have their remaining federal student loans forgiven after 20 years — or just 10 years, if they go to work for the government.

Stoteraux describes how little he got for his tens of thousands of dollars in annual tuition at Columbia: “During my 2nd year I suspected that the school wasn’t providing a launching pad to a career — most of the instructors were struggling to establish a career themselves & many weren’t even much more experienced than their students. A 4th yr student taught our cinematography class.”

After getting their MFAs, his classmates, unable to find jobs as filmmakers, sometimes ended up“teaching … in MFA programs.” So the MFA programs became a never-ending cycle of failure, in which people who already have the useless MFA degree help transmit it to others who spend a fortune on the degree.

Columbia film students received little for their massive tuition. As Stoteraux explains,

The brass ring the program dangled was that your film could be chosen for the annual festival where, in theory, big-time agents would see it and maybe sign you. But it was cutthroat to even be selected for the festival. And tuition didn’t cover the cost to make those films. You were on your own to pay for them. … Students were going into debt to the tune of 100K to make films with the hope that they might maybe have a chance to be seen by a CAA agent.

Not having the money to make a film, I switched to writing. I teamed up with a friend to write a screenplay that we hoped could be our calling card. … Within a year, that script sold — not because of anything my fancy school did, but because randomly I met a producer’s assistant who offered to read it, liked it, & championed to his boss.

I was officially a working writer, but I was still 2 credits shy of getting my degree. I asked if there was possibly a way I could finish my degree while in LA starting my career. But Columbia was offended by the request and refused. So I dropped out within 2 credits of MFA.

After Stoteraux became successful, the MFA program wanted him to speak to its students. In exchange, he wanted Columbia to allow him to finish his degree. But the Chair of the MFA program would only do so if he provided a special favor to the Chair himself: “The Chair began pitching me his idea for a TV pilot. In excruciating scene-by-scene detail. … He made it pretty clear if I wanted my degree, I needed to help him sell his tv pilot. Yep, the Chair of Columbia’s prestigious graduate film program tried to shake me down in order to jump-start his own stalled out career. … I still don’t have my MFA. That Chair is no longer the Chair, but still teaching there. And to my knowledge, they never sold their pilot.”


Editor’s Note: This article was originally published by Liberty Unyielding on July 13, 2021 and is crossposted here with permission.

Image: Ad Meskens, Wikimedia Commons, Creative Commons Attribution-Share Alike 3.0 Unported license, cropped.

Hans Bader

Hans Bader is a senior attorney at the Competitive Enterprise Institute.

7 thoughts on “Taxpayers on the Hook for Overpriced Master’s Degrees

  1. “And I’ve argued that the odds of winning at a casino are actually higher — that the return on investment for money gambled at a casino is actually higher”

    You may have argued that, but it’s not true. It’s simply absurd.

    1. Really?!?

      On what research do you base that presumption?

      First, start with the percentage of college graduates employed in jobs which do NOT require a college degree — they lost the entire investment, not only the money and the opportunity costs but the years of advancement in their non-college-degree jobs that they otherwise would have enjoyed.

      Then look at those who get a job that actually uses their degree and calculate out how much of a premium they are paying because of (a) college costs, (b) lost earnings, and (c) lost time in grade and tell me how long it will take them to repay this before they are where they would have been had they never gone to college.

      Yes, some may come out ahead, but some come out ahead at the casino as well…

  2. The univerities and probably the federal government are at fault here, but so are the students. How someone could go into $180,000 debt without doing due diligence on the program and the future career prospects is beyond me.

    1. Two words: “Bernie Madoff”

      People older and far more experienced in financial matters than the average 17-year-old were fooled by Bernie Madoff — and like Madoff, colleges sell dreams.

      Dreams that people wish to believe….

  3. The real problem is the no-limit loan feature. This has become a gold mine for colleges. Keep raising that tuition because you can tell the student to just go borrow more. Easy.

    Well, you can’t borrow an unlimited amount of money to purchase a home or a car; the bank tells you how much you can qualify for (if any). That policy should apply to student loans as well. The amount a student can borrow, for which taxpayers are on the hook, can be capped based on the expected median income two years after graduation.

    1. The “problem” with this is that institutions would have to actually guarantee the value of their degrees, much like auto manufacturers have to guarantee their product — and auto loans are based on the presumption of the value in the security of the loan, i.e. the car.

      Student loans are actually quite close to slavery as they are guaranteed by the student’s body, except that asset often isn’t capable of guaranteeing the loan. And there is no Kelly Blue Book value of various degrees — and the problem is that the value of the degree varies by which school awards it as well.

  4. “There were 55 students in my incoming class at Columbia’s MFA Film program. Only 4 of us ever managed to make a career out of it.”

    While not as egregious as Columbia, this is true of much of higher education today.

    From the community college to the doctoral degree, colleges & universities recruit with the promise of the career in a way that we’d never tolerate a casino doing — we require that casinos tell people their odds of winning and hence that most people won’t win.

    Casinos are required to say “you *could* win” while IHEs are permitted to say “you *will* win.” And I’ve argued that the odds of winning at a casino are actually higher — that the return on investment for money gambled at a casino is actually higher.

    What infuriates me is that the colleges & universities profile their one or two highly successful graduates without ever mentioning the tens of thousands who aren’t. Law schools are particularly notorious in this regard, and while the ABA now requires them to at least tell what percentage of their graduates actually are practicing law, reality is that graduates of third & fourth tier law schools aren’t going to be financially successful,.

    In any other economic context, there’d be indictments for “fraud.”

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