Alas, graduate students, prepare to pay through the proboscis. (For those who are undereducated, that’s a doctoral-level term for nose.)
Under newly passed regulations for the federal Stafford loan program, graduate students will pay about 40% more in interest on their student loans than undergraduate students will. (That sounds a little less dramatic when expressed as 5.4% versus 3.9%, but still.)
Most coverage of the new bill has focused on the fact that the legislation fixes rates for the life of current loans, but doesn’t do so for loans taken in future years (when interest rates may well climb). Meanwhile, graduate students have felt particularly aggrieved. “Airtalk,” a show on Southern California public radio station KPCC, even ran a segment last week titled “Does the Student Loan Deal Cripple Grad Students and the ‘Knowledge Economy?’”
As we’ve addressed a number of times, Peter Drucker was greatly concerned about high tuition costs in general. But his thinking about the value of graduate education, in particular, evolved over time.
In the late 1960s, he found many graduate students in a slightly aimless state. “A good many graduate students know perfectly well that they decided to stay in school in large part because grants and fellowships made it easy,” Drucker wrote. “Often they secretly suspect that they use graduate school as a pleasant way to postpone growing up, with its many commitments and decisions.”
But by the early 1980s, Drucker pointed out that, for at least more directed types, graduate professional education was providing a high return on investment. “Whether it is engineering school or medical school, law school or library school, business school or architecture school, graduation from one of them increases a person’s lifetime earning power by a substantial multiple of the investment, that is, of the cost of his or her education,” he wrote in The Frontiers of Management.
As for how to pay for all of it, Drucker laid out in some detail a system by which students would pay off past tuition by paying a cut of their earnings in excess of the median U.S. wage. High earners might pay a lot (although very gradually), while low earners might pay nothing.
At the same time, Drucker preferred it to be a non-governmental system, and he even went so far as to propose the creation of an “Academic Credit Corporation,” a “cooperative to which universities would turn over their claims, which the cooperative would collect for all of them.”
What do you think is the biggest improvement that can be made when it comes to financing the U.S. system of graduate education?