I have previously written extensively about Student Loan forgiveness on this blog twice this year. If you missed those, you can go back and read those below:
That said, one of my overriding frustrations with the conversation about student loan debt is the lack of focus on the source of the problem: the cost of higher education. Tuition at America’s public colleges went from $4160 in 1992 to $10,740 in 2022, putting the per-capita cost of college at $31,600, almost twice as expensive as the OCED average. So it's no surprise that student debt has kept pace: While in 1995, total student debt sat at $187 billion, by August 2022, it had reached $1.75 Trillion, an almost 10-fold increase.
So my latest op-ed, published in the OC Register last week, argues that if you want to reduce student debt in the future, one easy place to start is ending requirements to attend grad school. Please read the piece in full below:
I wanted to excerpt the piece and provide a few additional thoughts that got left on the cutting room floor:
Whatever the merits of Joe Biden’s student debt forgiveness, the move to cancel thousands of dollars in loans per student won’t solve the root cause of the crisis. The price of higher education is still astronomically high, and only getting worse.
While there’s no silver bullet to reducing educational costs, one surefire way to reduce student loan debt is to stop mandating unnecessary amounts of graduate school.
The student debt crisis is a graduate school crisis. While only 14% of Americans have attended graduate school, Americans with graduate degrees owe 56% of all student loan debt. The most recent federal data from 2016 found graduate students held an average of $82,000 in student debt, which would be over $100,000 in today’s dollars. In many ways, this reflects the double burden of graduate school: Not only do grad students go into debt to pay for school, but they often forgo earning income while in school.
The degree to which the student debt crisis has its roots in graduate school is very under-appreciated (and something I hit on in my earlier pieces about student debt forgiveness). The data shows that the percentage of student debt that originated in graduate school is significant and that the balances of those who attended grad school are much larger than those who attended undergraduate school. Worse yet, many master's degree programs are economically useless, and doctoral programs often are not much better:
So why do people continue to attend grad school?
For many students, graduate school conveys status, a sense of certainty and the grandiose promises of university marketing. But the biggest reason students attend graduate school and accumulate debt is state government policy. Almost all states have licensing requirements that require professionals to attend graduate school, even when said graduate programs have unclear value, and clear costs to our economy.
I want to postulate that there are four main reasons graduate schools exist:
Learning new skills: think of someone getting a data science degree so they can program machine learning algorithms.
Gaining social capital: think of someone going to an elite business school to make friends who will one day be executives in prestigious companies.
Gaining a necessary credential: Consider a medical doctor attending medical school to become licensed.
As an expensive hobby for aspiring educated elites (let’s be honest!)
For this piece's scope, I will broadly put aside the issue of social capital and hobbyism, though it’s clear subsidizing elite hobbies is counter-productive for society. And while gaining social capital through higher ed is valuable to the individual, the social impacts are probably harmful. While it may help a handful of successful people from marginalized backgrounds to have access to these elite networks, it’s perhaps net negative to society in that it largely entrenches inequalities between people of higher and lower educational attainment.
In this piece, I primarily focus on the difference between learning skills and gaining a credential. Learning new skills is valuable both for the individual and society: we want people to invest in themselves, especially early in their careers, when they can use those skills in the future. And codifying skills learning in the form of a credential can be good for both individuals and society to the degree it allows a labor market to flourish. The problem is that in the US, we have created a system where higher education, specifically graduate school, has a monopoly on training certain classes of professionals with the skills they need to succeed.
Consider accounting: in many ways, accounting would seem to be the perfect example of a field where multiple paths to getting a credential could exist. After all, it is a field that has a well-defined set of best practices and a rigorous test that aspiring accountants must pass to be publically certified. But instead, aspiring accountants are forced to attend grad school AND pass a test:
Take accounting, for example, where a noticeable CPA shortage has been in the news. To become a CPA, you must take a rigorous exam that ensures you are proficient in the subject. Common sense dictates that anyone who can pass the exam should be allowed to practice as a CPA. Unfortunately, all 50 states not only require bachelor’s degrees but also require a total of 150 units of college credit to be licensed. This forces most accounting students to attend a year of grad school where they incur tens of thousands of dollars in debt — all for a job in a field where the average first-year salary is $54,000. Research has compared the performance of accountants before and after this hour rule came into effect, showing that the requirement decreases the total supply of CPAs, raises the price of hiring accountants to firms, and does not increase the quality of work. Simply dropping this 150-hour rule could open more doors into the profession, help companies afford more accounting services, and reduce future student debt overnight.
So not only does the structure of grad school bad for aspiring accountants, it is harmful for all of us!
The same could be said for lawyers: historically, many successful lawyers passed the bar after being self-taught or apprenticed. Abraham Lincoln may be the most famous example, but he was far from alone. Consider that as late as the 1940s, we had multiple supreme court justices who did not come from what we would consider today to be a traditional legal education.
Robert Jackson, on the court from 1941-54, was not a college graduate, apprenticed out of high school, and only attended one year of college law before passing the bar.
Charles Whittaker, on the court from 1957-62, was not a college graduate and started an evening law program because he was interested, eventually finishing law school.
Stanley Forman Reed, on the court from 38-57, was a college graduate, but while he attended two different prestigious law schools, he never graduated from either.
James Byrne, on the court from 1941-42, was neither a college nor a law school graduate; he simply apprenticed as a lawyer and took the bar.
Consider how that compares to today, where only four states (California, Virginia, Vermont, and Washington) will allow non-law school attendees the ability to sit for the bar exam. While it is hard to know with certainty, there is reason to think that the apprenticeship model could see a comeback if states would legalize it and put a fraction of the resources into apprenticeship programs that the federal government spends subsidizing graduate degrees.
Now to examine this from the other side, consider teaching, a profession about as opposite from accounting as it comes:
As another example, consider high school teachers. Today many states are experiencing an exodus of teachers leaving the profession to head for greener pastures. While most states do not explicitly require teachers to have master’s degrees (though seven do), most have continuing education requirements in their certification that shepherd teachers into costly graduate programs. As a result, 58% of teachers hold a graduate degree, and graduates of these programs hold a median of $58,700 in student debt.
Theoretically, you could see why the lack of objective criteria for teachers makes licensing through tests harder. But the highly relational nature of the job also makes it very hard to see how learning in a graduate school environment (where there are no kids!) would ever prepare a teacher well for the classroom. One of my friends who teaches elementary school provocatively said, “my master's degree was bullshit.” And the research largely backs him up, with hardly any findings that the current credentialing system produces better outcomes:
This is even though researchers and principals are skeptical that these degrees create better teachers. Teaching is a profession with modest pay and where not all thrive: this already makes it hard to attract and retain talented teachers. By lowering the cost and time to get credentialed, states like California can entice more talented people to try it out; with less debt, more will hopefully stay with it.
It is telling that the most innovative teacher training models are happening outside the traditional graduate school system. For example, in Tennessee, they are trying to create a state-wide teacher apprenticeship model where aspiring teachers learn to teach in the classroom alongside existing veteran teachers. Mentorship and in-class experience are popular with teachers and principals as the best tools for professional development.
Lastly, consider medical school:
Or take doctors: The US and Canada are the only OECD countries to require a 4-year bachelor’s degree and four years of medical school. When combined with the three-plus years of residency, America asks doctors to train for at least 11 years before practicing. Thus, Doctors typically graduate with between $200,000 and $300,000 in debt, which takes some of the shine off their high wages.
Saying doctors need less training can raise eyebrows: one reader of the paper emailed me to say that they only want to see a doctor “who can do it drunk or sober.” But I think people underrate just how out of step with the rest of the highly educated world the US is. To see this illustrated, check out this chart from the Niskanen Center:
The issue is that these training requirements mean fewer doctors overall:
Extensive educational requirements have contributed to the US having the fewest physicians per capita of almost any developed country. This shortage is especially acute in general practice and one of many reasons American healthcare spending is out of control. Compare this to Germany or Japan, where doctors attend one combined 6-year program after high school for training and then train for two years as a resident. Or consider Sweden, where doctors finish all training and residency in seven years, allowing Sweden to train twice as many doctors per capita as the US, leading to more competitive market for healthcare provision, and lower prices for consumers. States like California should copy this model, and create six-year medical programs for driven high school students, empowering more doctors and making our healthcare system more dynamic
You can see here pretty clear the divergence between the US and countries with shorter medical training programs:
Of course, educational requirements are not the whole story: the US doctor shortage has a long history and fixing it will involve fixing broader problems with medical residency and regulations. But simply giving alternative pathways for doctors who would rather be general practitioners, not specialists, would be a good start.
The good news is that in places where the private labor market is not subject to licensing rules, we see companies opting for more flexible and diverse approaches to training:
In the private labor market, where licensing regulations do not apply, employers are dropping degree requirements because they recognize that while acquired skills are essential, how they are learned is flexible. Apple, Google and Tesla have all rolled back their college degree requirements, and Accenture only places degree requirements on 26% of its jobs. Recent research by the Burning Glass Institute found that 46% of middle-skill and 31% of high-skill occupations saw a significant reduction in job postings that required college degrees between 2017 and 2019. Even in Maryland, Gov. Larry Hogan has created a plan to eliminate degree requirements in up to half of the state’s 38,000 employed positions. The future of a more dynamic workplace is becoming clear and involves embracing more pathways to skills, not less.
To become more dynamic and fix the problem of college costs, you need to incentivize innovative approaches. If we want job training to be productive, students should have a right to learn the required material in the most efficient method, ideally in as few hours as possible. California state policymakers could act right now and reduce or eliminate these wasteful requirements that force professionals to go to graduate school.
This case is pretty clear to me: a world without these graduate school requirements is good for society on multiple fronts. It makes life easier for aspiring professionals and makes our economy more dynamic. It simply would take some political courage from our state lawmakers to create the freedom for institutions to start charting a new path