How The Debt Ceiling Deal Could Affect Higher Ed And The Job Market

The New York Times has been taking an interesting view of higher education and the marketplace lately that’s worth expanding on.  First, a look at the implications of the impending debt ceiling deal on students.  Ron Lieber writes:

“The undergraduates were spared in the package worked out by the White House and Congressional leaders. But graduate students would no longer have access to the subsidy. See the last couple of pages of the debt ceiling agreement for the official language.”

In other words, if nothing changes, graduate students won’t be able to put off paying interest on their student loans while they’re still in school.  Lieber reports the policy’s set to go into effect on July 1st, 2012. Given the current state of the employment market, that could be highly problematic for a number of people.  In a long-ish piece published a couple weeks ago, Laura Pappano, also of The New York Times, writes,

J. Paxon Reyes / Flickr

Hitting the books for graduate studies is set to get much more expensive beginning next summer.

“Call it credential inflation. Once derided as the consolation prize for failing to finish a Ph.D. or just a way to kill time waiting out economic downturns, the master’s is now the fastest-growing degree. The number awarded, about 657,000 in 2009, has more than doubled since the 1980s, and the rate of increase has quickened substantially in the last couple of years, says Debra W. Stewart, president of the Council of Graduate Schools. Nearly 2 in 25 people age 25 and over have a master’s, about the same proportion that had a bachelor’s or higher in 1960.  ‘Several years ago it became very clear to us that master’s education was moving very rapidly to become the entry degree in many professions,’ Dr. Stewart says.”

A little later in the piece, Pappano delves deeper into the market forces shaping educational achievement:

“’There is definitely some devaluing of the college degree going on,’ says Eric A. Hanushek, an education economist at the Hoover Institution, and that gives the master’s extra signaling power. ‘We are going deeper into the pool of high school graduates for college attendance,’ making a bachelor’s no longer an adequate screening measure of achievement for employers.

Colleges are turning out more graduates than the market can bear, and a master’s is essential for job seekers to stand out — that, or a diploma from an elite undergraduate college, says Richard K. Vedder, professor of economics at Ohio University and director of the Center for College Affordability and Productivity.”

So, as more employers in a tight job market are demanding master’s degrees, the federal government is cutting loan subsidies to graduate students.

That policy shift leaves open two major possibilities: Either students disregard the additional costs of grad school and push themselves even farther into debt in pursuit of that extra credential, or the lack of subsidies put graduate education so far out of reach for so many people that the master’s degree eventually slips off employers’ “preferred” list of qualifications.

Meanwhile, in a report issued last year, the New Hampshire Department of education found the state’s University System ranked dead last in the nation for funding:

“New Hampshire continues to rank last in state funding for higher education operating costs per $1,000 of personal income. It would take a 28.6% increase to overtake Massachusetts, the next lowest state.”

And this year, the legislature cut funding to the university system by nearly half, causing tuition to spike in response.

In this stark funding landscape, the consequences of losing federal (grad) student loan subsidies for New Hampshire’s public university system are unclear.  Low state funding means that the state’s institutions–and grad students, for that matter–already rely heavily on private money.  And despite the low levels of public funding, New Hampshire turns out respectable numbers of master’s degrees.  In the same report, the Department of Education found more than 3,000 people earned master’s degrees in 2009, outpacing the number of people earning associate degrees.

Given the state of the job market and the continued move toward a knowledge-based economy, there’s a good argument to be made for New Hampshire’s economic interests being tied to higher achievement in higher ed.


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