There’s been a lot of talk recently about increasing student loan balances and default rates. Student loan debt surpasses all the credit card debt Americans owe (more than $1 trillion). In academic year (AY) 2010-11 alone, students took out an estimated $112 billion in student loans, with graduate and professional students accounting for over 30% of that total. About half of all doctorate recipients now graduate with debt. According to the National Science Foundation, 16% of graduate students graduated owing $50,000 or more in combined undergraduate and graduate debt.

It’s getting more expensive to get those degrees. More and more of the cost is pushed onto students. This year, the cost of tuition and fees at public four-year colleges went up nearly 5%, even as assistance fell. The tide isn’t going to turn until the labor market for new graduates improves. Graduates need to secure a stable and steady paycheck, but half of college graduates today are either unemployed or underemployed.

The broader economic implications are troubling. Graduates struggling to dig out from a mountain of student debt also tend to put off getting married, having kids, or buying homes. As monthly student debt payments increase for college graduates, so does their struggle to qualify for a mortgage. Home purchases create jobs and spur economic growth. However, a key factor in qualifying for a mortgage is the debt-to-income ratio. Cutting out a cohort of graduates who previously participated in this market will add another drag to an economy only just emerging from the Great Recession.

While many graduate students, particularly those in the sciences and engineering, are able to complete graduate school with little or no debt, a growing number of graduate students are not as fortunate. Debt levels will continue to rise due to the combination of increased reliance on student loans to finance their education, the elimination of subsidized Stafford loans for graduate students, increases in tuition and fees, and decreasing support for higher education in many states. Many graduates are already entering the workforce saddled with debt that exceeds their annual salaries, and without changes to existing financial aid policies, more and more graduates will be in this position. ◊