Inside the Masters Degree Scam

Jordan Weissman did an interesting follow-on to the WSJ story about Columbia’s film industry master’s program. He interviewed higher ed financing expert Kevin Carey about the explosion in master’s programs, especially onlline programs, and how these have turned into basically completely unregulated cash cows for everybody from Harvard to Rapacious Small Town Bible College.

What a lot of schools, including very prestigious ones, are doing is outsourcing the development of these programs to private entities who create an online program in a box for the schools, then rake off as much as 70% [!] of the revenue they generate. That revenue is provided mostly by GRADPLUS loans, which as I started pointing out a decade ago now in the context of American law schools, have zero limits on either what students can borrow or what schools can charge, for both tuition and cost of living. GRADPLUS loans also have very high interest rates — currently 4.6% above the 10-year T-bill rate.

Here’s a little puzzler for all you fans of our magically efficient markets. Why do the feds charge such high interest rates for GRADPLUS loans?

Well, partly for a really bad reason, which is that grad students in the main pay their loans back at a higher rate than people in other parts of the system, and they [graduate student loans] charge higher interest rates, which means it’s scored as making money for the federal government. So you throw this into the mix of whatever budget deal you’re striking and there was more money to spend.

Um, isn’t that, like, the opposite of how credit markets are supposed to work?

But we’re talking American higher ed, where the laws of economics are often suspended, like the laws of physics when you approach the event horizon of a black hole.

A black hole is where increasingly large amounts of GRADPLUS loan money is going to end up, because as schools have learned to “monetize their brand” as the B-school kids say, they keep creating more and more online programs, designed specifically to credential students to get jobs that mostly don’t exist, especially in the fine arts, where jobs, or at least jobs that pay a decent wage, never exist, for reasons that are too obvious to belabor.

The result is that American universities are now cranking out more than one million graduate degrees every year, many of them worse than worthless, at extraordinarily high prices.

I don’t like to pick on Columbia — actually I do — but come on:

The Columbia School of Journalism offers what is essentially a 10-month master’s degree that costs $70,000 or something like that. It starts in September, ends in June. You can only do so much in less than a year. It’s completely a career-oriented degree. There are thousands upon thousands upon thousands of [career-oriented] programs out there.

A relative of mine just graduated from college and wants to go into journalism, so I asked a friend of mine — a prominent national journalist — to give her some career advice. His advice was, in short, for the love of Messi don’t go into journalism BECAUSE THERE ARE NO JOBS.

And that is the fundamental problem in an enormous number of fields — one that that is if anything exacerbated by the existence of federally-funded $70,000 one-year online vo-tech masters programs, of which there are more every day.