Much of the concern about student loans has focused on young undergrads taking out steep loans to pay for soaring college tuition costs. But a problem fewer people are talking about is loans for graduate and professional students, which now make up as much as 40 percent of the estimated $1.2 trillion in outstanding student debt, even though the students are only 14 percent of the student population, according to a New America Foundation report. Graduate student loans are also 30 percent more expensive than undergraduate loans, even though data suggests graduate and professional students are three times less likely to default on their loans.
This statistic spurred the Graduate Professional Council (GPC) at the University of Missouri to spearhead a national campaign to address the issue. The initiative, dubbed GradsHaveDebt2, hosts events on campus and on social media to encourage students across the country to talk with their members of Congress about the student loan debt burden.
GradsHaveDebt2 calls for two things. First, it seeks to reverse student loan inequality following the Bipartisan Student Loan Certainty Act of 2013, which severely cut interest rates for undergraduate students compared to graduate and professional students. Because the rates are set each year, the 2015 rate for graduate student loans is 33 percent higher than for undergraduate loans. Second, the campaign urges Congress to reinstate the in-school interest subsidy for graduate and professional students, which was eliminated in 2012. With the elimination of the subsidy, graduate and professional students can only take out unsubsidized loans that begin accumulating interest immediately, as opposed to after graduation.
Mobilizing MU students
Jesse Kremenak, a fifth-year physics Ph.D. student at MU, said he was motivated to start the GradsHaveDebt2 campaign because he felt graduate students were left out of the conversation.
“I’ve always been a person that is looking out for the little guy, and I’m willing to fight,” Kremenak said. “There wasn’t anybody out there talking about graduate professional student loans at that time, and the graduate professional population wasn’t mobilized, being so busy with their research. I took it upon myself to do it.”
As the director of national affairs for the GPC at MU and the director of legislative affairs for National Association of Graduate Professional Students (NAGPS), Kremenak frequently travels to Washington to advocate for change. Although it was difficult to get the word out at the beginning, Kremenak said, the GradsHaveDebt2 campaign gained traction because of the association with the NAGPS and the various events hosted across partner universities.
Since GradsHaveDebt2 kicked off at MU in 2013, it has been adopted by around 35 universities nationally. When the initiative started, it recorded more than 1,000 phone calls to Congress during its first event, known as the National Call-Congress Day. Its latest event, in November, logged more than 600 calls from universities across the country, including MU.
In response to an interview request, the office of Rep. Vicky Hartzler, who represents Missouri’s 4th Congressional District — which includes the university — said it recorded a handful of calls from MU graduate students and will keep their concerns in mind when legislation on the issue makes its way to the House.
Hartzler also sent a statement to the MU Graduate Professional Council:
“Ensuring students have access to funding sources like student loans is critical for the pursuit of higher education. With increasing college costs, it is important that lawmakers like myself work with students and school administrators to ensure our educational system is affordable to all students who want to work hard to earn a degree. I believe improving education on the wise use of student loans and supporting policies to provide a higher quantity of quality career opportunities are critical for this generation of college students.”
Kremenak said Missouri Reps. Billy Long, Jason Smith and Sam Graves have started to change their position on graduate and professional student loans.
Student loan inequality
This year’s interest rate for new Stafford Loans, a form of federal aid for students, is 4.66 percent for undergraduate students and 6.21 percent for graduate and professional students. Rates are set for the academic year every July 1, based on the spring rate of the 10-year Treasury note and a fixed percentage. Now, although subsidized and unsubsidized loans have the same rate, the difference is that the government pays the interest on subsidized loans while the borrower is enrolled in school. By contrast, students themselves have to pay interest rates for unsubsidized loans, which are the only ones available to graduate and professional students. Although undergrads and graduate students used to pay similar rates for unsubsidized student loans, that changed after new legislation was adopted and grad students were required to pay more.
In an effort to understand what led to the decision, Kremenak and his colleagues spoke to House Committee on Education and the Workforce.
“I was shocked to hear that they were purposely set in this manner to pay more because undergraduate education is a higher priority and that they want to fund and make it more accessible at the cost of graduate professionals,” Kremenak said. “The profit coming off from the graduate professionals will go to subsidize undergrad loans.”
Plus, since President Barack Obama signed the Budget Control Act of 2011 into law, grad students are no longer qualified for subsidized loans, which means their loans accrue interest on a monthly basis while they are still completing their degrees.
That adds up to a couple hundred dollars per year for Sarah Lirley McCune, a fifth-year graduate student at MU pursuing her Ph.D. in history. She and her husband owe a combined $50,000 for their undergrad and graduate loans. Though most of their undergrad debt was subsidized, McCune and her husband are still paying off interest for the loans they took out while in grad school, when they lost their eligibility for loan subsidies due to the new legislation. In addition to her teaching assistant position, McCune decided to take a job as a tutor to help pay some of those interest fees.
Apart from being concerned about not yet saving for retirement, McCune said she finds it highly unfair that undergrads pay less in interest rates because they have access to a larger variety of funding sources, including scholarships, Pell Grants — federal aid allocated to financially needy undergraduate students — and support from their families.
Unlike their undergraduate counterparts, grad students get most of their funding from student loans and stipends. Apart from Stafford Loans, other options include private loans, Direct PLUS loans — federal loans at a 7.21 percent interest rate, as of July 2014 — and Perkins loans, low-interest federal loans for graduate and undergraduate students with exceptional financial need.
Fellowships are another source of income, but for McCune that amounts to no more than $1,000.
“As a grad professional student, your funding is your stipend, and if you get something outside of your department, they reduce your funding in the department,” McCune said. “So the most I can make is $15,000 a year. That’s if I got the dissertation fellowship next year.”
Research funding suffers
Lack of research funding has also been a big problem for graduate students. Forced federal budget cuts, also known as sequestration, slashed hundreds of research jobs and took away grants and funds from university research departments.
Hallie Thompson, who is a doctoral student in plant sciences at MU, chose to do drought research over science communication because of funding considerations.
“I was driven to my current degree program in a large part because of the fact that I could get an assistantship or fellowship to fund my graduate degree,” said Thompson, who currently serves as the GPC president.
Decreased research funding also caused grad students in certain fields to rely more heavily on loans, and therefore pay higher interest rates. For Kremenak, the math just doesn’t make sense. Graduate loans are a safer investment than undergraduate loans, as the default rate for graduate students is nearly three times lower than for undergrads, according to the U.S. Department of Education.
“That statistic personally bothers me quite a bit, because as grad students we are the ones that spend time in the classroom, being graduate instructors, so we are helping to make undergraduate education more affordable on far too many fronts,” Kremenak said.
“These are people who are trying to find cures for cancer, trying to solve the world’s problems, and now we just made it even more difficult to actually pursue that.”