Want to fix the student debt crisis? Stop superfluous grad school requirements

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.

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.

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.

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. 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.

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. 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

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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.

Thomas Irwin is the founder of Elevate Equity, a nonprofit dedicated to increasing economic opportunity on the Eastside of Los Angeles.