A series of recent Wall Street Journal investigations has demonstrated the limited value of some graduate degrees from elite private institutions. Ivy League schools such as Columbia University have built a sterling reputation on small, highly selective undergraduate programs. The colleges then cash in on this reputation at the graduate level, offering master’s degrees that can leave students with debt up to six times their annual income.

A closer look at federal student aid data reveals just how financially dependent elite schools have become on their graduate programs. The twelve “Ivy-Plus” universities (the eight schools of the Ivy League plus Stanford, Duke, Chicago, and MIT) collectively draw over $1.2 billion from federal student aid programs such as Pell Grants and student loans. Three-quarters of that money—nearly a billion dollars every year—comes in the form of loans to graduate students.

Ten of the twelve Ivy-Plus schools receive a majority of their federal funding through the graduate loan programs. The worst offender is Columbia University, which raked in $268 million from graduate loans during the 2019-20 academic year. In the same year, Columbia’s undergraduates borrowed just $16 million. The university received less than $10 million from Pell Grants, the main federal scholarship program for low-income undergraduates.

Also of note: The Ivy-Plus universities have a combined endowment of nearly $200 billion.

The business model for most elite schools has shifted to making money off taxpayer-backed loans to graduate students. The reasons are obvious. Unlike undergraduate loans, there is effectively no cap on federal loans to graduate students. While typical student debt for bachelor’s degree recipients is just $30,000, many graduate students rack up six-figure balances.

Importantly, however, graduate students with the highest balances are unlikely to pay back their loans in full. Because federal borrowers can use income-driven plans to lower their monthly payments, the Congressional Budget Office reckons that taxpayers will eventually have to forgive a large chunk of outstanding graduate debt. Schools such as Columbia, meanwhile, will get to keep the profits.

But the graduate-loan racket is more than an issue of fiscal responsibility. Graduate-degree factories fueled by federal subsidies contribute to credential inflation. Employers tend to bump up education requirements in response to a glut of people with advanced degrees. The upshot is that less-credentialed Americans are shut out of jobs they might be otherwise qualified for.

The solution is to abolish the unlimited loans for graduate students that enrich Ivy League universities while burdening students with debt, widening the federal deficit, and feeding credential inflation. If elite universities wish to offer graduate programs, they should fund them from their endowments or seek financing in the private market. Taxpayers should have no obligation to send a billion dollars in graduate loans to the Ivy League every single year.