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Don't some universities give MS diplomas out to people who make it so far in the program, but drop out before getting their PhD as a kind of "well, here's something for your work"?

Yeah those are usually referred to as "terminal masters", meaning that you terminated your education with as MS.

"terminal masters" more usually refers to a field where a Masters degree is the highest attainable degree, like a Masters of Fine Art (there is no Doctorate of Fine Art).

Although searching Google - I can find references to the usage you're giving.

But, I fully agree that a Masters in a hard science, especially from a top research school, is almost always a consolation prize for those who drop out. My program would not accept students into the program for a Masters, it was PhD only, unless you dropped out.

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