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A lot of factors go into deciding whether or not to go to grad school. Here’s how to step back, take an objective look at those pros and cons, and determine whether an advanced degree is going to get you a return on your investment.
Do I Really Need a Graduate Degree to Advance in My Field?
The answer isn’t always yes.
“Thirty years ago, getting a graduate degree was a pretty reliable way of getting into a well-earning job. Now, things are different,” cautions Shahar Ziv, the renowned personal finance lecturer and consultant behind AcingYourFinances.com.
Gary Alan Miller, the director of career services at the University of North Carolina at Chapel Hill, says around 75% of employees these days work in a field that’s different from what they got their degree in.
To find out whether you need a grad degree, Miller suggests this exercise: Lookup 20 job postings for the position you’d like to have. See what the educational requirements are for each one.
Is Now the Right Time?
“We see a lot of ebbing and flowing of applications as the job market rises and falls,” says Miller.
When the job market is bad, people often assume grad school is their only option, he says. However, waiting out a slump with a lower-paying job can still be more profitable in the long run than jumping straight into grad school and incurring unnecessary debt.
Regardless, don’t be afraid to spend a few years in the workforce to save up and decide what you want.
“There’s some advantage to giving yourself some breathing room after your undergraduate degree and reflect on what should come next,” Miller says.
How Do Costs Vary Between Programs?
Figure out what a typical price tag is for a graduate degree in your field. Compare several different programs, even in states or cities you may not have initially considered.
Ziv also recommends reviewing data from the US Department of Education, which shows the average debt graduates of different programs take on.
Do I Need a Degree from a “Name-Brand” School?
To get into some careers—like teaching fifth-grade history, for example—you’re going to need some certifications, but your future income and job prospects likely won’t depend on the school you go to, says Ziv. In those situations, there’s likely no need to pay for an expensive private school.
“In other fields, like business or law, your job prospects increase dramatically if you have a name like Princeton behind you, and paying for the name—and the alumni network that comes with it—might be worth it.”
How Long Am I Going to Be in Debt?
“Think of grad school like a bond investment,” says Certified Financial Planner and author Mel O (and, yes, that’s her real name). “You want to look at the duration—or how long it’s going to take for that investment to pay you back.”
First, estimate how much debt you’re going to take on, O suggests. You can find a total expected cost of attendance on your preferred program’s website. Figure out how much you’ll have to take out in loans, and what you expect your monthly loan payment to be after you graduate. (Include any student loan debt you already have.)
Then, determine what you can expect your starting salary to be with your new degree. Miller recommends using Glassdoor.com or Salaries.com to make an estimate. Then, he says, Use that number to mock up a budget for your future self, based on the cost of living of the city you expect to end up in.
There’s no hard-and-fast rule on how much is too much debt, but crunching the numbers can reveal some important trends.
“If you take on $200,000 in debt, for example, and your typical salary post-grad school is $20,000, that’s going to be a pretty tough mountain to climb,” Ziv says.
What’s the Statistical Likelihood That I’ll Finish Grad School?
Any time you make an investment, you should consider what will happen if it falls through, and grad school is no exception.
“One of the biggest risks when it comes to grad school is that you incur the debt but don’t get the degree,” says Ziv. “Everyone is confident they’ll finish, but it’s important to look at the data.” He cites one example of a study of a graduate art program where only 28% of students earn their diploma within eight years. “That’s a red flag,” he says.
What’s My Total Return on Investment Going to Be?
The duration of an investment isn’t the only factor to consider. To determine your return on investment (ROI), use an online salary calculator to compare your expected lifetime earnings with your current degree to your expected lifetime earnings with an advanced degree.
Also, consider the current job market. The Bureau of Labor Statistics publishes growth predictions for most occupations. You’ll get a better return on your investment if a graduate degree will put you in high demand in a growing field.
How Good Is My Data?
“Someone looking at going to grad school should treat it similarly to vetting other investments,” Ziv says. “The first step is asking, ‘Who is giving me advice and how are they making money?’”
Many schools report data like average income, or the percentage of recent grads who are employed. However, sometimes the data they publish can be misleading, Ziv says. One example: Schools have been known to count all jobs, even waiting tables, as post-graduate employment, rather than only jobs requiring a degree. Likewise, recruiters who are paid by a school might not be honest about its shortcomings.
Have I Sought out the Best Advice?
Do a LinkedIn search of alumni from a certain program, and find out where they are now. Reach out to a few and ask if you can pick their brains about their career path. “Just make sure you qualify the information they give you,” O warns. Markets, inflation rates, and tuition costs are different now than they were even five years ago, so take career advice with a grain of salt.
Finally, sitting down with a financial planner can be a great way to distill all the data and get advice that’s tailored specifically to you.
What Are My Motivations, Really?
Mel O gives prospective students the same advice she gives prospective investors: “There’s no reason for you to take a risk with your money if you don’t need to.”
Deciding whether to go to grad school is a huge decision, and one that’s often tied up with a lot of emotions. Understanding those emotions and unconscious biases can help you make the right decision—and avoid taking unnecessary risk with your money.
O says she works with a lot of graduates who got a degree because their family viewed it as a measure of success, not because it was a career path they truly wanted. Eventually, they switched careers—and ended up stuck with debt without anything to show for it.
On the other hand, though, passion for a career can mean much less risk on your investment.
“If you’re passionate about becoming a surgeon and it’s going to make you happy for the rest of your life and you can do it until you die, then that’s a good investment,” O explains. “If you love what you do, maybe you’ll work until your 75 instead of 65—and that puts you in a much better position, both in your finances and in your happiness.”
Disclaimer: The opinions expressed by the interview subjects are not necessarily those of Earnest.