The Rising Cost of Graduate School: Is It Worth It?

Posted

Graduate degrees are becoming like tattoos: you should think hard before getting one.

Tuition at graduate schools has been skyrocketing—for professional programs, it has jumped 60% in the last decade. In 2009, a year of grad school was $21,900 at a public school and $34,100 at a private one. These are serious numbers, especially considering that you’ll also pay living expenses and most grad school programs are two years long.

At the same time, traditional grad school funding options are vanishing. Cash-strapped companies are dropping tuition reimbursement and universities are cutting graduate fellowships. To cap it all off, a job afterwards is not guaranteed in this economy, while grad school debt is very, very real.

Deciding whether to spend the cash (and time) on a degree depends on the return on your investment. No single equation will determine this, but the following factors can help you make a smart decision.

Why Do You Want to Go?

Obviously, some career paths like psychology, medicine and law require an advanced degree to practice without getting arrested. And if you’re switching fields and don’t have relevant experience, then graduate school can make sense as well.

However, nowadays the more traditional appeal of graduate school—that it’s a safe bet to further your career and earning potential—should be questioned in light of rising costs. For instance, the University of California system will raise tuition 31% this year, and Stanford Law School’s planned tuition increase this fall—5.75%—is higher than inflation.

It’s true that on average, holders of postgraduate degrees earn 23% to 55% more than those with bachelor’s degrees. But when you drill down into individual professions and financial situations, it’s unclear whether that increased earning potential will outweigh the real costs.

How Will You Pay for It?

Determine the sticker price. It pays to comparison shop. The average public-private tuition difference is $12,000 a year, while, in most cases, private school graduates earn the same as those from similarly ranked public schools. Compare programs and costs at USNews.com and PrincetonReview.com. (Avoid for-profit schools, which are one giant hustle—many aren’t even accredited.)

Search for a free ride. Look into traditional grad school funding options: company reimbursement, university fellowships or teaching assistantships. (Search for opportunities on Fastweb.com and FinAid.org.) And since those offerings are starting to disappear, investigate other options, such as tuition discounts to alumni offered by your alma mater or degree programs that take one year instead of two. Many universities also offer tuition reimbursement for employees, so consider working for a school.

Count your cash. Can your savings cover tuition and living expenses? Even then, if you look into hidden costs, it may not be worth it. Also consider your college or credit card debt. If you’re $50,000 in the hole, don’t tack on another $50,000 unless your shiny new diploma will definitely earn big returns. Also check out LV’s checklist on paying for grad school.

What Are the Hidden Costs?

Interest. If you can’t pay for your degree up front, do the math. What will you shell out in principal and interest? A $50,000 loan at 5%, for example, requires monthly payments of $530 for ten years. Total amount paid? More than $63,000. Calculate your potential interest payments at FinAid.org.

Retirement savings. If you’re a full-time student, you won’t be contributing to retirement. Say you typically max out your Roth IRA. For every year of grad school you’ll miss out on the $5,000 contribution and all the interest it would earn. Throw in whatever you’ve been stashing in your 401(k)—up to $16,500—and you could be out hundreds of thousands of dollars by age 65.

(To figure out how much you need to retire, try this calculator.)

Opportunity cost. If you’re pursuing an advanced degree in a field that doesn’t require one, think about what your competition will be up to while you’re hunkered down in the library. Two things we can think of: gaining experience and building a salary history.

What’s Your Earning Potential?

Check job prospects. Choosing a profession without knowing whether there are jobs is a recipe for unemployment. This applies even for more traditional careers like law, where recent layoffs have left newly minted attorneys with hundreds of thousands in debt and no jobs in sight. Looking for a growing field? Try biomedical engineer, network systems and data communications analyst, or even home health aide, jobs which all topped the 2009 Bureau of Labor Statistics’ list of professions projected to grow the most until 2018.

(You also want to keep your eyes open for how companies treat women employees. Read this eye opening account of what it’s like for women on Wall Street.)

Investigate salaries. Do some sleuthing on Salary.com. If grad school will cost $80,000 and starting salaries are $40,000, you’ll be digging yourself out of that hole for a while.

Consider the intangibles. If networking is a crucial part of your field, then graduate school could connect you to future employers, business partners, colleagues or clients. However, if you work in a field where work history matters more, you may not need to pay for another degree to open doors.

Will You Get a Worthwhile Return on Your Investment?

Take all of these questions into account and tally up your answers. Even if your parents will pay your tuition and living expenses, your grad school ROI will still be negative if you’re in a field that pays master’s and bachelor’s holders the same. Conversely, if you’ve done the salary research and know that you’ll recoup your investment within five years even if you’re paying full tuition, grad school could upgrade your earnings and lifestyle in the long run.

Grad school can be the smartest investment you ever make or a pricey mistake – ultimately, you need to crunch the numbers to decide.

  • http://profiles.google.com/kathader76 Kathy Anderson

    I understand the thinking that many for-profit schools aren’t the best choice, but this is another case of “do your homework”.  I’ve been a student at University of Phoenix for 2 1/2 years and will be graduating with my Bachelors of Science in Accounting in 2 weeks.  I will also be attending UOP for my Masters in Accounting but first, I’m taking the summer off).  They are accredited and I need the Master’s to sit for the CPA exam (since this is my first Bachelor’s, I’m graduating with 130 credit hours and you need 150 to sit for the exam).  UOP was the best choice for me, and is for many professionals who have full-time jobs, a family, and want to finish our degrees.  An accredited school with a good professional reputation, it’s relatively cost-effective, and we can work full-rime and go to school full-time as well.  A traditional university will make that schedule very difficult to maintain.

  • Jancullinane

    I earned my master’s while I was working ( and did the same as I worked toward my doctorate).  Worked full-time outside the home, went to school part-time at night, and had three children – tough to juggle, but worth every minute of it, and I didn’t incur any debt. If you’re thinking of attending full-time and money is an issue (as it for most of us), be be sure to talk to the placement office and find out what percent of graduates got a job over the last several years in the field you’re considering. Assuming you’re going for advanced degree because you want/need a job in your field when you graduate, that is.

  • Jancullinane

    I earned my master’s while I was working ( and did the same as I worked toward my doctorate).  Worked full-time outside the home, went to school part-time at night, and had three children – tough to juggle, but worth every minute of it, and I didn’t incur any debt. If you’re thinking of attending full-time and money is an issue (as it for most of us), be be sure to talk to the placement office and find out what percent of graduates got a job over the last several years in the field you’re considering. Assuming you’re going for advanced degree because you want/need a job in your field when you graduate, that is.

  • Jancullinane

    I earned my master’s while I was working ( and did the same as I worked toward my doctorate).  Worked full-time outside the home, went to school part-time at night, and had three children – tough to juggle, but worth every minute of it, and I didn’t incur any debt. If you’re thinking of attending full-time and money is an issue (as it for most of us), be be sure to talk to the placement office and find out what percent of graduates got a job over the last several years in the field you’re considering. Assuming you’re going for advanced degree because you want/need a job in your field when you graduate, that is.

  • Jancullinane

    I earned my master’s while I was working ( and did the same as I worked toward my doctorate).  Worked full-time outside the home, went to school part-time at night, and had three children – tough to juggle, but worth every minute of it, and I didn’t incur any debt. If you’re thinking of attending full-time and money is an issue (as it for most of us), be be sure to talk to the placement office and find out what percent of graduates got a job over the last several years in the field you’re considering. Assuming you’re going for advanced degree because you want/need a job in your field when you graduate, that is.

  • Akrieg15

     I like this article, but I sometimes think my graduate degree is worth way more than my undergraduate degree.  I graduated from small liberal arts school wanting to be a lawyer, unfortunately you can’t go to law school (in most states) until you obtain an undergrad degree.  After graduating from school early to save money and not being able to find any work with my degree and went into a field I really wanted to, I just graduated and now have a job offer on the table.  Now my only regret is my undergraduate debt, which I dread paying each month and wish someone would have told me when I was 18 what I would end up paying for all that I went through!

  • Akrieg15

     I like this article, but I sometimes think my graduate degree is worth way more than my undergraduate degree.  I graduated from small liberal arts school wanting to be a lawyer, unfortunately you can’t go to law school (in most states) until you obtain an undergrad degree.  After graduating from school early to save money and not being able to find any work with my degree and went into a field I really wanted to, I just graduated and now have a job offer on the table.  Now my only regret is my undergraduate debt, which I dread paying each month and wish someone would have told me when I was 18 what I would end up paying for all that I went through!

  • Akrieg15

     I like this article, but I sometimes think my graduate degree is worth way more than my undergraduate degree.  I graduated from small liberal arts school wanting to be a lawyer, unfortunately you can’t go to law school (in most states) until you obtain an undergrad degree.  After graduating from school early to save money and not being able to find any work with my degree and went into a field I really wanted to, I just graduated and now have a job offer on the table.  Now my only regret is my undergraduate debt, which I dread paying each month and wish someone would have told me when I was 18 what I would end up paying for all that I went through!

  • CarolWaterSailor

    I am a big proponent of trying to go to undergraduate without incurring any debt.  Try for scholarships, save while in high school ( my parents signed a work permiit for me when I was 14) and work while in college.  It feels good to work your butt off and pay for it yourself!  It is a good way to tone up those Work Ethic Muscles you will  need in your career and get experience.
    I started at Burger King for four months to get some job history.  Then I worked as a receptionist at a Hospital Lab (guess what my field of study was…right, Medicine)  When I worked that job for 3 years while in HS I was not only learning about what lab tests Doctors use for diagnosing disease, I was networking.  I wanted to go into Genetics as a specialty way down the road, but I had sought out advisors and mentors who suggested that if I could not get a job in the field, I should volunteer in that area until I could show enough experience to be hired in that field.  So, one of my three committments when I was 14 was volunteering every monring at the Special Summer Park and Rec Program.  I had a LOT of connections and also a lot of fun!
     

  • CarolWaterSailor

    I am a big proponent of trying to go to undergraduate without incurring any debt.  Try for scholarships, save while in high school ( my parents signed a work permiit for me when I was 14) and work while in college.  It feels good to work your butt off and pay for it yourself!  It is a good way to tone up those Work Ethic Muscles you will  need in your career and get experience.
    I started at Burger King for four months to get some job history.  Then I worked as a receptionist at a Hospital Lab (guess what my field of study was…right, Medicine)  When I worked that job for 3 years while in HS I was not only learning about what lab tests Doctors use for diagnosing disease, I was networking.  I wanted to go into Genetics as a specialty way down the road, but I had sought out advisors and mentors who suggested that if I could not get a job in the field, I should volunteer in that area until I could show enough experience to be hired in that field.  So, one of my three committments when I was 14 was volunteering every monring at the Special Summer Park and Rec Program.  I had a LOT of connections and also a lot of fun!
     

  • CarolWaterSailor

    I am a big proponent of trying to go to undergraduate without incurring any debt.  Try for scholarships, save while in high school ( my parents signed a work permiit for me when I was 14) and work while in college.  It feels good to work your butt off and pay for it yourself!  It is a good way to tone up those Work Ethic Muscles you will  need in your career and get experience.
    I started at Burger King for four months to get some job history.  Then I worked as a receptionist at a Hospital Lab (guess what my field of study was…right, Medicine)  When I worked that job for 3 years while in HS I was not only learning about what lab tests Doctors use for diagnosing disease, I was networking.  I wanted to go into Genetics as a specialty way down the road, but I had sought out advisors and mentors who suggested that if I could not get a job in the field, I should volunteer in that area until I could show enough experience to be hired in that field.  So, one of my three committments when I was 14 was volunteering every monring at the Special Summer Park and Rec Program.  I had a LOT of connections and also a lot of fun!