Some 3 million people will be doing it this fall—and, in certain cases, they’ll be quitting their jobs to do it.
We’re talking about going to grad school, which can be a savvy career move.
Just look at the income data from the National Center for Education Statistics: Young adults with a master’s degree or higher typically earn about 18% more than college grads.
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Get started with a free financial assessment.
Still, those extra letters can also be a liability—especially if you’re quitting your job to go back to school, leaving a steady income and taking on debt in the process.
According to a New America Foundation report, graduate students take out 40% of the country’s $1 trillion in student loans.
So before making the grad school move, you should consider running the numbers on your return on investment to get a clear sense of the ratio of your expected debt to your future earning potential.
Of course, intangible factors like job satisfaction and personal fulfillment also play a role—and you can’t type those into an ROI calculator.
To see how the grad school cost-benefit analysis really shakes out, we asked three people in different fields to share what they hope to get out of an advanced degree—as well as their payment strategies.
Then we asked Dan Sheehan, CFP®, founder of Sheehan Life Planning, in Fresno, California, for his feedback. In his 20 years as a financial planner, he’s advised many people on higher education decisions—including his three kids, who all got advanced degrees.
Read on to find out how he grades the plans of our three wannabe grad students.
“I Want a Master’s to Become a College Professor”
Who: Bethany Cantwell, 23, assistant account executive, Chicago
Why She Wants to Go Back to School: “I graduated with a bachelor’s in communications last year.
During college, teaching always stood out to me—I really enjoyed leading the class whenever I got to present a group project.
At my current job in PR, I get to train the interns, but it’s not the same. I want to teach at the college level, and that means getting my master’s in communications.
Grad school also seems like a good fit because I love delving deep into academic research. I’m especially interested in how the communications industry is going to change as we move more into the digital space.
How She Plans to Pay for It: I’m mostly looking at schools in the Chicago area, like Northwestern and DePaul. Their master’s programs cost less than $50,000 in total. Plus, I wouldn’t have any relocation costs.
I’d continue working, at least part time, and put that income toward paying for my education.
And while scholarships for grad school can be scarce, I believe I’d be a pretty strong candidate, based on my academic background and—hopefully—a high GRE score.
I’d also look into research grants, as well as graduate assistantships, since I want some teaching experience.
“With an M.A., she’ll be an associate professor. The pay is OK, but she’ll have limited upward mobility. She's not going to get tenure—and the higher pay—without a Ph.D.”
I’ve already paid off about half of my undergrad student loans, which leaves $11,000. Right now, my salary is in the mid-thirties, and my husband makes $50,000 as an accountant. If I went back to school, his income could support us. Plus, we've saved up about $4,000 for a cushion.
But there is a possible wrinkle: My husband wants to go back to school himself for an MBA in four or so years. He’d be looking at top-tier schools that cost at least $100,000—so we’ll have to pay for that, too."
What the CFP® Thinks: “While this isn’t a clear-cut situation, it sounds doable, especially since Bethany has a supportive husband. And five years is a good amount of time to spread out between their two graduate degrees.
But I have some concerns about her financial readiness. That $50,000 of tuition is really going to strap them, and she’s going to wind up borrowing a good part of that, unless she can get some help.
So I’d like to see her pay off her existing loans before she takes on more. I’d also look for ways to cut costs, by either doing some work at the school or getting a grant.
Before moving ahead, Bethany should also think through what she really wants from this grad school experience.
With an M.A., she’ll be an associate professor. The pay is OK, but she’ll have limited upward mobility. She’s not going to get tenure—and the higher pay grade that goes with it—without a Ph.D.
Is breaking even going to take 20 years? If that’s the case, what would make the sacrifice worth it?
I’d say if it’s her heart’s dream, that certainly counts for something. But for a $50,000 investment, they really need to know what they’re getting into.”
“I Want an M.B.A. to Become an Investment Manager”
Who: Eugene F., 25, corporate treasury associate, New York City
Why He Wants to Go Back to School: “I work in the corporate treasury department of a large investment banking firm.
But what I really want to do is investment management, ideally at a hedge fund. However, within finance, I’m finding it’s tough to switch fields.
I took the exams to become a Chartered Financial Analyst (CFA). But everyone I talk to says that in order to break into investment management, you need experience in the field—or an M.B.A.
How He Plans to Pay for It: I’d apply to the top five to 10 business schools in the country. I think I’d be a viable candidate for these programs, which feed into the best finance jobs—they’d be the only schools to make it worthwhile for me to quit my job.
Annual tuition will be $50,000 to $60,000, so $100,000 to $120,000 total, plus living expenses and travel.
“He may say he wants to leave his firm and join a hedge fund—but if he's open to other post-grad possibilities, he should ask if his employer would pay for his degree.”
When I applied to college, I got a full scholarship and took it so I wouldn’t have any debts weighing me down after graduation. I’ve also chosen to live at home with my parents post-graduation, so I haven’t had to pay rent.
I now make around $80,000 a year, including bonuses. And I have saved up about $200,000—enough to spring for a first-rate graduate program without having to take out any loans.”
What the CFP® Thinks: “Eugene has really got his ducks in a row. He has a lot of savings for a 25-year-old—and he’s clearly learned how not to spend.
An M.B.A. would be a great next step for him, even though it’s not a necessity for working at a hedge fund. It would broaden his CFA, which is specific to investments. With an M.B.A., Eugene could move beyond being one of the analysts or worker bees.
Still, I’d encourage him to look for ways to cut tuition and avoid using all of his savings to finance school.
He may say he wants to leave his firm and join a hedge fund—but if he’s open to other post-grad possibilities, he should ask if his employer would pay for his degree.
Larger companies often have tuition-sharing or tuition reimbursement programs for at least their top 20% of employees.
The catch? He’d probably have to commit to staying at the firm for a few years after he graduates.
But it could also be that the M.B.A. will open up other areas in the firm that are of more interest to him.”
“I Want a Master's (or Two!) to Become a Director at a Nonprofit”
Who: Katherine V., 26, health program specialist, Oakland, California
Why She Wants to Go Back to School: “I do a fair amount of creative and collaborative work at my nonprofit job, especially when it comes to training and curriculum development.
For example, I teach various health care providers how to assess for signs of intimate partner sexual violence.
I’d say it is my dream job for right now.
But with an advanced degree, I’d get to do more of the interesting stuff, and less admin work. I’d also get paid more. At my current job, I just started making $50,000.
I’m interested in getting both a master’s in public policy and a master’s in public health, either through a joint program or sequentially. Having an advanced degree can be a requirement, or is at least recommended, for many director-level positions at nonprofits.
I don’t know that I want to do this work forever, but having those letters after my name will make it easier if I want to go into another policy field—or even leave the nonprofit world.
“I’d question this potential grad student the most. It seems like Katherine may not love her industry—and this is going to be her way to change it.”
How She Plans to Pay for It: I’m looking at in-state schools in California, plus a few options on the East Coast.
The tuitions really vary, also depending on factors like whether or not it’s a joint program, and could total anywhere between $40,000 and $160,000.
I have a few thousand dollars in savings and no debt. I went to college in-state, and it was cheap enough that my parents were able to cover the tuition.
I’d probably pay for my graduate degree with a combination of loans and a part-time job, either at a nonprofit like the one I work at now or a campus researcher position.”
What the CFP® Thinks: “I’d question this potential grad student the most. It seems like Katherine may not love her industry—and this is going to be her way to change it.
She needs to ask herself: Is this a stepping stone to something specific that I’m really after? If this is what she really wants, then go for it. But it can’t be nebulous—there has to be a strong case made.
Plus, return on grad-school investment is more difficult in the nonprofit world. And nonprofits can’t help pay for your education, like a big company might.
If Katherine makes $50,000 now, will she be able to double or triple that? Or is she just going to get $70,000, after spending up to $160,000 to get the degrees?
If she does go for it, in-state tuition is a good strategy—it will be cheaper, so it’ll be easier to make a return on that investment.
Still, if she were my client, I’d like to see her set aside more money first on her current salary. I’d like to see that she knows how to save.”
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.