How To Decide If Graduate School Is Worth Your Investment
Education investments are rarely a simple decision of financial cost-benefit. To help you decide, I share my personal story of my graduate school financing and a methodology based on my expertise in higher education and the perspectives of other experts.
To finance my doctoral degree, I was fortunate to have a tuition benefit, a taxable benefit that allowed me to get free classes with one important caveat: the cost of these classes (with a little over $5k as tax-deductible) was tacked onto my salary as taxable income. Therefore, I paid about a third of the cost of my education, but as a tax to the federal government, not to the college itself.
Others aren’t so lucky because they’ve chosen the wrong career, have loans that can’t be paid off and/or salaries that don’t make up for the time and money they invested in graduate education, like this unfortunate story about a law school graduate with $350,000 in student loan debt.
Don’t end up in debt or despair because of your decision to go to graduate school. Here are questions to consider and formulae you can use from this downloadable Excel spreadsheet to make your investment decision:
What is the opportunity cost of attending? Graduate school can take you away from full-time work, so you have to take into account your lost wages over the time you’re enrolled in the graduate program. For example, if you’re making $40,000 per year and your graduate program is 1 years, your opportunity cost is ($40,000 * 1 = $40,000). Going part-time for your degree can mitigate its opportunity cost, especially if you’re able to retain a partial or full salary.
Earnings while in graduate school. Look for programs that offer paid assistantships and, if you can’t find a paid job, at least find relevant unpaid work experience. Bryan Yackulic, Assistant Director of the Chartered Leadership Fellow(r) (CLF(r)) Program and Adjunct Professor of Management at The American College of Financial Services, advises students that “an unpaid internship or low paying job while in school will pay off when looking for a position.”
Immediate post-grad salary. There are a number of data sources you can check to learn about post-graduate salaries. Assistant Professor of Psychology, Caitlin Faas, of Mount St. Mary’s University, recommends that students check O*Net online, which includes employment projections data from the Bureau of Labor and Statistics as well as “average salaries and average education levels for the job you want.” Practice Professor of Higher Education and Director of the Institute for Research on Higher Education, Joni Finney, of the University of Pennsylvania, recommends that students use Georgetown University’s Center for Education and the Workforce, which breaks down projected salary of college graduates on a state-by-state basis.
Expected lifetime earnings. Faas recommends that students compare the average starting salary to how long it will take to pay back the money for the degree. I recommend that you run a comparison of your lifetime earnings at your current salary without your graduate degree versus your expected future earnings post-graduate degree.
Tuition and living expenses: Out of pocket. Check the net price calculator on an individual college or university’s website to get an estimated total. Then, consult with a financial advisor to see what you can reasonably expect to pay out of pocket. Don’t forget to look for scholarships and grants that may be available through your state and outside organizations.
Tuition and living expenses: Loans. How much money will you need to borrow to cover tuition and living expenses? What is the interest rate at which you’re borrowing? Finney cautions that it’s important to look at “how much [debt] you’ve accumulated as an undergrad and your expected debt level on the graduate level.”
Your next step is to plug in your numbers into the formulae in this spreadsheet (example case provided) to see where you stack up financially. How are your numbers looking?
Remember, there are sacrifices other than financial that you make to attend graduate school. Here are professional and personal concerns to consider:
- How will this graduate degree benefit your life and career in the short and long-term? Will this graduate degree be the most relevant, strategic, and cost-effective step toward your goal(s)?
- Is the graduate degree necessary to enter your field or to get a promotion (and what is the financial value of that promotion)?
- Does the graduate degree allow you to acquire skills and expertise that would be otherwise unavailable to you through other means? Check out online courses offered within and outside of universities to see what’s available.
- What sacrifices to your personal or family time will you have to make? For example, Faas asks: ”Is it okay if you miss your kids’ bedtime because you need to work on your graduate education?”
- What are the alumni of a particular graduate program doing professionally? Wendy D’Ambrose, Director, Graduate and Alumni Career Advising of McCallum Graduate School of Business at Bentley University implores prospective graduate students to seek out alumni of the graduate program to get feedback on starting salaries and the strength of the alumni network.
If you’re reading this article, you’re already on the right track to making the best possible decision about graduate school. As far as my own decision, I have no regrets. I finished my degree in 2015, after 5 years of study. Getting full-time work experience while earning my degree allowed me to simultaneously develop my business acumen and higher education expertise. It allowed me to hit the ground running right away on my business, and to take on a wonderful role at the University of Pennsylvania as Affiliated Faculty in Organizational Dynamics.
No matter who you are, there will be financial and personal sacrifices you make while in graduate school. But the experience itself can be very rewarding and propel you beyond what you thought possible for your own potential. Using your intuition and this methodology, you will make the best possible decision for investing in graduate school. Oxunub (28) dəfə