SmartMoney has an article that I think is very helpful for people considering whether or not to go to graduate school – it shows the annual difference in earnings in several common degree programs for those without a graduate degree and those with one. The ones that make the most (law and medicine) are those where you essentially can’t practice the profession without the graduate degree. In most other professions, a master’s degree will add to your salary, but isn’t a requirement.
The problem with graduate degrees in my opinion is that too many people get them. From a financial perspective, it’s not really justified in every case. Teachers, for example, earn about $8,000 more on average with a masters than without. That’s at the low end of the spectrum – but it’s also an average. Some people will get a masters and not earn all that much more, while others will more than that $8,000 a year. If you go to a high-end program that costs you $30,000 a year (for $60,000 total), you’ll have ended up wasting your money if you end up on the low end of that number.
This problem is most pronounced in law and business degrees, where while the average salary is very high, there are a lot of people who end up not making anywhere near the $101,000 that the article lists as the average. What adds to the problem is that it’s about as expensive to get a degree from a less-marketable school as it is to get one from a much better school. Take Ave Maria Law School – which clocks in at $30,000 a year for tuition, but, because it’s a new school, has only provisional approval to grant degrees and isn’t ranked among the top law schools. Pepperdine, another law school that isn’t ranked all that highly, also clocks in at $32,000. Harvard law is only a little more expensive at $35,000.
You see the same thing with business schools. Vanderbilt, ranked 49th in the country, costs $34,000 a year to attend. Boston University has a similar ranking and costs $30,000. Harvard Business School is about $38,000.
There are a lot of people who think the rankings don’t mean all that much – I’ll give you that for schools that are pretty close to each other in quality. But for a graduate education, barring a state school discount, you pretty much pay the same thing for a degree from the best school in the country as you would for a degree from the worst. And that means someone isn’t getting their money’s worth. If you’re coming out of Harvard Business School with $80,000 in debt, you’ve probably gotten a good deal. The vast majority of students there will find jobs that pay well enough to make it worthwhile. If you’re coming from a school whose reputation isn’t as stellar, you’re making a gamble by getting that degree. The top part of your class might do well enough to make it worthwhile. But what about the people at the bottom? Most of the employment statistics the schools give out aren’t trustworthy – and a lot of students end up disgruntled as a result. If you come out of a two or three year degree with a huge debt and not much more in terms of earnings potential, you’ve wasted both time and money – the debt PLUS the money you could have earned if you hadn’t gone back to school. And in many cases, you’d have made more simply by working to get yourself promoted in your current job.
In other fields you’re luckier: you may have a ready-made rubric for determining whether or not the increase in your earnings potential from going back to school will be worth it. If you’re planning on getting a degree in the same field that you currently work in, simply find out how much more you’d get paid by your current employer. Most employers will give you a bump to reflect your education – and most of them will be up front about how much it will be beforehand. If they won’t pay you much more, then it might not be worth the risk and cost to see if you can find someone else who will. If they would pay you enough to justify the cost, then go for it. You’ll have a lock on a job after graduation if nothing else pans out if your employer likes you – and if they don’t, or you don’t want to work for them again, you at least have reliable information about how much the degree would be worth.
Don’t get me wrong – going into law or business or getting another degree can be an incredible opportunity. If you do it right, you can make a LOT more money than you would without it. The problem is that too many people jump into it without realizing that there is a cost, too. Many people go to graduate school just because they don’t like their job or can’t think of anything better to do. In my experience, graduate school doesn’t make things better for them – it’s a temporary diversion, and many people jump into a degree program without an idea of what it would be like to have a job in that area. When it turns out to be something they absolutely hate, they’re forced to either switch careers again or be miserable until retirement. And they paid for the privilege. I’d ask myself two things before taking the plunge:
1) Am I sure I like the career I’d end up in? If not, try to get a taste of what it would be like beforehand.
2) Would my degree pay for itself in the next 10 years? That means both in terms of debt load from what you pay AND from opportunity cost from money you could have made working. If you’re not sure, it’s probably too speculative. Going to school isn’t supposed to be like gambling. You’ve got options, though: you can still do it if you can cut the costs. Look at state schools with residency discounts – or only go someplace where you can get a scholarship that will cut the costs. If, even after all that, you can’t make it work – then from a financial perspective it’s better to let it go and focus on getting the next promotion.
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