Earning a master’s degree, professional degree, or doctoral degree has long been seen as the ticket to higher earnings and a better lifestyle, and the data seems to back this up. In fact, the Bureau of Labor Statistics (BLS.gov) reports that, on average, individuals with a master’s degree earned $1,574 per week in 2021 while professional degree holders earned $1,924 and those with doctoral degrees earned $1,909. Meanwhile, Americans with an associate degree earned average weekly wages of $963, and bachelor’s degree holders earned $1,334.
That said, there’s more that goes into the value of graduate degrees than just wages earned. You also have to factor in the return-on-investment for advanced degree programs, as well as the time investment required for school and how much debt is left to pay off in the end.
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Ultimately, this is where the numbers get murky and the outcomes are far from cut and dry. Earning a graduate degree can pay off in a major way, but grad school loans still pose an enormous cause for concern.
Growing Graduate School Debt
Why is graduate school debt such a big problem? First, it’s worth noting that graduate school can be expensive, and that borrowing has soared as more and more students have chosen to pursue advanced degrees. Data from CollegeBoard shows that graduate students received almost half of the $95 billion federal student loans issued in 2021-22 despite making up only 16% of the student base. Not only that, but nearly 40% of all outstanding federal student loan debt can be attributed to graduate school loans.
One major driver of this problem is the fact that some federal loans for graduate students don’t come with the same limits as undergraduate school loans. In fact, graduate and professional students (along with the parents of dependent undergraduate students) have the option to borrow up to the full cost of attendance with Direct PLUS Loans.
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Of course, graduate students can and often do use private student loans to rack up even more graduate school debt. Without graduate school loan caps in place, it’s far too easy for students to fall into the trap of pursuing more and more degrees without worrying about cost.
When Graduate School Doesn’t Pay Off
Many students love the prestige that comes with earning an advanced degree, and they often build positive relationships and gain work experience during their graduate program. However, that doesn’t mean they earn more money as a result.
A 2022 report from FREOPP made this fact crystal clear when it studied the return-on-investment of 14,000 different graduate degree programs and discovered that 40% of graduate degree programs have no net value at all. Worse, the authors of the study found that 14% of advanced degrees and 40% of master’s degrees have a negative financial return. This means students who pursued these degrees wound up worse off financially than if they had entered the workforce directly after earning a four-year degree instead.
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How does this happen? Essentially, some graduate school degrees cost a lot of money but don’t lead to higher earnings. FREOPP authors point to graduate degrees in psychology, social work, education, and the arts as options that may not translate to a bigger paycheck despite the significant time and financial investment required.
Is Graduate School Worth It?
All of this begs the question: Is graduate school even worth it? That really depends, but you’ll want to run the numbers on your potential return-on-investment before you borrow tens of thousands of dollars to earn another degree you may not even need. At the very least, you should come up with a way to pay for your degree that doesn’t require excessive student loan debt.
Thomas G. Plante, Ph.D., who works as a professor of psychology at Santa Clara University and an adjunct professor in psychiatry at Stanford Medical School, says students in his field of clinical psychology often fail to consider the financial implications of their decisions. For example, he says too many students take out loans for a program that lasts at least 5 years and often longer for a PhD and “then they end up in positions that don’t pay that well given the amount of loans they took out.”
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At that point, they are in a hole that is hard to get out of unless they have a wealthy partner or family member to bail them out. Plante says that students considering advanced degrees at a significant cost should think twice about it before they move forward. He also adds that there are shorter training programs for a masters degree, or at least you can consider advanced degree programs that do tend to result in higher pay (on average).
College consultant Pierre Huguet of H&C Education points out that, by and large, there’s been a shift in the thinking about some advanced degree programs. Specifically, Huguet has noticed that mid-career professionals and college students who were planning on applying to non-professional degree programs are being advised to hold off.
Huguet points out that the academic and research job market for graduate students now looks very bleak.
“Federal and state governments have invested massively in sustaining families and resuscitating the economy, which conceivably means less funding for education, especially for public universities and other research institutions that rely heavily on external funds,” he said.
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The Bottom Line
If you decide you absolutely must earn a graduate degree, there are steps you can take to avoid financial mayhem. For starters, James Lewis of the National Society of High School Scholars (NSHSS) says that if you plan to rely solely on student loans to earn your graduate degree, don’t borrow more than you need.
“It’s important to understand the long-term implications of borrowing money, especially considering that it will end up costing you more than you borrowed due to interest rates and the amount of time that it takes you to pay off your loans,” he adds.
For example, you can consider an in-state school to receive a lower tuition rate, seek a school that offers teaching assistant or research programs that will pay you or lower your overall tuition cost, and apply for as many scholarships, fellowships, and grants as possible. Lewis adds that you can also consider delaying enrollment to save money and attend school once you are in a better financial position.
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Christa Montagnino, who serves as Vice President of online education at Champlain College, also points out that you can ask your current employer to invest in your education. Most employers can deduct $5,250 per year of tuition reimbursement benefits for each employee, she said, so you should find out if your employer provides this type of perk.If no formal policy exists, you can even approach your manager to see if tuition assistance is a possibility.
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