Is Going to Grad School a Good Financial Decision During a Recession?



By Kenadi Silcox

As the coronavirus recession continues to strike fear into American workers, some may consider fleeing the labor market toward the potential safety of graduate school.

During the last recession, higher education enrollment jumped by nearly 3 million students. And while master's and professional degrees only accounted for a portion of that growth, graduate degrees are more popular today than ever before, as employers require higher levels of advanced training from applicants.

While graduate school can be an excellent way to broaden your job prospects with specialized skills, make a drastic career change, and potentially increase your earning potential, it's not a decision to be made lightly. Beyond the process of researching schools, filling out applications, and then actually being accepted into a program, there are a lot of tough choices to consider. How will you finance your education? What do opportunities look like for a career in your desired field? Are you simply looking to gain more knowledge on a subject, or is your main goal to make more money?

Here's what to consider when deciding if graduate school is a good investment.

How Will You Pay for Graduate School?

It hopefully won't come as a surprise to hear that graduate school in the United States can be expensive. While PhD programs are typically fully funded, most master's and professional programs like law and medical school are not. Average tuition and fees for out-of-state and private university graduate programs are above $20,000 each year, while in-state tuition is around $11,000, according to a study from the Urban Institute. And that doesn't include basic living expenses if you enroll in a full-time program that requires you cut back (or stop) working.

More often than not, students pursuing master's degrees will take out student loans from the federal government—there's no debt limit in place for graduate students—in the hopes that the degree will earn them a higher salary to help pay back that debt. (Others may borrow expecting to have some debt forgiven) But while graduate degree holders earn on-average around 20% more than those with bachelor's degrees, not all master's degrees are one-way tickets to a luxurious life. Before you take out six-figure student loans, do your research on how your future will likely look.

One good place to start is PayScale's Salary Data and Career Research Center, which allows users to browse salaries by parameters such as degree, industry, and location. While graduate school degrees like a master's in petroleum engineering or an MBA with a focus in business strategy tend to have some of the highest payoffs, there are other jobs without high earnings that may still require a graduate degree, like social work or certain teaching positions. That doesn't mean you shouldn't go for it, just that you may need to do a careful cost-benefits analysis beforehand.

"If it's an occupation that won't pay a huge amount of money, look at tuition, cost of living, whether it's possible to work while in graduate school, and employment opportunities," says Sandy Baum, nonresident senior fellow at the Urban Institute.

Baum also urges prospective students to stick with federal loans if they choose to take on the debt—private loans tend to be more costly in the long run and don't have the benefit of income-driven repayment plans, which can help alleviate the burden of paying them off if you don't initially land in a higher-paying job.

Can You Handle the Commitment?

It's a scary time to be without a job or in a rocky industry, and it makes sense why someone might think going back to school is their only option to avoid the potentially catastrophic fallout from a recession. While it may be temporarily relieving to find yourself in a graduate program, students still have to apply themselves and work hard in order to actually see the results of their investment.

"It's so important to pick something you're passionate about studying because you're not going to be sustained doing something unless you can see yourself in it as a career," says Daniel Hughes, president of Spider Web Education, a college consultancy firm.

Some degrees might sound like a fast-track to financial comfort (for example, computer science), but for the most part, that's only true if you actually complete the program. So if you're thinking about selecting a master's program based solely on the potential salary bump, be sure it's something you're actually interested in pursuing. If not, you may end up paying off loans for a degree you will never use or never even completed—according to the Urban Institute, completion rates for master's programs are around 61% while rates for professional programs are 77%.

What Are Your Career Prospects?

The humanities, arts, and social sciences sometimes get a bad reputation due to a lack of obvious money-making career tracks within undergraduate and graduate programs. But finances aren't the only important factor when selecting a career path — it's also vital to think about whether or not you would find fulfillment in a given industry and set realistic goals for yourself.

"Look at it as holistically as possible," says Hughes. "If you decide you want to be an executive at Goldman Sachs, then realistically only the top 10 or 15 MBA programs will get you there under normal circumstances."

That's not to say there aren't obvious benefits to completing a master's program, especially one that's career-focused. Even if you don't attend one of the top business schools, the management skills you obtain can up your lifelong earnings and help you to run a more successful business. And for those making career changes, a master's degree might be necessary even if it won't lead to six-figure salaries.

"You don't want to just look at money, you want to look at the outcomes," says Baum. "If you're going toward a career that'll be more satisfying, then it's worth an investment."

Ask your admissions advisors about the university's and program's alumni network and use tools like LinkedIn to see what positions students that graduated from your program hold before committing to anything. It also wouldn't hurt to shadow someone in the field to see if the day-to-day work aligns with your interests.

Are There Alternative Paths to Success?

Sometimes people pursue master's degrees due to a perceived knowledge gap in their industry. Maybe the next step up above your current position requires experience in financial accounting that you just don't currently have. But do you need to go back to school full-time, paying exorbitant fees and tuition prices in order to qualify for a job with a slightly higher salary? According to Hughes, probably not.

"I really encourage my clients to look at how they can get to where they want to go and have the lowest costs," says Hughes.

Specialty certification programs, corporate-sponsored executive MBA programs, and Massive Open Online Courses (also known as "MOOCs") are just a few examples of ways people who are eager to expand their knowledge in a way that might help on the path toward a secure career at little-to-no costs. It's even possible to complete online master's degrees in a variety of subjects for $10,000 or less from renowned universities including the University of Texas at Austin and Georgia Institute of Technology.

That's all to say: there are plenty of options to get ahead in your industry, even if you aren't prepared to take on the burden of graduate-level debt.


September 2020


The opinions and views expressed in this publication are for general information only and are not necessarily those of Mutual of America Life Insurance Company.



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