5 Things to Consider If You’re Considering Grad School

People go to graduate school for various reasons. For some professions, like medicine, law and academia, a higher degree is required. For others, the question of whether or not to go is not so cut and dried. Factors like knowledge, skills and prestige come into play, as well as personal reasons like wanting to switch into a new field.

But the other big impetus is to earn more money. The problem is that the cost of those extra letters these days calls into question whether they actually bring a return on investment. We’ll look at how you can evaluate a grad school program’s potential ROI.

1. Find out cost and job prospects.

The advertised price for college can be quite different from what you actually pay, since colleges price tuition the way airlines do. Not so with graduate school. “The cost proposition for graduate school is significantly different. Financial aid for graduate school is predominantly debt,” says Mark Kantrowitz, senior vice president and publisher of Edvisors, publishers of more than a dozen websites about planning and paying for college.

To help with costs, some students could get teaching assistantships, research assistantships or even employer tuition assistance, in which your current employer will pay for your graduate degree in exchange for some number of years of continued work with them (this is especially common with MBAs).

Also, look into the job prospects for people with this degree. Is it an obscure field where a PhD will relegate you to trying to get one of the handful of professorships in that field in the country? Is it a law degree from a mid-tier school, at a time when recent law grads of all stripes have been having a hard time finding jobs? (The National Association for Law Placement recently found that the employment rate for recent grads fell for the sixth straight year.) Then it may not be the best idea.

2. Conservatively project your first-year salary post-grad school.

While no crystal ball will give you an exact figure, try to figure out how much you’ll earn your first year out by checking out Payscale.com, Salary.com and Glassdoor.com, to see what people with your experience make with the job title you would expect to get upon graduation. Go with a conservative estimate, at the 10th or 25th percentile for your calculations. “Better to be pessimistic so that even in a worst-case scenario, your decision is going to be financially beneficial,” says Kantrowitz.

3. Make the first cut: undergraduate debt + grad school debt first year’s salary.

If your total undergraduate debt and grad school debt are higher than your first-year salary out of graduate school, then the cost of your total education is too high.

Another good rule of thumb: “You should borrow no more than you can repay in 10 years or than you can repay before you retire,” says Kantrowitz. If this particular degree and field doesn’t pass those guidelines, that doesn’t necessarily mean you should skip grad school. Maybe you look into a different type of degree that will increase your earnings enough to justify the cost, or you find another way to fund your tuition so it’s not debt.

4. Consider how a few years out of the workforce will affect your retirement nest egg. 

If you’re concerned how a few years out of the workforce could affect how much money you accumulate for retirement, then use a compound interest calculator to see how much you’ll have saved for retirement if you don’t miss any years of working versus if you skip those years of grad school. (However, if you have enough savings, you could still make IRA contributions while you’re in school so as not to miss out on those years of retirement contributions, which would make the IRA comparison calculation unnecessary.)

Read 4 ways to increase your retirement savings.

5. Factor in intangibles.

Remember that grad school has many benefits that can’t be quantified in dollars. If it’s financially a wash, “so long as you’re reasonably confident you will break even, and it’s not too soon before you retire and so you have plenty of work life ahead of you, then it will boil down to the non-financial aspects,” says Kantrowitz. Some of these include the extra knowledge and skills you gain, the new friends and acquaintances you make during school, alumni connections you make afterward, and, especially if the program is a prestigious one, the possible boost to your hiring desirability should also be considered.

Still undecided? Here are some more ways to consider if grad school is right for you.

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