With the rising cost of higher education, you may wonder: is grad school worth it? In this helpful decision guide, we’ll help you figure out if graduate school is a smart decision for you financially and professionally by digging into your motivation for going to grad school and determining the ROI of your potential degree.
Is Graduate School Worth It Financially?
There are two financial factors to balance when deciding if graduate school is worth it: how much the degree costs and what the earnings payoff will be. Combining these two things together will help you figure out the return-on-investment, or ROI. The ROI is what will ultimately help you answer the question: is grad school worth it for you financially? A high ROI means that it probably is; a small one means it may not be.
How Much Does Grad School Cost?
The cost of graduate school is impacted by a number of factors beyond just the actual sticker price of tuition and fees, although that is an important consideration! Here are the five major things that affect the cost of graduate school:
Tuition and Fees
The major cost consideration is the tuition and fees you’ll have to pay throughout your course of study. In general, private schools cost more than public ones. Your lowest-cost option is usually an in-state public school. You may be willing to pay more for a more prestigious program; for some fields (like the law) degree prestige is quite important.
Of course, the longer a program is, the more semesters of tuition you’ll have to pay for, too. Dual-degree programs can be particularly expensive, as you often have to pay dual tuition for at least part of the time! So if you’re in a dual-degree JD/MBA program, you may have to pay tuition to both the law school and the business school during semesters when you’re taking classes at both schools.
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The greater proportion of your expenses that you have to pay for with loans, the more you’ll ultimately be paying for your education. This is because of our pesky friend interest; the more time it takes for you to pay back a loan, the more money you’ll ultimately be paying back.
We won’t get into all the details of loans here, but in general, federal loans have better terms than private loans. Plus, federal loans typically have a grace period of six months post-graduation before you need to start repaying them. (However, they still accumulate interest in this time!)
Loan forgiveness programs can mitigate the expense of loans by cancelling part of your debt in return for some kind of service employment. There are federal loan forgiveness programs for public service jobs. There’s a special federal loan forgiveness program for teachers who work in underserved areas. There are also a variety of state loan forgiveness programs for lawyers, doctors, and nurses who take on qualified employment.
If you are interested in loan forgiveness, make sure to comply religiously with all the terms of the program. They often require extensive documentation and have hard deadlines. You don’t want to become ineligible because you forgot administrative details!
In addition to tuition and fees, you’ll have to pay for living expenses like housing and food. If you’re moving, you’ll also have to pay moving costs. Where you go to school is going to make a big difference in the cost of living. It’s much more expensive to be a student in NYC than in Austin, TX!
Graduate students can sometimes get positions as resident advisors/assistants (RAs) to subsidize housing. Keep in mind that at most schools competition for these positions is fierce.
Any time that you spend in graduate school is time that you won’t spend in traditional full-time employment. Even if you are able to work part-time, you’ll almost certainly be taking a pay cut. Most graduate school employment is barely enough to cover living expenses.
Of course, the more lucrative your current job is, the more income you’re forgoing. On the other hand, graduate school may dramatically increase your earnings potential, depending on the field and degree (see the next section on future earnings for more on this).
Funding and Scholarships
Let’s end on a positive note: you can offset the cost of graduate school with any funding or scholarships you receive. Most graduate school funding will come from the programs you apply for; they often offer scholarships, fellowships, and grants to attract promising students.
See more on finding graduate school funding in our list of graduate school scholarships you could apply for!
Do Future Earnings Make Graduate School Worth It?
Graduate school can be an enormous expense, but it can also pay huge dividends. Some programs will dramatically increase your earning potential. Here are two factors that will play into your future earnings:
Program Field and Degree
The primary driver of your future earnings is going to be the field your advanced degree is in. Some fields—particularly in STEM—have very high starting salaries for graduates. Advanced degrees in health and business fields also have sunny salary outlooks.
Less well-compensated are positions in education, library science, divinity and theology, and the humanities.
If you’re trying to choose between a Master’s and PhD in the same field, you should definitely compare salaries between the two. In some fields, the PhD gives a sizeable bump in pay (or employability), while in others, it really doesn’t do much more for your income than a Master’s. The answer to the question “is a master’s degree worth it?” might be yes, but that doesn’t mean a PhD is an even better investment.
In some fields, the prestige of the program makes a big difference in your starting (and lifetime) salary. For example, the prospective lifetime earnings for a lawyer from a top-tier law school are much, much higher than those for a lawyer from a mid-tier school. Definitely research your field to find out if program prestige is going to make a sizable difference in your ultimate earning potential.
Putting It Together: Return-on-Investment
Whether graduate school is a good financial decision ultimately depends on the return-on-investment of the degree. Essentially, how much money will you spend on the degree (input costs) and how much money will you get back from having the degree (investment output)? We’ll walk you through how to do a basic ROI calculation.
Step 1: Determine Input Costs
If you’re just considering whether or not to apply, you can estimate input costs based on tuition, fees, living expenses, and moving costs for programs that you’re interested in, and how much you think you’ll have to take out in loans. It’s hard to guess in advance how much you’ll be offered in funding and scholarships, though, which can also make a big difference in input costs. Note that we won’t take into account lost income here because we’ll account for it in step two.
If you have an offer in hand, you can determine input costs with a higher degree of accuracy. You’ll be able to calculate tuition and fees (and living costs) for each program, less any financial support you’ve been offered. You’ll also have a better idea of how much you’ll need to cover with loans. If you don’t want to mess around with complicated interest calculations, just assume that each dollar you borrow will cost an additional dollar to pay back (so double your loan amount when you calculate input costs). This may be a bit of an overshoot, but it’s better to be conservative with these calculations anyways.
Let’s say I’m going to do a 2-year program in Milwaukee with tuition and fees of $15,000 a semester. At four semesters, that’s $60,000 in tuition. However, I’ve been offered a $30,000 fellowship, so school costs are only $30,000.
Milwaukee does not have a very high cost of living, so if I live pretty frugally I can probably make it by on about $1000 a month. My part-time research assistant job will pay me about $800 a month, so I’ll be at a loss of $200 per month. Over 20 months, that’s about $4,000. So far we’re up to total input costs of $34,000.
I have $16,000 dollars of savings, but it will probably cost me a couple thousand dollars to move, leaving me with about $14,000 to put towards my schooling and living costs. This means I’ll need to take out about $20,000 in loans to cover all my costs. Since we determined earlier that a conservative estimate for the cost of interest is to assume that we’ll pay a dollar in interest for every dollar we borrow, we can estimate based on my $20,000 loan that by the time I pay that back, I will have paid $40,000 in principal + interest. So $40,000 is my input cost!
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Step 2: Determine Investment Output
The first thing you need to determine is your likely future earnings if you don’t go to graduate school. To do that, take your current salary and assume you get a standard 3% raise every year. Your added-up incomes up until you retire is your current earnings projection. There are programs online that will do the calculations for you; you don’t have to do it by hand.
Next, you need to determine your likely future earnings if you do go to graduate school. Take a conservative starting salary number for graduates of your desired program based on salary research from Payscale and/or Glassdoor. Then, project your future earnings with that salary and a standard 3% raise. (Use your handy earnings calculator again). Remember to make your starting age the age you’ll be when you graduate from the program!
The investment output is your graduate school future earnings minus your current future earnings.
So, if I’m currently making $50,000 a year, my current future earnings with a 3% annual raise would be $3,770,063 (assuming retirement at 65, in 40 years). Let’s say that my starting salary after my graduate program in Milwaukee is going to be about $60,000. Then, starting work at 27 and retiring at 65, assuming a 3% annual raise, I can expect lifetime earnings of $4,149,567.
So, if I take my graduate school future earnings of $4,149,567 and subtract my current projected earnings of $3,770,063, this leaves me with an investment output of $379,504!
Step 3: Calculate Return-on-Investment
The last step is easy—just take your investment output from step two and subtract the input costs from step one!
For our Milwaukee example, this means $379,504-$40,000, giving me an ROI of $339,504 over my lifetime. That’s not bad!
If, on the other hand, my degree was going to cost me $250,00 with the same salary outlook, the ROI is much less sanguine, at less than $100,000.
Of course, we can’t predict everything. These calculations assume continuous employment until retirement. On the other hand, it also assumes you won’t get any major promotions or moves that come with big pay raises, and we tried to keep our figures conservative, so we can assume we are at least in striking difference of a reasonable estimate.
Because they are rough calculations, if the ROI with these figures isn’t super positive—think less than $100,000—the financial investment may not pay off. Of course, that’s not the only consideration; breaking more or less even to get your dream job is probably worth it! Just be aware of what you’re getting into financially first.
Is Graduate School Worth It Professionally?
There are a few situations where a degree is basically necessary to meet certain professional goals. We’ll discuss those here.
There are some professions that require a graduate degree. Of course, careers in law and medicine require special advanced professional degrees. But there are other career paths that almost always need at least a master’s degree. For example, becoming a school administrator requires at least a master’s degree in Education. Most counseling and therapy professions need advanced degrees, as do careers in library and information science. If you’re interested in a profession that requires it, it makes sense to pursue graduate education. However, some of these careers do not pay particularly well. This doesn’t mean you shouldn’t pursue your professional dreams, it’s just something to be aware of.
Pivoting Into a New Field
If you want to pursue a new field that’s pretty different from your existing education and experience, graduate education can be one of the most effective ways to shift your professional focus. In many fields, you can even find master’s programs especially for career changers. A master’s degree in a new field will equip you with the skills you need to work in that field post-graduation, regardless of your pre-existing credentials. This can be an especially appealing option for those who feel their progress or interest in their current line of work has plateaued.
If you want to go into academia, you will almost certainly need a PhD. However, breaking into academia is incredibly competitive. There are many, many more PhDs than there are professorships (or even lecture and adjunct positions)! Even students from the most prestigious PhD programs often have trouble finding jobs in academia. And if you are lucky enough to get a job, entry-level academic positions often pay poorly, so you’ll need to invest many, many years into your schooling and career before you can hope to have a high level of job and income security. You’ll also need to be willing to move pretty much wherever you can find a job.
You can typically still get more traditional jobs in private industry with a PhD. While some of these positions are quite high-paying (especially in STEM), you won’t necessarily receive a much greater salary with a PhD as opposed to if you only had a Master’s degree. Of course, even that depends on the PhD—it’s going to be hard to translate your PhD in Medieval French into a relevant job. If you just want to teach at community colleges, or you want to teach at an art school, you may only need a master’s degree. However, note that these positions often do not pay well. This is perhaps why people often transition into community college teaching as second careers after working in industry.
Basically, you need a PhD to go into academia, but a PhD is far from a guarantee that you’ll be able to find a position in academia afterwards.
The Bottom Line: Is Grad School Worth It for You?
Financial and professional advancement aren’t the only considerations for going to graduate school. Even if you aren’t likely to accrue much financial and/or professional benefit from that degree, the answer to “is a master’s degree worth it?” could still be yes—just along a different metric. If you can afford it, it’s fine to pursue advanced education just because you’re passionate about a field. However, it’s critical that you are realistic about your financial and career prospects with any graduate degree. It’s not necessarily realistic to think that your $80,000 MFA in creative writing will lead inevitably to a 6-figure book deal. But if you know that and you want to pursue the MFA as a passion project anyways, there’s nothing wrong with that!
If you are concerned about your financial and professional prospects after graduate school, here’s what to consider:
- How much will the program cost? This includes not just the “ticket price” of tuition and fees, but relocation costs, living expenses, loan interest, and forgone income.
- How much financial benefit will you accrue from the program? The primary consideration here is what your probable starting salary and future earning prospects are with the degree.
- Together these two things constitute the return-on-investment: how much you’ll get back over your lifetime from your initial cost outlay into grad school.
- There are some situations where a graduate school degree is necessary for professional advancement.
- Certain careers require an advanced degree. For example: doctors, lawyers, school administrators, counselors, and librarians basically always need graduate degrees!
- Changing careers often necessitates a graduate degree to get the professional skills for that field.
- Academia basically requires a PhD—but even with a PhD, academic employment is no guarantee!
Need more information about graduate school? We’ll tell you how long graduate school is and what GPA you need. We’ll also provide insight on the average GRE score by graduate major and the average GRE score by grad school!