Do One Thing. If you’re thinking about getting a graduate degree, run the numbers first. Weigh how much you’ll need to borrow to complete your program (with the interest you’ll spend repaying your loans) against the expected pop in compensation the degree will bring you. If the math doesn’t make sense, ask yourself if there’s another way to get the training you need to advance in your career.
Education Borrowing is Up
Americans are now borrowing more money through federal student loans in pursuit of advanced degrees than at any other time in the nation’s history, according to a new economic report from the U.S. Department of Education. Some $39 billion in federal student loans were disbursed to graduate students (and $44 billion to undergraduate students and parents) between July 2021 and June 2022, according to data released in August.
That $39 billion represents the highest share—at 47%—of such loan disbursements going to graduate students since the federal loan program started, despite the fact that graduate borrowers made up just 21% of those taking out loans during that time period.
The report on borrowing trends notes cause for concern: “Unlike undergraduate students, graduate students have been able to borrow up to the cost of attendance of their program of study since 2007… which has led to increases in total borrowing among graduates, and large increases in the fraction of borrowers completing their studies with extremely high balances.”
In recent years, the average cost of a Master’s degree can range from $54,000 to $73,000 depending on the school, the major, and the length of the program, according to the Education Data Initiative. Some programs at in-state schools cost less, of course, while private colleges often charge more.
Unfortunately, notes the Department of Education report, “there is generally little correspondence between the amount students borrow to finance their advanced degrees and their labor market outcomes.” In other words, when it comes to a financial return on investment, not all advanced degrees are created equal.
Do the Math
While earning an advanced degree can mean making more money in some professions, it’s important to weigh how much a specific program costs, plus the amount of interest you’ll pay to borrow money, and how long it will take to pay back those student loans. You’ll also need to plug the figures into your household budget to see if you can still afford to cover all of your other monthly expenses when the loan payments eventually come due.
There’s a Tool for That
There are some helpful loan calculators and estimators out there to help you get a good idea of how much your payments will be for specific loan amounts. The SallieMae student loan calculator provides users with a few options, including a way to compare how much you would need to borrow at different schools. Over at FinAid.org, there are several calculators to help students figure out how much specific programs will cost and what they may need to borrow.
Will an Advanced Degree Equate to a Bigger Paycheck?
In some professions, such as education and nursing, the amount of money you can potentially earn by obtaining an advanced degree is spelled out in job descriptions and through internal ladder programs at some employers. Unfortunately, not all jobs come with such guarantees. That’s why it’s important to get an idea from your current employer if earning an advanced degree in your field could lead to career advancement.
Research Potential Pay
If you are seeking an advanced degree to leave one field for another, it’s wise to research how much jobs in your desired field pay now. Online job sites such as Glassdoor, ZipRecruiter and Payscale are good places to start. Plus, pay transparency laws in some states and cities are making it easier to find out the real salary ranges for thousands of jobs.
Phone a Friend
If you know someone with an advanced degree at work or in your social circle, ask them if they feel like the time and money they devoted to the degree was worth it. Whether they say yes or no, you can politely press them for more details by asking “Why is that?” Their answers might surprise you.
With Reporting By Casandra Andrews