Despite the rising cost of college, a bachelor's degree remains a good investment for most people.
Economists from the Federal Reserve Bank of New York estimate the return on a college degree is about 14%. The average bachelor's degree holder earns $78,000 a year, compared to $45,000 for the average worker with just a high school diploma.
But is the same true for more advanced degrees?
Graduate and professional degree students account for 38% of federal student loan debt, according to research from the AccessLex Institute, a nonprofit promoting access to legal education, and the Urban Institute, a think tank. The average advanced degree student borrowed $18,210 during academic year 2015-16, three times more than the average undergraduate.
Is all that debt worth it?
The price of graduate school
While the federal government limits how much undergraduate students can borrow, graduate students can borrow the full cost of attendance via grad PLUS loans.
"They can borrow huge amounts of money from the federal government," said Sandy Baum, a senior fellow at the Urban Institute and a co-author of the study on graduate school debt.
The cost of tuition and fees for a year of full-time master's and doctorate programs averaged over $20,000 in 2015-16. But what graduate students pay varies widely depending on the type of degree they pursue and the type of school they attend. For example, a growing number of graduate students attend for-profit schools, which charge higher tuition and provide less grant assistance, Baum said. This leads to high borrowing for what turns out to be worthless degrees.
Even among master's degrees, there's a lot of variance. Many don't lead to high earnings, but some, like a Master of Business Administration, pay off well, Baum said. In contrast, many doctorate students have their education subsidized by their schools, making the investment much more affordable.
"There's not just one story that describes what's happening to all graduate students," Baum said.
How do you know graduate school is worth the cost?
A bachelor's degree tends to pay off even if you major in something like philosophy, Baum said. But if you attend graduate school, you're training for a specific occupation.
So you should know ahead of time what kind of job you can expect to get and what you can expect to earn, Baum said. (Interested in where you can earn more money? Check out the highest-paying zip code per state.)
"If I'm getting a Ph.D. in education I'm going to earn less than if I'm getting a Ph.D. in computer science," Baum said. "You need to think about all those things."
Many professional organizations publish what graduates can expect to make. The Department of Labor also posts expected earnings for almost every occupation you can think of on the Bureau of Labor Statistics website.
Kashif A. Ahmed has made use of all three of his master's degrees in business administration, finance and computer science. The certified financial planner, professor and president of American Private Wealth paid for them without going into debt by using earnings from the stock market and applying for scholarships. (Learn how this Policygenius contributor paid for grad school without taking out student loans).
There's no reason to rush into the decision to attend graduate school, Ahmed said. Some of the graduate students he teachers are in their 50s.
"If you're not very clear on what it is you want, don't enroll in school," Ahmed said.
Ahmed suggested graduate students pursue scholarships to help pay for school, like he did. The Department of Labor lists thousands of scholarship opportunities on its CareerOneStop website.
Graduate school can propel you into the upper echelon of earners, but it's also a huge investment, not to be taken lightly.
"Think hard about what you want to do, why you want to do it and whether you really need to earn that degree," Baum said. "For many people it's a very good choice but it's a choice to be made very carefully."
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Image: Nastia Kobzarenko