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Is graduate school worth the cost? Here’s how to know.

Trees bloom on the campus of Yale University. (Photo by Christopher Capozziello/Getty Images)

It’s that time of year when people are compiling graduate school applications, gathering transcripts and deciding whether they want to take the plunge.

It’s a big decision — and an expensive one. Should you do it?

Grad school has its benefits. People with advanced degrees tend to earn bigger paychecks than those who have only an undergraduate degree. They’re also more likely to land a job — and less likely to end up on their parents’ couch.

But those perks come at a cost. For some it might mean temporarily giving up a paycheck, something they’ve gotten used to in the working world. And graduate students, who often reach this next milestone without the help of mom and dad, account for about 40 percent of the $1 trillion in outstanding student loan debt, according to the New America Foundation.

Ideally, people will come out with the potential to earn a much bigger paycheck and to reach a point in their careers that wouldn’t have been possible without the advanced degree. The jobless rate for people with master’s degrees was 3.4 percent in 2013, compared to 4 percent for people with a bachelor’s, according the Bureau of Labor Statistics. Median annual earnings were $69,100 for people with master’s degrees and $57,600 for those with a bachelor’s. But the payoff varies.

“The general conclusion about graduate degrees is that they do improve earnings,” says Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. “There’s almost no doubt about that.”

Still, he points out: “That doesn’t mean there aren’t some turkeys in the mix.”

Indeed, outcomes vary by major. Working as an engineer? Getting a graduate degree will probably lead to a big raise. For a journalist, not so much.

Communications majors don’t see any change in pay, on average, after getting a master’s degree. But income doubles after that person gets a PhD. Engineers, on the other hand, see a steady bump with every degree.

In the end, a person’s pay will depend on the demand for that job, the level of difficulty of the degree and whether a master’s is needed to advance in the field, Carnevale says. Some people can earn hefty paychecks fresh out of undergrad. But those with a bachelor’s in education, psychology or the arts might struggle to find a decent paying job, making a graduate degree practically required. “Truthfully, you need the graduate degree because otherwise you won’t make the A earnings,” he says.

For some careers, the type of degree will have a bigger effect on pay than the school it comes from, Carnevale says. Teachers, for instance, are better off borrowing as little as possible, he says. “School teachers get paid the same,” he says. “It doesn’t matter where you went to school, but the degree itself is valuable.”

Business majors see a bump in pay after getting a master’s degree, which can put them on the fast track for a management position, Carnevale says. There’s actually a slight decrease in average pay for people with business-related PhDs, perhaps because the credential isn’t essential.

Related: Where to go to business school if you want the highest salary

Of course, money isn’t the only reason for going back to school, but when debt enters the picture, it becomes more important. The average graduate borrowed $29,400 for a four-year degree and $57,600 for a graduate degree in 2012, according to the New America Foundation.

Potential students need to ask themselves if they will make enough, or get a big enough raise, at the end of the program to afford those loans. And if the change in pay won’t be substantial, people should think about whether the degree will help them change careers, or to land a job they couldn’t land otherwise.

Lisa Manglass, a health physicist in  Denver, is planning to apply to some PhD programs over the next several weeks. Manglass, 30, is still paying off loans she took for her bachelor’s and master’s degrees, and she may need to borrow again if she goes back for doctoral work.

One of the biggest challenges for Manglass will be giving up a paycheck for a few years while she’s in school. (With the course load and research responsibilities, taking on another job is out of the question, she says.) But she hopes that the degree, combined with her work experience,will help her move into a more senior position in her field. “I look at my PhD as a way to open more doors to me in terms of career advancement,” she says.

Student loan payments become more of an issue when they take up more than 10 percent of a person’s income, the level at which many financial advisers say loans stop being affordable. The New America Foundation studied the issue this fall in a report focusing on how people in jobs that require graduate degrees may benefit from public service loan forgiveness, a program that might offer relief to people who want to work for nonprofits or in the public sector, where the pay may be lower. The study estimated average debt levels for different types of jobs and compared that to their likely earnings.

Take a lawyer, who might face a typical debt load of $140,000 before interest. That lawyer would need to make $190,000 for monthly payments on those loans to be equal to 10 percent of his income. But at the median salary of $114,000, those payments may eat up 17 percent of his pay.

Payments might become manageable if he signs up for an income-based repayment program, which would cap payments at 10 or 15 percent of income. And if he signs up for a public service loan forgiveness program, that debt could be forgiven after 10 years of payments.

“Graduate students can get a pretty decent benefit out of the program because they can borrow a lot,” says Jason Delisle, a policy analyst at the New America Foundation.

There are other ways to get help. Grad students have options like fellowships, teaching assistance programs and financial help from employers, which may not have been available to them when they were earning their bachelor’s.

Manglass says she’s hoping to qualify for a program where she’ll be fully funded, which means tuition would be covered and she would receive a stipend for housing — an arrangement that’s pretty common for people entering research programs. But she still expects to take out a loan to help pay for living expenses not covered by the stipend.

Once she is done, it would be nice to make a little more money, but Manglass says that isn’t her main motivation. “If you’re going into a research intensive field, going back to school for the money is a terrible reason to go back,” Manglass says.

“Graduate school is very difficult,” she says, “and research requires a lot of self motivation.”

Read More:

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