Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research may determine where and how companies appear. Learn more about how we make money.

Published: Feb 09, 2015
two diplomas two graduation caps stacked
Wendell and Carolyn—Getty Images/iStockphoto

Four years of college is no longer enough to give you an edge in the job market—at least that's what most of the nation's college students seem to believe.

More than three-fourths of freshmen at four-year colleges plan to go to graduate school, according the latest in a 49-year long UCLA survey of the attitudes of college first-years. (More than 150,000 full-time students at 227 universities were polled.)

That's up from 51% in 1974, and only slightly below the record sent in the depths of the recent recession, says Kevin Eagan, interim managing director of UCLA's Higher Education Research Institute.

Usually, interest in grad school spikes during economic downturns. But with the economy healthy, there's clearly something else going on.

"The percentage of freshmen who think it is important to be well-off financially is at its highest point ever—more than 82%," explains Eagan, "and during the recession these students were hearing of all of these folks with bachelors' degrees who were unemployed. So they are recognizing that in order to achieve their objective they need additional credentials."

Higher Degrees = Higher Pay

Indeed, recent evidence indicates that those with more education have better job prospects. The unemployment rate for those with professional degrees is almost half of the 4% rate for those with just a bachelor’s, for example.

And an analysis by the Georgetown Center on Education and the Workforce found that while the average bachelor’s-degree holder earns about $2.3 million over a lifetime, a master’s degree holder typically earns about $2.7 million and a professional degree earner typically takes home $3.6 million.

Higher Pay ≠ Fast Payoff

But Eagan and other analysts who’ve crunched the numbers say that graduate degrees are also an expensive gamble—and in some cases, have low odds of a financial payoff.

Tuition and fees for a two-year master’s program exceed $20,000 at the average public college, and $45,000 at the average private school. The tuition and fees for a degree from an elite graduate program such as Harvard Business School totals more than $120,000. Living costs can another $12,000 to $24,000 per year, depending on location. All together, you're looking at a considerable expense on top of the more than $28,000 in undergrad debt new grads who borrow are carrying.

Plus, many graduate programs don't result in big salaries.

Besides, in some fields, those with advanced degrees aren't immune to the challenges of finding a job: For example, Eagan says he cautions students pursuing PhDs in humanities about the low odds of finding full-time jobs as professors, as more colleges are replacing tenured instructors with part-time adjuncts.

When a Grad Degree Makes Sense

Wondering if continuing your education pay off for you? There are three situations in which going back to school will put you ahead, according to several recent studies:

  1. You are aiming for a job in a field that either requires a graduate degree or in which employers use graduate degrees as a hiring screen. Besides the traditional graduate-degree-requisite jobs of doctor, lawyer and professor, a growing number of jobs require graduate study, including as librarian, social worker and physical therapist.And, in a study of 19 major employers, Sean Gallagher, an administrator at Northeastern University, found that a growing number of human resources administrators are giving preference to job applicants with masters’ degrees, and that masters’ often helped in competitions for promotions.
  2. You need the degree to get the public service career you want anyway. Students who use the federal direct Stafford and PLUS loan programs to borrow the full cost (including living expenses) of their graduate study and then spend 10 years working for a government agency or a non-profit can have much of their graduate school expenses forgiven under the government’s Public Service Loan Forgiveness program.According to research by Jason Deslisle, director of the federal education budget project at the New America Foundation, a new veterinarian with the typical education debt load of $132,000 who gets a government job and signs up for Income-Based Repayment (which caps payments at 10% of disposable income) will likely pay a total of only $36,000 in debt payments over 10 years. After the 120th on-time payment, the government would forgive a total of $147,000, which is all of the original debt, plus some unpaid interest. But beware: if you don’t end up making 120 on-time payments while working at public service, you will likely either have to pay off your debt in full, or have to keep making on-time income-based payments for at least 20 years, after which you may be eligible to have any remaining debt forgiven.
  3. You are in a field in which graduate degrees tend to lead to higher earnings. The Georgetown study found that graduate degrees typically add about $1 million to the lifetime earnings of, for example, chemists and financial professionals. But graduate degrees appear to have little overall impact on the average earnings of writers, editors, architects and many kinds of health-related therapists, such as audiologists. You can see the affects of advanced degrees on other occupations by viewing the full report.

Related: