For many Americans, the path to success is clearly laid out: Get good grades in school so you can go to a good college, do well in college so you can get a good job. For some, however, a good job doesn’t feel like the end of the path; in these cases, workers might consider additional education, in the form of a post-secondary degree. But is it worth it to go back to school?
To answer that question, you must consider the potential costs of a post-secondary degree (both in terms of actual cost, time, and opportunity cost) against what you hope to achieve after graduation. Let’s walk through those considerations.
The true cost of a post-secondary degree
For ease, let’s start with the cost of the degree itself. How much you’ll pay to go back to school will vary based on the type of degree you’re considering, the school you select, and a variety of other factors like whether you qualify for scholarships or financial aid.
According to NCES data, the average tuition and fees for a year of post-graduate education is more than $20,000. Total costs, when you factor in room and board, may top $35,000.
However, that could be a gross underestimate of the real costs. For instance, if you have to borrow money to cover those expenses, you’ll want to factor in the interest rate on that debt as well as potential repayment terms. Federal student loans have different rates and protections from private student loans. (Keep in mind: The federal loan options for graduate students differ from those available to undergraduates.)
Beyond the actual cost, however, you’ll want to consider the opportunity cost.
- What are you missing out on if you leave the workforce to go back to school? Think about your salary as well as paid vacation time and opportunities for raises and promotions.
- Will you need to hit pause on saving, investing, and other goals? If you aren’t earning income, you may end up pausing retirement account contributions or saving for other goals.
Of course, there are ways to alter these calculations. For instance, you might choose a school that costs less, continue to work while you attend school, or attend a program that is paid for in-part by an employer.
Beyond that, you may want to reframe the way you think about these expenses. Instead of looking at them as costs, could they be an investment?
Calculating the ROI of a post-secondary degree
If you’re viewing a new degree as an investment in your future, it’s helpful to calculate the potential return on that investment—how might your earning potential and career prospects shift if you invest in another diploma?
The majority of people who go back to school do so in order to improve their career prospects. For some careers, these degrees are a requirement, and most surveys show those who pursue a professional degree, such as a medical or dental degree, think it was worth the expense.
However, the same isn’t necessarily true for ‘discretionary’ degrees like an MBA. Some hiring managers say that MBAs perform the same as (or worse than) a bachelor’s degree holder with two years of experience. Yet most firms pay MBA employees more.
Law degrees tend to fall somewhere in the middle of these two. Most students who pursue a law degree want to become lawyers, however many end up in roles that don’t necessarily require a law degree.
To get the most out of a post-secondary degree, it’s important to outline why you’re pursuing it—what return would you like to get on your investment? For some careers, the degree might be table stakes, in which case, your main goal is to evaluate the cost of a specific program against what it might offer you in terms of career prospects and earning potential.
Be sure to consider job prospects, as well. A highly specialized degree might feed into high-salary positions, but if there are only 5 such jobs in the country, you may end up in a lower-salary alternative.
Be proactive about outlining your goals to help avoid surprises. Are you pursuing an MBA to secure a promotion or to assist with a career pivot? Are you simply looking to improve your earning potential?
Once you know your goals, ask yourself if a new degree is the only way to achieve them. Can you reach those same goals without going back to school? What would that cost you, in terms of time and effort? This approach can help you prevent buyer’s remorse, whatever your final decision.
Finally, knowing your goals can help you fine tune both your expected costs and your expectations around the benefits of going back to school. If your goal is to build a well-connected network, consider picking a school where graduates feed into the higher ranks of your industry.
Additional considerations
A financial advisor can help you work through a more thorough cost-benefit analysis, looking at how long it might take you to pay off any new student loans based on current interest rates and expected earning potential post-graduation. This can help you determine how going back to school might impact your other goals—such as saving for a home or retirement.
An advisor can also help you account for variables, like how a lucrative summer internship might impact your plans compared to a prestigious pro bono opportunity.
There are some considerations that are more difficult to model, however. It’s hard to quantify the financial benefit of expanding your network. While banks can’t discriminate based on education level, many financial risk models view people with higher-level degrees as less risky with higher earning potential, and may market different products to you.
Degrees can also be a helpful way to hit “reset” on your career—helping you pick a new location or field with fewer questions asked by hiring managers.
Ultimately, only you can decide whether a post-secondary degree is “worth it.” There is far more to any cost-benefit analysis than the basic financials. However, finances are a good place to start. If you’d like help running the numbers, set up a time to connect with us.
