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  • 4m.

    How To Determine If Grad School Is Right For You Financially

    Most people know that having a higher degree typically leads to a higher-paying job, but with rising tuitions and interest rates, the financial payoff isn't as clear-cut as it used to be.
    Updated: April 23, 2018

    What You'll Learn

    • Why you shouldn't borrow more than your potential starting salary.
    • How much more graduates from top schools earn than graduates from other schools.
    • Why it all comes down to your career choice.
    Image with a clock, pencil and apple balancing on top of a book

    Numerous studies have indicated that people with their master's and doctorates typically earn more than people with just a bachelor's—and usually a lot more than people without any college degree at all. But is the increase in pay worth the cost of the higher degree?

    If you are set on grad school, getting a post-graduate degree definitely makes you a more competitive job candidate. However, if you're considering getting a higher degree to guarantee a higher-paying job or entry to a new career path, be careful. Like much in life, nothing is certain.

    At What Cost?

    When deciding if a post-grad degree is right for you, first consider the cost of the degree program versus your possible starting salary once you graduate. This is especially important if you want to pursue an advanced degree to change to a potentially less lucrative career, like getting a master's degree in education so you can leave the corporate world and become teacher, for example.

    It's a good idea to borrow no more in student loans than your potential starting salary. That way, you'll only have to put 10% of your annual salary toward your loans to pay them off in 10 years. Students who borrow 15% more than their starting salary typically have more difficulty repaying their student loans and run the risk of default. You can estimate whether your salary will be enough to cover your debt with this calculator.

    Of course, not all grad schools are created equally. Graduating from top-tier grad schools can lead to a higher salary. Even if a bigger paycheck isn't your goal, these schools may help you network, so when you do get your post-grad degree, you may be more likely to find that ideal job. Many schools even treat their graduate programs just like the careers they prepare you for, thus getting you some hands-on experience with the exact skills you'll need.

    It's also worth figuring out whether you'll work part time while in school or whether you'll need a loan for living expenses. Considering all of these things definitely adds a lot of complexity, but then again, no one said planning the next 4-8 years of your life would be a walk in the park. When everything seems overwhelming, use your projected starting salary as a guideline and check the math to see if and by when your grad school degree will pay for itself.

    Financial Aid

    Financial aid can make a huge difference in whether grad school is ultimately worth the cost of investment. Financial aid programs can vary widely from school to school, so be sure to look at what options you have and use best-case/worst-case scenarios when comparing the totals to your projected starting-year salary.

    When taking financial aid into account, know that there are big differences depending on your major. For example, if you're going into science, there tends to be a lot more scholarship and grant money available to help cover tuition costs. If you're pursuing the arts, you may be better off searching for assistance through private scholarships and organizations outside the school.

    Career Choice

    Some professions require a master's or doctorate, so if you're really passionate about that career, you might just have to take on the debt. Health professionals, for instance, are able to borrow larger amounts of aid to cover med school costs. However, their projected higher starting salary means they may be able to pay off those big loans quickly.

    If you're in the arts, communications, or journalism, you might be better off building your skills in the marketplace and networking for a few years rather than going back to school for a post-grad degree. That being said, if you're looking to advance your career, the high cost might be worth the productive classroom environment, free of the distractions of the workplace.

    All-in-all, there are a lot of important factors to consider. It's a good idea not to borrow more than your projected first year's salary and to look for a school with a good record for placing their graduates into jobs. Financial aid will definitely help, but if you're entering a high-salary field, it might not be as important to you.

    Most importantly, though, take a look at your career path and think about your plans for the future. What will you be happiest doing?

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