Is graduate school worth it?

BY CECILIA CAPUZZI SIMON, The New York Times, July 24, 2011 >>

Graduate school has long been a recession hideout, a place to add new skills and credentials that, presumably, increase job opportunities and salary in a market recovered by graduation.

A year after 2008’s economic meltdown, applications to graduate school rose more than 8 percent. Last year, as the country hobbled toward recovery (or not), 27 percent of college seniors said they planned to attend immediately after graduation, up from 21 percent in 2007, according to the National Association of Colleges and Employers.

Students will invest, typically, two or more years in advanced study and thousands of dollars in tuition and expenses. A little more than half of students working toward a master’s will borrow an average $31,000, on top of any undergraduate debt they may already have.

So as a strictly financial calculation, does the investment pay off?

Some academics balk at the return-on-investment question. “Universities don’t sit around and say, ‘We will only have graduate schools in which the starting salary is higher than the tuition,’ "says Nicholas Lemann, dean of Columbia University’s Graduate School of Journalism. Journalists, like others who are pursuing a passion, he says, “do not think of their lives in pure R.O.I. terms."

Indeed, when it comes to gauging the value of education, considering only payback is seldom sound, especially for programs steeped in traditions of “knowledge for knowledge’s sake.” But if schools of applied learning aren’t asking the tough questions about the financials of a degree, potential students should, says Anthony P. Carnevale, director of Georgetown University’s Center on Education and the Workforce. “No one’s telling them what it’s worth. Certainly the colleges aren’t.”

Looking at the big picture, the case for grad school seems indisputable: in 2009, the median salary of master’s recipients was nearly 25 percent more than that of colleagues with only a bachelor’s, according to a report released in May by Dr. Carnevale that analyzed never-before-gathered Census Bureau data on compensation by major and degree level.

Dr. Carnevale concludes that grad school is “the best place to ride out a recession” for those who can afford it and are young enough (under 35) to reap the long-term benefit, or who are in fields like health or social work where a master’s or certification is critical to advance. For new college graduates, he says, entering the current job market with a diminished starting salary and job description could compromise a lifelong career and earnings trajectory.

Think of grad school as a 40-year investment, Dr. Carnevale says. Over time, it can move you out of the rank and file into elite positions. The key is determining where the jobs and compensation are. Consider, in your calculation, these variables: institutional quality, tuition costs, debt incurred, and the economic outlook over all and for particular specialties. So-called opportunity costs — lost wages and possible career advancement had you stayed in the job market — also change the cost-benefit picture.

“Field matters,” Dr. Carnevale and others caution. As the Census study shows, in some fields the bump from an advanced degree is minuscule (meteorology), or relatively small because it’s coming off an already low salary (counseling psychology).

But over all, in every major, more education results in more money, and in some (engineering) the increase can be significant.

Engineers are in such demand that those fresh out of undergraduate programs land well-paying positions, and it’s a field that values skills learned on the job.

Still, a graduate degree can identify candidates in the workplace for higher-paying management positions or jobs that require specialized knowledge, says Jeff Strohl, an economist who worked on the Georgetown report. In that report, engineers with master’s degrees in 2009 earned a median salary of $99,000 — $24,000 more than those with only a bachelor’s. With research grants covering tuition for many students, a master’s degree in engineering can provide a great return on investment.

That is not usually the case for doctorates, however, unless they move into high-tech fields or supervisory roles. K. Mani Chandy, chairman of the engineering school at the California Institute of Technology, makes clear to Ph.D. candidates at the outset that they will give up significant income and five years of marketplace experience — perhaps the bigger sacrifice, he says, in the fast-changing world of engineering and information technology.

“The R.O.I. for them,” he adds, “is intellectual happiness and not money.”

Which brings us back to journalism students’ labors of love. Hopefuls can spend between $18,680 (in-state for Kansas State University’s two-year program) and $50,000 (for Columbia’s one-year degree) for a master’s that, according to an an annual survey by the University of Georgia, adds about $9,000 to starting salary. That’s on average $39,000 for those lucky enough to find a job in the worst employment market for journalists in 25 years. (By graduation, 31 percent of Columbia’s class of 2011 had full-time job offers; half had lined up paid internships, which Mr. Lemann insists often lead to jobs.)

If a degree in journalism seems risky, the financial benefit of an M.B.A., while taking a hit during the recession, is clear. The average expected starting salary of an M.B.A. in 2011 is $91,000, according to the Graduate Management Admission Council.

The institution attended can influence R.O.I. as well. Using data from GMAC and other sources, two business-school professors set out to calculate the financial impact of an M.B.A. In 2007, the 50 top-ranked M.B.A. schools averaged a 17 percent return on investment — that’s starting salary compared to tuition costs, according to the two professors, Brooks C. Holtom at Georgetown and Edward J. Inderrieden at Marquette University.

The top-10 M.B.A. schools, with their higher tuition ($102,000 at Harvard; $108,000 for Wharton), scored a lower R.O.I. of 12 percent. But with corresponding raises and bonuses and institutional cachet, the net value of the investment in an M.B.A. from an elite institution is greater over time, according to Dr. Holtom and Dr. Inderrieden.

Business is on Dr. Carnevale’s “you’re-crazy-if-you-don’t” list, along with life sciences, physical sciences and social work.

The master’s in social work has become “absolutely essential” to advance in the profession, says Jacqueline B. Mondros, dean of Hunter College’s School of Social Work, of the City University of New York. Ninety percent of the members of the National Association of Social Workers, the field’s largest professional organization, have an M.S.W. But the return on investment won’t tempt. For social workers with the advanced degree, the median salary in 2009 was $55,000, according to the group’s research. Social workers with a B.A. earned $15,000 less, while Ph.D.’s added $17,000 to their median pay.

And the investment? Students seeking an M.S.W. borrow an average $35,500; a degree can cost about $20,000 at Hunter or $80,000 at Columbia. By comparison, their M.B.A. counterparts borrow on average $32,000, and more M.S.W. candidates borrow (three-quarters of them; half of M.B.A. students borrow).
The rule of thumb for borrowing, says Mark Kantrowitz, publisher of, is that debt should never exceed starting salary. Ideally, he adds, it should be half that.

“I’d be the last person to say not to pursue a dream,” Mr. Kantrowitz says. “But do it with your eyes open.”

It’s easy to see how students can get into financial trouble, and how the economics of postsecondary school can affect choices, and so the professions themselves.

That’s what’s happening in veterinary medicine. Vet students pay tuition comparable to medical students. They also take on comparable debt. At Cornell University’s highly regarded program, tuition for three years totals $85,200 ($128,250 for nonresidents) at 2010 rates, and students incurred a mean debt of $92,700. Last year, half of Cornell graduates went on to jobs with an average starting salary of $75,000. Counting the half that went on to low-paying internships brings the average to $68,000.

The field, dominated by small businesses, was hit hard in the recession as practices cut back on staff vets. To pay off debt, most graduates are choosing more lucrative urban “companion animal” practices over rural, large-animal practices. This has caused a shortage that will worsen as practitioners retire, and applications have stagnated.

“The debt-to-salary ratio is something we worry about,” says Michael I. Kotlikoff, dean of the Cornell veterinary medicine program. “It’s not like philosophy or literature,” fields notorious for turning out unemployable Ph.D.’s. “But at some point you start to wonder whether that investment is financially sound.”

Meanwhile, many law school graduates are taking what work they can get. Last year, while law schools continued to overpopulate the market with J.D.’s (43,000 in 2009, or 11 percent more than a decade ago), 17,000 jobs were cut from the field, and there were 33 percent fewer summer associate offers.

Those who graduate from the top schools have the best opportunities for the high-paying jobs out there. But many newly minted lawyers are picking up hourly work, or taking staff jobs that typically pay $65,000 a year.

That happens to be the “break-even salary” that makes the investment in law school worthwhile, according to research from Northwestern University School of Law. (Many believe that figure to be low.)

A law degree can run $100,000 at low-tier schools, and upward of $140,000 at top ones. According to the National Postsecondary Student Aid Study, 89 percent of law students borrow an average $80,000. You don’t need a master’s degree in finance to see what kind of investment that might turn out to be.

"Grad school is 'the best place to ride out a recession' for those who can afford it and are young enough to reap the long-term benefit, or who are in fields like health or social sciences. "