A Basic Cost-Benefit Analysis of Advanced Degrees

admin | October 18, 2012

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Even though more and more people have begun doubting the value of bachelor’s degrees, the evidence incontrovertibly points to the fact that you’re much better off, over the course of your life, if you go to college and complete a degree program. But what about advanced degrees? Many recent graduates and workers hoping to switch their career tracks or bump their salaries consider getting more education, whether it’s an MBA, a law degree, or any number of Master’s or PhD degrees in different fields. We know, of course, that advanced degrees aren’t always completely necessary, yet we still understand them to be the keys to a better future. At the same time, earning an advanced degree can be financially devastating if you don’t plan accordingly. So how do you decide? The answer is simple—do a cost benefit analysis. Here are some questions to consider:

1. Do you absolutely need the degree to work in the field you desire?

Most jobs do not require advanced degrees. Of course, there are notable exceptions, like positions in law, medicine, or higher education. If you’ve been looking through job listings lately, you may have noticed that for some positions, a master’s degree is required or preferred. Other job ads may ask for an advanced degree or “equivalent work experience,” meaning that education and experience may be interchangeable. If you are considering getting an advanced degree, do plenty of research to determine whether you really need a Master’s to be successful in the field you desire to pursue.

2. Is there evidence suggesting that you’ll increase your earning potential after acquiring a degree?

Of course, there’s nothing wrong with wanting to get an advanced degree simply to learn more. But because pursuing such a degree will require significant financial investment on your part—not just tuition but also the opportunity cost of being out of the workforce for several years—the investment should pay off in the long-run. As explained in this excellent U.S. News and World Report article, the return on investment of graduate degrees varies widely by field. Be sure to check if your desired graduated degree improves your earning potential by a margin that you’re comfortable with.

3. Do you have a plan to pay for the advanced degree?

Pursuing a graduate degree will usually entail a mix of loans and scholarships, so you might not have to pay full tuition. If you do have to front the entire cost of your Master’s degree, be sure that you have a plan to pay it off once you graduate. If you don’t find a job immediately, do you have enough savings or another person who can help you (say, a spouse or parent)? Of course, in the best of all possible worlds, we would get a high-paying job as soon as we get the degree, and you’ll be able to pay back your loans with ease. But if you don’t, do you have a plan to pay back loans without being in debt forever?

4. What’s the state of the industry you wish to work in after obtaining your degree?

Of course, if your dream is to be a lawyer, go out there and get a law degree. But be sure that you understand exactly what being a lawyer entails, and also take into consideration the state of the legal industry. Because of advances in technology and the glut of law degree holders, entry-level work in the legal industry has become scarcer, and the pay and security has decreased substantially. Since prospects don’t look very good for lawyers, you may want to reconsider going to law school, which has become astronomically more expensive than it used to be.

At the end of the day, getting more education usually means a more robust and rewarding career. But that’s not always the case, so be sure to research and plan carefully before jumping into a graduate program. Good luck!

Karen Smith is a freelance writer and aspiring entrepreneur. She enjoys writing about all things related to business, including finance, accounting, marketing, and the best way to go about getting an online business degree. Share your questions and comments with Karen below!