In a hypercompetitive workforce, it's important to stand out, and many employees see graduate school as a way to do so. But a master's degree isn't always a smart financial move.
Students considering an advanced degree in any discipline should know two things: what the degree will cost—including tuition, student loan interest, and lost wages and retirement contributions—and what salary they can expect when they graduate, says Alexa von Tobel, founder and CEO of LearnVest, a personal finance site.
"Graduate school is such a rich experience. I think it is fabulous," von Tobel says. "I absolutely recommend it, if you can make [the] numbers make sense."
[Get tips and tools to help pay for grad school.]
Most master's programs post the average starting salary for recent grads on their websites, and some schools offer grants, scholarships, and fellowships to help minimize the cost of the degree. Students can use a grad school calculator, like the one offered by LearnVest, to crunch the numbers and calculate the return on their investment.
The MBA payoff
"If you're currently making $100,000, and going to a two-year MBA program for $100,000 is going to land you making $100,000, that doesn't make sense," says von Tobel, who dropped out of Harvard Business School to start LearnVest. "If it's going to land you making $150,000, well that absolutely makes sense."
The top business schools advertise the starting salaries for recent graduates, but it's important to remember these are only averages.
"If you want to do some weird, quirky job that commands something much lower, then the average becomes irrelevant," von Tobel says. "If you want to go into investment banking instead, it commands higher, so you also have to consider that."
Pursuing a less-traveled path, such as economics or finance, can also pay dividends and help graduates stand out from the sea of MBAs, says Dick Startz, a professor of economics at the University of California—Santa Barbara.
"You're really getting some professional and technical training," he notes. "Very, very few undergraduates come out with the kind of technical skills that you need ... to actually figure out how to set prices, or to actually do forecasts."
For grade school and high school teachers, however, a master's in education isn't always a smart move, says Startz, who penned the book Profit of Education.
"If you control for [experience], you make about another $5,000 a year if you get a master's degree," says Startz.
That's an extra $125,000, on average, over 25 years, but nearly 50 percent of new educators quit teaching within five years, according to the National Commission on Teaching and America's Future, a nonprofit organization.