Posted: 2:34 p.m. Monday, May 20, 2013
When the job market stinks, many college students take refuge in graduate school, figuring the time and money spent getting a master’s degree will boost their career prospects. But with the interest rate on student loans doubling to 6.8 percent on July 1 — adding to the $1.1 trillion in outstanding student loans — is that really a good idea?
Big picture, there is no doubt that more education means a bigger paycheck. The median salary for workers with a master’s degree was $67,600 in 2012, according to the U.S. Bureau of Labor Statistics. Those with just a bachelor’s degree made more than $12,000 less — a pretty big gap. (Even greater is the gap between college graduates and those with just a high school diploma – more than $21,000.)
Teachers with a master’s degree in Montgomery County Public Schools in Maryland earn $4,700 to $7,100 more than their peers with just an undergraduate degree.
Those with advance degrees not only earn more — they are more likely to have a job to begin with. The unemployment rate in 2012 for those with a master’s degree was 3.5 percent, according to the Bureau of Labor Statistics, while the unemployment rate for workers with a bachelor’s degree was 4.5 percent.
The educational pay gap has been growing. In a study by the Economic Policy Institute, the real hourly wage, in 2011 dollars and adjusted for inflation, for workers with advanced degrees was $36.40 — $8.40 more than those with a BA or BS. In 1973, the gap was $5.21. Those with just a high school diploma, by the way, saw their real hourly wage — again, adjusted for inflation — drop from about $17 to less than $16.
Getting that advanced degree doesn’t come cheaply, however. The average total price — including tuition and fees, books and materials, and living expenses — for one year of full-time graduate education was $34,600 for a master's degree program, according to the U.S. Department of Labor. That means a master's degree in business administration could set you back $70,000 or more.
In households headed by people with student debt who attended graduate school and are under 35, average student loan debt climbed to $81,758 in 2010 according a Wall Street Journal analysis of Federal Reserve data. That figure is up from $55,594 in 2007.
And an MBA isn’t what it used to be. The median salary for newly hired MBAs has been flat since 2008 and 2011, not adjusting for inflation, according to a survey by the Graduate Management Admission Council.
A master’s degree is no longer a gold ticket to success. And a master’s degree in counseling or music may not pay off at all.
A master’s degree “should be looked as a long-term strategic investment,” says Dee Masiello, academic and faculty affair and lecturer for the College of Professional Studies at Northeastern University in Boston. “A master’s degree may not give you immediate financial return, but over time it will give you some sort of return — whether that’s the new skill set, networking base or career trajectory you’ve built.”
Still, crunch the numbers. A master’s degrees in engineering or finance will have a greater return on investment that a master’s degree in, say, journalism.