The cost of a higher degree
Grad school doesn't always pay. Here's how to tell if it makes sense for you.
February 26, 2002: 5:22 a.m. ET
By Leslie Haggin Geary
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NEW YORK (CNN/Money) - It's tough to believe Susan Swayze isn't schooled enough for her dream job -- running a college or university. After all, she already has a Ph.D. in education. But to oversee an academic institution, Swayze needs to learn about finance.
"I want to be able to think big picture," she said.
So it's back to the books, this time for an MBA.
She's in good company. These days, wage earners are returning to graduate school in droves, and like Swazye, many are working for a second (or third) degree that will give them an extra edge.
The number of candidates taking the Graduate Management Admissions Test (GMAT) for business school, for example, surged 17.5 percent in the last six months of 2001, and pros estimate that half those test-takers ultimately will enroll in grad school. Law school applications also have soared nearly 21 percent as of the first of the month.
"If that number holds, it will be by far the biggest single increase of applicants to law school ever," said Ed Haggerty at the Law School Admission Council.
Of course, it's long been wise to obtain a higher degree if you want to expand your career -- and earning -- potential. But these days, the recession has pushed more workers back to school than ever. Overall, grad school applications rose by 4 percent from 1999 to 2000, according to the most recent study by the Council of Graduate Schools.
"Graduate school enrollment has been growing over time because there are increased requirements in the labor market for highly educated people," said Peter Syverson, the council's vice president for research. "But as the job market gets more difficult, people go to graduate school in greater numbers."
Weighing in
Ditching your briefcase for a backpack, however, isn't always a smart decision. Anyone considering such a move should do their homework first.
"Looking at the financial cost benefit is essential," said Letitia Chamberlain, director of the Center for Career, Education and Life Planning at New York University's School of Continuing and Professional Studies. "You have to be realistic, practical and financially wary. You wouldn't want to go back for a doctorate in English Literature without weighing the time, effort and money it will cost and before you ask, 'Is it worth it?'"
In general, those with more education make more money. A typical wage-earner with a bachelor's degree earns $49,700, but someone with a master's degree makes $61,033 per year, census figures show. Those with Ph.D.'s make about $79,986 annually. And those with professional degrees in lucrative fields like law and medicine earn about $94,400 a year. But earning power isn't everything; you've also got to scrutinize the cost of education to determine whether it's a worthwhile investment.
College savings calculator
Start with tuition. Student debt can be a heavy burden, even if you expect to earn a substantial paycheck when you graduate. First-year law associates, for example, now earn about $95,000 -- and as much as $125,000 in big cities like Los Angeles and New York. But with private law school tuition running $21,790 a year, "many graduates emerge from law school with crushing debt burdens," according to the American Bar Association.
To be sure, the easiest way to minimize costs is to attend a less expensive school. A year's tuition and fees at a state school runs at a relatively modest $4,056 per year. Opt for a private university and the tab runs about $13,995.
Tuition, books and fees, however, are only part of the price tag. There are also opportunity costs.
Consider the salary you'll surrender by taking time off to study. How will your 401(k) or retirement fund fare if you stop contributing while in school? And what benefits, such as health insurance, will you have to start paying for on your own?
Lost savings can add up faster than you think. Take, for example, a 30-year-old woman with no retirement savings who quits work for four years to attend law school. If she started maximizing her 401(k) when she returned in 2006, she'd have accumulated $1.8 million by the time she retired at age 60, assuming an 8 percent annual return and no employer match. Had she not quit work, and instead starting maxing out her 401(k) this year, she'd have a nest egg worth $2.23 million, according to Gregg Maleri and Evan Snapper at Ernst & Young.
(Those calculations assume a 4 percent increase in annual funding limits for 401(k)s after 2006.)
"Taking full time off to go back to graduate school once you're, say, past 28, is very costly," said John Challenger, CEO of the Chicago outplacement firm Challenger Gray & Christmas. "Yes, there's no question it enhances your value -- particularly in the big stream areas like finance, sales and marketing, engineering, health care. But you don't want to use graduate school as a deferral because you don't want to face the job market."
That's why Challenger counsels most wage earners to continue working while they attend school part-time.
Part-time enrollment is difficult, especially if you're juggling the demands of a family. But there's another reason to continue working: it keeps you current, and thus more attractive to future employers.
"When you're out for three or four years, you've got book knowledge and the market doesn't want that," said Challenger.
It turns out that schools have been gearing up to accommodate professional students. Duke University, for example, is one of 175 schools that now offer so-called executive MBA programs with weekend classes and alternative schedules.
"These work well for people who are more senior in their careers who don't want to leave their jobs," said Alison Ashton, associate dean of Duke's Executive MBA programs. In fact, Duke expects that by year's end, it will have fewer business school students enrolled full-time than executives attending its part-time MBA programs.
Swayze is among those in the executive track at Duke. Though she admits the program is "intense," Swayze didn't want to leave work and lose her health benefits.
"This is one way to get a degree without changing your lifestyle," she said. "You arrive on a Thursday afternoon every other week, do the work on the weekend, and the rest of the time use conference calls. One of my classmates flies in from Mexico. Another one flies in from California."
Have a Plan B in place
Of course, even if you find ways to minimize the cost of education -- say, by going to a state school or attending part-time -- experts warn the effort will be for naught if you're too focused on a narrow field. That's because the job market can change radically by the time you earn your degree, warned Richard Bolles, career counselor and author of "What Color is Your Parachute?"
"When you graduate you need Plan B," he said. "It's foolish to go back to college unless you have a clear idea of what you want to do based on a thorough knowledge of yourself. Otherwise, you look at the job market and hear that such and such a job is in high demand only to find out the job market's changed by the time you graduate. I can't tell you how many letters I've received from disgruntled graduates."
To avoid heartache (and a big waste of time and money), Bolles advises potential grad students to stay flexible and identify a variety of jobs they'd like to pursue with a second degree. Then, before you enroll, conduct informational interviews with prospective employers to see if your expectations are in synch with reality.
"If people stick to this process, if they inventory their favorite skills and fields and find out what kinds of jobs offer a chance to use them, then they can make the best evaluation of what they want out of graduate school," said Bolles. "Plus, once they get to school they'll be able to ask some really smart questions." 
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