People think graduate school is the secret recipe for success. I’d like to offer a different perspective.
Think like an investor. Think in terms of ROI (return on investment).
• How much will tuition cost?
• How much debt will you acquire in the form of student loans?
• How much will you pay in interest?
• How long will it take you to graduate?
• How will your annual income suffer during your time as a student?
Let’s say you make $40,000 a year before taxes. Graduate school can typically cost $31,000 a year. It takes 2-3 years to earn a masters degree and it can take 2-6 years to earn a doctorate
(These numbers are from brief Google searches. This is a blog and not a scientific journal after all. Please adjust accordingly.)
If you work 40 hours a week, that’s 1,920 hours a year. If you earn $40,000 before taxes, that’s $20.84 per hour (we’ll round down to $20 for the sake of simplicity).
Let’s say you cut back to 20 hours a week while you focus on graduate school. Okay, that’s 960 hours a year instead of 1,920. At $20 an hour, that’s $19,200 before taxes. Don’t forget, part time employees don’t get health insurance benefits.
The price of health insurance varies depending on where you live, your age, any pre-existing conditions, your deductible, etc. but let’s say you pay $200 per month out-of-pocket.
That $200 per month is $2,400 per year. So the $19,200 you made before taxes is now $16,800.
Going from $40,000 to $16,800 is a $23,200 decrease. So right there…before you’ve given a nickle to the university, you have lost $23,200 in a single year. Over the course of 3 years that is $69,600.
Combine that with the typical $31,000 over the period of 3 years ($93,000) and you get a total of $162,600!
Now that you know your masters degree is going to cost $162,600, look at the median annual income for your field based on bachelors degrees and masters degrees.
For some fields, it makes sense. Anything within the medical field or in the soft sciences—okay—it’s a given that you have to go to graduate school to be able to do anything.
What about other fields like business or design or communications?
It just doesn’t make sense!
Let’s say it’s a $20,000 bump in annual income—it’s going to take 8 years just to break even. Combine that with the three years you were in graduate school and it actually takes you 11 years to break even.
That’s a terrible ROI!
Ask any real estate investor or any venture capitalist what he thinks of those numbers. 11 years just to break even (scoffs).
You can keep your MBA—seriously. I don’t want to work for the rich…I want to be rich.
I prefer real estate.