Consumer Comeback Blog

6 Questions to Ask Before Taking On Debt for Graduate School

Written by Jeffrey Trull

graduate-school-student-loansDeciding to attend graduate school is a tough choice. Taking on debt to earn an advanced degree makes the decision even harder.

The choices with graduate student debt put potential students in a tough spot. If you’re considering another degree, you may feel stuck in a job you don’t like making less than you wish. You want to go to graduate school to increase your salary and move on or move up with your career, but you’ll have to borrow to do it.

If you’re like most graduate students, the amount of loans isn’t insubstantial, either. The Wall Street Journal reports that approximately 832,000 students that graduated with an advanced degree 2012 finished with average debt of $43,500.

While ignoring the debt questions and letting everything work itself out later may seem like the better choice, as someone that’s attended graduate school, you’ll only feel worse later when you’re stuck paying back loans you wish you didn’t have.

Before you take on debt to attend graduate school, consider the following questions.

1. What’s the expected starting salary in your field?

Before you jump into grad school, you’ll need to have an idea if it makes financial sense in your particular case.

Generally speaking, those with an advanced degree do earn more, but how much more varies widely across different fields. According to a Georgetown study, Master of Fine Arts graduates only saw 3 percent boost in income potential despite some schools costing more than $22,000 a semester. Compare that to a physician’s assistant studies master’s student who earns an average of 30% more with the advanced degree.

Because of this disparity, you’ll need to take a look at your specific field. Are employers hiring for your dream job right now? How’s the job growth outlook for this field according to the Occupational Outlook Handbook? Can you pinpoint an exact job you want and what the starting salary is? All of these are important questions to look at before deciding to take on debt for graduate school.

Of course, all of this ties into one important aspect of your new career: the salary and how well your paycheck will fare against the student debt. When it comes to paying back student loans, your starting salary after graduation will largely determine how much you can afford to borrow.

A great tool for this is FinAid’s graduate student loan advisor calculator. You can actually input your field and graduation year, and the calculator will tell you how the maximum you should borrow. For example, the recommendation for civil engineers graduating in 2014 is to borrow no more than $60,700 for a master’s degree. Compare that to psychology majors with a maximum of $36,500 borrowed. The difference, of course, is in the expected starting salary for these two fields. Because of this, your field needs to be considered before you sign on to too many loans.

2. Are you certain this is what you want to do?

The results of graduate school may sound amazing, but the reality is that it’s still hard work to earn a degree.

Before you fork over the cash to start on your advanced degree, make sure you’re really motivated to finish. One of the worst outcomes for you financially is to take out loans to start grad school only to never finish and earn your degree.

The same goes for being sure this is field is actually your calling. For you undergraduate major, you were going in nearly blind with what you wanted to do. But there’s no excuse for graduate school; you need to know you’re picking the right concentration this time.

If you don’t have any experience in your desired field, get some first. Whether it’s part-time, full-time, or an internship, find out first hand what you’re in for after graduating so you’re not left with both student debt and a job you’re unhappy with later.

3. Is an advanced degree necessary?

Before you embark on a multi-year journey to earn a new degree, make sure it’s really necessary for what you want to do in your career. If you plan to become a doctor or lawyer, there’s obviously no negotiating on that position. But other careers might not be as limited.

An MBA is a nice bonus to have, but it’s not completely necessary for a lot of jobs in that field. According to Brazen Careerist, financial analysts pull in a median salary of $85,000 without the requirement for an advanced degree.

4. Are you carrying undergraduate debt?

Having debt left over from earning your first degree makes the situation more complicated. While you can postpone payments while attending graduate school, it’s going to all come back once you’re done. Yes, there are flexible repayment options for federal loans, but those choices actually cost more interest over the entirety of the repayment process.

Don’t forget that if you’re working on paying off student debt already, you’ll be hit with the double whammy from graduate school of adding to your debt and potentially losing some or all of your income while you attend school.

5. Will your employer pay?

If the conditions are right, getting an employer to pay for your graduate education can be a huge advantage. US News reports that 54 percent of employers out of 600 respondents to a recent survey offered at least some aid to employees seeking a graduate degree.

While getting this type of assistance often only makes sense for both sides if you’re planning to stay on with your employer after completing your degree, you can receive tuition benefits up to $5,250 a year tax-free from your employer.

6. Does part time make more sense?

Attending grad school part-time open the possibility for continuing to earn money while you’re in school. This way you can have the best of both worlds while avoiding some or all student loans. The drawback is that you’ll likely be very busy between work and school, but it’s a trade off.

The final word: Don’t expect any advanced degree to wipe away problems with income and debt. Consider the real issues now to avoid any problems with student loan debt later