Navigating the complexities of graduate school debt can be daunting, but understanding the key factors can help you make informed decisions. The average graduate student owes over $88,000 in student loans, and this can vary widely based on the degree program. Before you take on debt, it’s important to consider your program type, earning potential, and funding options.

Is grad school worth it? The answer isn’t always clear, and depends on your personal and career goals.
What are the risks? Some graduate degrees have a negative financial return.
What are the rewards? Earning potential can increase with an advanced degree.

To learn more about the types of loans available, how to minimize your debt, and other strategies for success, keep reading.

Are Graduate Student Loans Worth It? A Comprehensive Guide to Making Informed Decisions

Is a graduate degree truly the ticket to a better life, or could it be a financial trap? The answer isn’t always clear-cut. While a graduate degree can often lead to higher earnings and career advancement, it also comes with significant costs. Many students must take on substantial student loan debt to fund their advanced education. This article aims to provide you with a comprehensive overview of all the factors you need to consider when deciding if taking out student loans for graduate school is a worthwhile investment. It’s important to note that the “worth” of graduate school is highly dependent on your individual circumstances and the specific details of the program you choose.

Understanding the Landscape of Graduate School Debt

The cost of graduate education has been steadily rising, and, as a result, borrowing has soared. Graduate students, though only 16% of the student population, received almost half of the $95 billion in federal student loans issued in 2021-22. Nearly 40% of all outstanding federal student loan debt can be attributed to graduate school loans. The average graduate student loan debt sits around $88,220. However, this figure varies widely. The type of degree you pursue, the institution you attend (public, private nonprofit, or private for-profit), and the length of the program all influence the final debt amount.

Post-baccalaureate certificates range from $55,883 to $84,826 in debt.
Master’s degrees range from $54,699 to $80,068.
Research doctorates range from $106,297 to $183,508.
Professional doctorates can range from $165,600 to $259,703.
Some specialized health professions can have an average debt of over $240,000.
MBA programs average around $63,517 in debt, while a Master of Arts (MA) averages $67,024.
The average debt for a Ph.D. is $128,845 and a Medical Doctorate (MD) averages $202,453.

Federal loan options for graduate students include Direct Unsubsidized Loans, which allow you to borrow up to $20,500 per year. Direct PLUS Loans can cover the full cost of attendance, which often means many students take on more debt. The aggregate federal loan limit for graduate and professional students, including both undergraduate and graduate loans, sits at $138,500. Many graduate students also turn to private student loans to cover remaining costs. While private loans may offer lower interest rates to those with good credit, they often lack the same protections as federal loans. Therefore, you should maximize federal loan options before considering private loans. Where you go to school matters a lot too. Public institutions often have much lower tuition than private nonprofit or for-profit institutions.

The Potential Benefits of a Graduate Degree

A graduate degree can bring many potential benefits. On average, individuals with graduate degrees earn more than those with only a bachelor’s degree. In 2021, the Bureau of Labor Statistics reported that those with a master’s degree earned an average of $1,574 per week, while professional degree holders earned $1,924, and those with doctoral degrees earned $1,909. This compares to $963 per week for individuals with an associate degree and $1,334 for those with a bachelor’s degree. Over a 10-year period, this can translate to significant additional earnings. For example, someone with a doctoral degree could potentially earn $338,000 more than someone with a bachelor’s degree over 10 years. Furthermore, a graduate degree can often be essential for career advancement and can provide you with specialized skills and knowledge. A graduate degree can also enhance your resume and improve your overall employability. Finally, grad school can provide you with opportunities for exploration and personal development.

The Downside: When Graduate School Doesn’t Pay Off

However, not all graduate degrees provide a financial benefit. A 2022 report found that 40% of graduate degree programs have no net financial value, and 14% of advanced degrees and 40% of master’s degrees actually have a negative financial return. This means some graduates end up worse off financially than if they had entered the workforce directly after earning a four-year degree. Some graduate programs, particularly in fields like psychology, social work, education, and the arts may not lead to higher salaries, despite the significant investment of time and money. Some career paths, like rehabilitation counseling, marriage and family therapy, and healthcare social work, require a master’s degree, but often have lower median salaries, ranging from $37,000 to $52,000 per year. Additionally, the academic and research job market can be very bleak for some graduate students, which impacts the return on investment. Significant student loan debt can also limit career options after graduation. High monthly payments might make lower-paying jobs less feasible. The time spent in graduate school also represents an opportunity cost, which means you won’t be earning a salary during that time.

Key Questions to Ask Before Taking on Graduate School Debt

Before making the decision to take out loans for grad school, you should ask yourself some key questions. First, what kind of program is it? The type of program you choose matters significantly. Some programs, like medical, dental, pharmacy, and veterinary schools, typically require high levels of debt. On the other hand, other programs may have more funding opportunities available. Also, consider: what is your future earning potential? Earning potential varies widely depending on the field and degree type. Finally, what are your funding options? Funding options can vary greatly by program. Some disciplines offer assistantships and fellowships, while others do not. It is also crucial to ask yourself: how will debt affect your career opportunities? Large amounts of debt can limit your career options after graduation.

Strategies to Minimize Graduate School Debt

There are many strategies you can use to minimize graduate school debt. Prioritize fully funded programs. These programs can cover tuition and living expenses through assistantships, fellowships, and grants. These types of programs are often more common at the doctoral level and in the arts and sciences. You should apply for scholarships and fellowships. There are many external funding opportunities based on your field of study, career goals, and school, so be sure to explore these options. Underrepresented groups may also qualify for special scholarships. Working during grad school can also help offset costs. Part-time work, work-study programs, and teaching opportunities can be beneficial. Many universities offer teaching assistantships that can provide a stipend and tuition waiver in exchange for teaching duties. You could also research employer tuition assistance plans. Some employers may offer tuition assistance or reimbursement programs, and some may be willing to invest in an employee’s education. Additionally, you could get an on-campus job, as some staff positions offer tuition benefits. Finding a work-study position can also help, as these programs pay students to work in qualifying roles, usually on campus. Always plan ahead. Research total costs, required credits, and program length, and work with an advisor to design a cost-effective course of study. Finally, consider in-state public institutions for potentially lower tuition rates. Delaying enrollment to save money could also be an option that will help you be in a better financial position when you start graduate school.

Refinancing Student Loans

Refinancing your student loans can be a useful strategy. This process involves paying off your old loans with a new loan from a private lender. Refinancing can result in lower rates and monthly payments. Other potential benefits include shorter terms and the release of a cosigner. However, it is important to note that refinancing may result in losing federal loan benefits, such as income-driven repayment plans and loan forgiveness.

When Is Graduate School a Good Idea?

Graduate school may be a good idea when you can get a scholarship to cover some or all of your expenses. It can also be a good idea when you have paid off your undergraduate loans or you are in a good financial position to take on more debt. If you need an advanced degree to reach the next level in your career, it may be a good investment. You may also decide to attend graduate school when you want to take some time off from your career to explore a new interest. If you are confident that you will be able to pay off your loan balance, graduate school could be right for you. Finally, attending graduate school is a good idea when you enjoy school and the prospect of studying.

When Might Grad School Not Be the Best Idea?

However, graduate school might not be the best idea if you are currently in deferment or forbearance with existing private or federal undergraduate student loans. If you do not want to increase your total student loan debt, then grad school may not be the right choice. Additionally, if you are not confident that an advanced degree will open up new, lucrative opportunities for your career, then you may want to reconsider. If you did not enjoy college and are not interested in continuing academic study, then graduate school might not be for you. Finally, if you want to change careers to something that does not require an advanced degree, grad school might not be worth it.

Conclusion

The decision to take on student loans for graduate school depends on your individual circumstances and financial considerations. Carefully weigh the costs and benefits. Assess your career goals, explore all available funding options, and avoid excessive debt. While graduate school can be a valuable investment, it should always be approached thoughtfully and strategically. Use this information to make sound financial decisions about your future.

Frequently Asked Questions

1. How much student loan debt do graduate students typically accumulate?

The average graduate student loan debt is approximately $88,220. However, this figure varies widely depending on the type of degree, whether the school is public or private, and program duration.
For example, a post-baccalaureate certificate might incur an average debt of around $55,000 – $85,000, while a professional doctorate can result in debt ranging from $165,000 to over $250,000.
Specific programs like an MBA average around $63,000, while medical degrees often result in over $200,000 in debt.
Master’s degrees average around $70,000 in debt while PhDs can be closer to $130,000 or higher.
During the 2019-2020 school year, the average graduate student borrower took on anywhere from $52,050 in debt for a post-baccalaureate certificate at a private non-profit institution to more than $242,000 for a doctorate in a specialized health profession.
The level of degree you pursue isn’t the only factor affecting your post-grad debt. Within each degree level, there’s a wide range of degree types, and each has its own specific costs.

2. Is graduate school always a good financial investment?

No, it’s not a guaranteed financial win. While graduate degrees often lead to higher earnings on average, a significant portion of graduate programs, especially master’s degrees, have a negative financial return.
A 2022 report found that about 40% of graduate degree programs have no net financial value, meaning they do not provide a return on investment compared to entering the workforce with a bachelor’s degree.
Additionally, 14% of advanced degrees and 40% of master’s degrees can even put students in a worse financial position than if they had not pursued further education.
Certain fields like psychology, social work, education, and the arts may not see a significant salary increase despite significant investment.

3. Why is graduate school debt so high? * Graduate school debt is high for several reasons. First, tuition and living expenses are high and rising. * Second, unlike undergraduate loans, federal loans for graduate students, particularly Direct PLUS Loans, often don’t have the same borrowing limits. This allows graduate students to borrow up to the full cost of attendance. * Graduate students also have access to private loans without caps, leading to excessive borrowing. * It should also be noted that graduate students receive almost half of federal student loan funding despite only making up 16% of the student population.

4. What can I do to reduce my graduate school debt?

Prioritize fully-funded programs that offer tuition remission and stipends through teaching or research assistantships.
Apply for scholarships, fellowships, and grants, as there are more external funding options for graduate students than undergraduates.
Work part-time, either on-campus or through work-study programs, to offset expenses.
Check if your current employer or potential employer offers tuition assistance or reimbursement programs.
Also consider attending an in-state public university for lower tuition.
If possible, save money and delay enrollment to attend school when you are in a better financial position.

5. How can I determine if graduate school is the right choice for me? * Consider your personal career goals, income potential, and the financial aspects of the program you are pursuing. * Determine if an advanced degree is necessary to achieve your professional aspirations and whether the income increase will justify the cost of the degree. * If you are considering an unfunded program, evaluate the long-term implications of monthly student loan payments on your desired lifestyle and career path. * Also assess your interest in academic study; if you did not enjoy college it is possible you will not enjoy a graduate program. Consider whether you can get the degree without taking on additional debt.

6. What types of student loans are available for graduate students, and which should I prioritize?

Graduate students can utilize federal student loans, private student loans, or a combination.
Federal Direct Unsubsidized Loans allow students to borrow up to $20,500 per year, with additional borrowing available through PLUS loans, but these tend to have higher interest rates.
Private loans are another option, but you should prioritize federal loans first.
Federal loans offer more protections such as income-driven repayment plans and potential for loan forgiveness. However, private loans may sometimes have better interest rates for those with established credit.
Refinancing your loans might also be a smart option, especially if you can secure a lower interest rate.

7. How can graduate student employment assist with cost reduction?

Teaching assistantships (TAs) and research assistantships (RAs) often come with tuition remission and stipends, reducing the need for loans.
Work-study jobs on campus can provide additional income to cover living expenses, and some on-campus positions can even offer tuition benefits.
Employers might also offer tuition assistance or tuition reimbursement, which can help pay for some of the degree costs.
It is important to research various employment policies and programs to find what is best suited to you.

8. What are some specific fields or programs with lower or higher earning potential? * Some programs, like those in medicine, law, and dentistry, often lead to higher incomes but come with very high debt. * Fields such as nursing, political science, and computer science generally have a good return on investment, with graduates often earning significant salaries. * On the other hand, programs in fields like rehabilitation counseling, social work, and education may have lower earning potentials, making the risk of high debt less desirable. * Evaluate salary data in the Occupational Outlook Handbook to research potential income based on the field of your degree. Prioritizing fully-funded programs or lower-cost options is essential, particularly for fields with lower earning potentials.

9. What is a fully funded graduate program?

A fully-funded graduate program is a program where the student’s tuition and living expenses are fully covered by the university or external sources such as grants, fellowships, or scholarships.
This means that the student does not have to pay for tuition, fees, or living expenses such as housing, meals, and transportation.
Fully-funded graduate programs are highly competitive, and you may be required to meet certain academic and research standards to be considered for them.
In addition to covering tuition and living expenses, fully-funded graduate programs may also provide opportunities for research, internships, or teaching assistantships, which can offer valuable experience and connections for soon-to-be grads.

10. Should I refinance my student loans? * Student loan refinancing is the process of paying off your old loans with a new loan from a private lender. * This new loan will have new rates and terms, and if you’re in a better position financially than you were when you took out your original loans (better credit score, DTI ratio, credit history), you may be able secure a lower rate. * This could translate to hundreds or thousands of dollars saved over the life of your loan. * Refinancing can also enable you to lower your monthly payments, pay off your loans faster, switch your loan type from variable to fixed-rate, or release a cosigner from your original loans.

11. What factors should I consider when choosing a graduate program? * Consider the total credits required, the total cost including fees, and whether the program offers funding opportunities. * Research whether the program is a good fit for your career goals and whether attending a top program is necessary for your chosen field. * Consider the potential return on investment. For example, in some fields, attending a top program might pay off in terms of job opportunities, even if it means taking on more debt. In other fields, an affordable program will pay off more in the long run. * Talk to an academic advisor or someone in the field to weigh your options.

This comprehensive list should help you understand the complexities of graduate school debt and make informed decisions about your future.

Graduate School Debt: Is It Worth the Investment?