Grad School Math: Which Degrees Are Worth the Debt

With unemployment high and wages stagnant, now's a rough time to be entering the job market.

Historically, when an unwelcoming economy awaits, graduating college students tend to run for grad school. But the monetary value of an advanced degree varies greatly depending on major, school, and how much debt you take on to get it.

A forthcoming article in the American Economic Journal: Applied Economics outlines the dangers of starting a career during an economic downturn. According to the study's authors, it can take up to 10 years for high-level workers entering the job market in a recession to narrow the wage gap between themselves and their peers who entered in better times. As for less-skilled workers, their earnings "can be permanently affected by cyclical downgrading" -- in other words, a weak start on wages can lead to a lifelong disadvantage.

For most people, the best move is to delay entry into the job market until the economy is stronger and workers are in higher demand. And when it comes to orchestrating that delay, few methods are better than graduate school: Not only does an advanced degree improve employability, but it can also have a huge effect on earnings. In fact, the median salary for someone with an advanced degree is $73,738 -- over $13,000 more than the average salary for someone with only a bachelor's degree.

But not all degrees are created equal. Based on an analysis of Census data, Georgetown University's Center on Education and the Workforce determined that the payoff from a graduate degree can vary wildly, from a 1% salary bump to a 190% wage explosion. And the degrees that deliver most bang for the education buck may surprise you.

On the low end of the scale, the worst graduate major for salary improvement is meteorology, which only improved wage prospects by 1%. Only marginally better were studio arts (3%), petroleum engineering (7%), oceanography (11%), mass media (11%), advertising/public relations (12%), pharmaceutical sciences (13%), forestry (15%), computer engineering (16%), and miscellaneous education (16%). The reasons for the low salary bumps varied: In some majors, such as petroleum engineering and computer engineering, workers with bachelor's degrees already earn high salaries, which aren't much improved with higher degrees. In others, such as studio arts and mass media, the job market is weak regardless of how much education one has.

Degrees That Are Worth the Money (and How to Tell)

On the happier end of the spectrum, some graduate degrees can vastly improve your earnings. The big winners are health and medical preparatory programs, from which graduate or professional degrees can increase salary by 190%. Similarly, social sciences (134%), zoology (123%), molecular biology (115%), public policy (107%), biology (106%), biochemical sciences (101%), chemistry (93%), pre-law (81%) and physiology (78%) majors can all expect to get a major dividend from pursuing graduate or professional degrees.

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The differences are hardly academic: The average undergrad leaves school with more than $25,000 in student loan debt, and graduate students routinely finish with $30,000 or more added on to that tab. Degrees that increase salary by 10% or less can take a long time to start paying off.

When it comes to determining how much a degree is worth, the "starting-year salary" guideline is a good rule of thumb. Basically, prospective grad students should calculate what their expected salary at graduation, then borrow no more than that amount. According to the Student Loan Network, most federal student loans follow a 10-year repayment schedule, which means that students who limit borrowing to a year of salary can expect to dedicate about 10% of their paychecks to paying off their educational debts -- a manageable percentage. By contrast, they note, students who borrow 15% or more stand a much greater likelihood of defaulting.

For some students, such as those in MBA programs, this isn't much of a problem: Average income for MBAs after graduation hovers around $91,000, while the average cost of a two-year program is about $80,000. By comparison, law students face a tougher road: According to one survey, almost 90% graduate with $80,000 in loans, only to land in a glutted job market that pays an average starting salary of $62,000.

For many people, graduate school is a chance to follow their passions and study what they love. But when the biggest dream is finding a job, it pays to choose a degree that the market will reward.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at@bruce1971.


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