Weighing the Costs vs Benefits of Graduate School — Factors to Consider

What this article covers: employment opportunities, scholarships, grants, & stipends, depth & type of knowledge, network & personal connections, ability to switch careers and industries, degrees across geography, costs of attendance, opportunity costs, debt.
By Stephen Oloh | Sep 13, 2022
Weighing the Costs vs Benefits of Graduate School — Factors to Consider
Photo by Andre Hunter on Unsplash
  • Share:

In regards to graduate school, both the positive benefits of a great choice and the negative effects of a poor choice are likely to have a lifelong impact. For this reason, understanding the net value of a desired graduate degree is of unparalleled importance in your career. Unfortunately, though, this understanding is often hard won. No empirical equation exists for calculating whether a graduate degree will pay off, and there are a multitude of factors at play.

Luckily, we can approximate the net value of any degree by examining the various levers of assessment described in this article. These include both costs and benefits, and they vary widely in both form and impact. Thoughtful cost evaluation of the graduate degree path must account for this broad range of elements.

Obvious and tangible factors, like the tuition you will pay and the related debt you may accumulate, have to be weighed against the intangible and less obvious costs that you may not have initially considered (e.g., average years to graduate and related living expenses, applicability of the degree to a broad spectrum of fields, etc.). These are elements that are often forgotten, but are hugely important to evaluate.

Less easily forgotten are factors like the type of career available to you after graduation, the type of knowledge you’ll gain, and the amount of funding available, which vary considerably between degrees. By now it should be clear that the choice of whether or not to go to graduate school is inevitably tied to the type of graduate degree you wish to pursue. There’s really no answer to the question, “Is graduate school worth it?” But you can find out whether a particular degree is worth it for you. If all the relevant benefits outweigh the costs, graduate school might be the right move.


The concrete reasons for pursuing a graduate degree, and for eschewing one, are quite widely known. But a lack of knowledge exists in terms of understanding the ultimate value of one degree versus another, as well as the unique factors that go into the graduate school decision.

In contrast, an MBA from one of the most elite schools offers compensation of over $4MM to $6MM in the first twenty years post-graduation. Comparing an MBA to a high school degree, we find a financial benefit of over $3MM to $5MM in the first twenty years. This radically increased earning power is one unique benefit of graduate school.


However, graduate school also comes with unique costs. As income potential increases, so does opportunity cost. The price of pursuing a graduate degree is much higher than that of an undergraduate degree, because once you possess a bachelor’s degree, your earning power is much higher than it was after high school. As a college graduate, you give up more income when you go back to school. Nonetheless, many students choose graduate school. What other benefits can they look forward to?

Employment Opportunities Available With Your Degree

Most graduate degrees will not offer as dramatic a contrast in earning power as the elite MBA. However, careful analysis of what your employment opportunities will be once you have a particular degree is important for calculating return. Ask yourself: What jobs can I reasonably get with this degree? What would those jobs pay? Am I really interested in pursuing those jobs? As you can see, this analysis includes both quantitative and qualitative factors, and each degree will have its own profile.


For example, pursuing a Master’s in Education and pursuing a Master’s in Business Administration represent highly distinct paths. The former will generally offer lower salaries than the latter, and it will develop your skills in educational curriculum rather than in finance or marketing strategy. Quantitatively, you need to factor in your starting compensation (salary and any bonuses) after you graduate. That figure needs to be coupled with expected pay increases (use 2 to 3% as a conservative figure) for the intended number of years you expect to work (use 30 to 40 years). So, if you’re starting at $60K in compensation after you obtain your graduate degree and your salary rises 2.5% each year, you will earn $161K in year 40.


You can calculate what the value of those 40 years of earnings ($60K today up to $161K in 40 years) is today such that you know the general net value of that graduate degree. Of course, there are cases where you don’t know exactly what your job will be in the future, and thus don’t have an accurate picture of your future compensation. That’s where other factors come in.

Scholarship, Grants & Stipends

There are large differences in the “free money” available between graduate degrees, making it a differentiating factor that is a vital component of your cost-benefit analysis. Scholarships, grants, and stipends are considered benefits because they lower the cost (improve the net value) of pursuing a graduate degree, and they vary between degrees and programs. Thus, as applicants consider their particular field of interest, they should be aware of differences in free money between degree types.


Certain degrees, like PhDs, are a better deal in terms of scholarships, grants, and stipends. Depending on the degree and the school, PhD applicants can expect to receive a stipend on top of free tuition. However, for those pursuing a master’s degree in the same field, those free funding opportunities are rare. For example, if a candidate is pursuing a Master’s in Organizational Behavior, she will often have to pay for it out of pocket or take out loans. If that same candidate was a PhD student, the bulk of her tuition would be free (even if paid out at a later date) and there may be a stipend offered as well.


Furthermore, specific degrees, like a Master’s in Education, often don’t have a lot of free money available due to the financial position of the graduate school’s alumni in comparison to other programs (which is, perhaps, a warning in itself about that degree’s earning potential). Pursuing a degree in a business school (a Master’s in Data Analytics or a Master’s in Finance, for example) will typically lead to more offers of free money than a Master’s in Education, because business schools generally have more financially prosperous alumni who can afford to donate more money to their alma mater than the typical education graduate.


As you’re undertaking the graduate school consideration process and thinking about various degrees, keep this free money in mind. Beyond these few tangible benefits, there are many more intangible benefits that are exceptionally important, despite the fact that they are impossible to quantify in your analysis. These elements may be used as tiebreakers between two or three degree options, and may ultimately guide your decision on whether to pursue graduate school or not. Regardless of whether you can add them as variables to a formula for a rigorous cost-benefit analysis, or simply utilize them as qualitative considerations, their impact is undeniably important.

Depth & Type of Knowledge

Potential applicants need to recognize both the tangible and intangible benefits provided by their actual learning in a graduate program, including the depth and type of knowledge the program provides. Being positioned as a future leader in your industry and gaining knowledge in a new or emerging industry can both be massively beneficial.


For example, those who studied for a Master’s in Computer Science twenty years ago, or a law degree focused on immigration five years ago, now possess a degree with irrefutably high earning potential and utility. Similarly, if you previously earned a PhD in microbiology, and are now one of just a handful of scientists researching the ability of microbes to reduce pollution, you are in high demand!


Not all degrees offer this depth of knowledge, relevance, or possibility for growth. For example, a graduate degree in ichthyology (the study of fishes) or in print journalism won’t provide the same opportunity for growth as a Master’s in Statistics. Part of your analysis needs to center around the intellectual nature of what you study and its applicability.


Ask yourself: Is this degree relevant to a rapidly growing field? Can it position me as the singular expert on a topic of my choice? Is it something I can apply to my daily life? The answers to these questions certainly differ across various graduate degrees, and can even differ among individuals within the same area of study. Understanding your own level of interest in working in a growing field is critical.

Your Network & Personal Connections

Above and beyond knowledge, graduate school provides the opportunity to build important relationships that will last a lifetime, so long as you consistently nurture them. As the relevance of your coursework fades with time, these personal relationships become significantly more important.


Additionally, most career service offices (both graduate and undergraduate) are focused on helping current students. As you advance in your career and take a step back from your alma mater and its associated resources, your graduate school network will play an increasingly important role. But some degree programs do a better job of facilitating those relationships than others. This human component, the building and cultivation of a deeply connected network, differs a lot between programs.


As a rule of thumb, graduate degrees associated with business or social science generally have a stronger networking focus than those associated with STEM. As an example, a Master’s in Public Health program might provide a more valuable network than a Master’s in Computer Science. There are a few possible explanations for this phenomenon, most of which are still hotly debated:

  1. People in business and social science are generally more social
  2. Business and social science programs are more focused on facilitating discussion and debate in the classroom and beyond than are STEM programs.
  3. Lastly, STEM generally involve more ‘hard’ skills, while business and social science involve more ‘soft’ skills. Business and social science programs focus more on networking because it will be critical to securing professional opportunities in the future. In comparison, technical expertise is the main requirement for advancement in STEM.

Ability to Switch Careers & Industries

To truly gauge the value of a particular graduate degree, it is important to consider your ability to switch careers and industries once you graduate. Due to the rapid pace of change in modern industry, and the distinct possibility that your own interests themselves will change over time, the ability to leverage a graduate degree within different spheres is critical. Level of widespread applicability is yet another factor that varies between degrees.


For example, a Master’s in Social Work is a highly specialized degree that will predominantly qualify its recipient for occupations focused around that particular topic. Graduates of such a program will generally not be able to leverage their degree to enter into law firms, medical device companies, or investment banks. Conversely, a law degree has great utility across a wide range of industries. At the same investment banks and medical device companies mentioned in the first example, you will find recipients of law degrees employed.


Law degree holders are also able to serve leading nonprofit organizations across a wide spectrum of topics, including education, health care, voting rights, elderly care, and social work. Graduates with Juris Doctors have considerably more options than their Master’s in Social Work counterparts. This dramatic dichotomy is an illustration of the large variability in graduate degree applicability across fields. Candidates should seriously consider this variable when calculating return on investment within and between degrees.

Your Degree Across Geographies

The ability of a degree to transfer between cities and countries is just as significant as the ability of a degree to apply across careers and industries. Although this factor may be less important to candidates not planning to move, globalization has put increased pressure on all workers seeking continuous employment to be at least somewhat flexible in their geography. Some degrees, and the names of the schools that offer them, translate better across geographies than others.


A Harvard MBA is a degree that is valued in nearly every corner of the globe, across cultures and across economic systems. It’s a powerhouse combination of degree and brand-name school. When you compare a Harvard MBA to, say, a Masters of Communication degree from the Annenberg School at the University of Pennsylvania, the difference is clear. While University of Pennsylvania is certainly elite and is known globally, the specific communication degree doesn’t carry the same weight as does a Master’s in Business Administration. So, if a candidate is looking to work in Ghana, he won’t get much leverage from this graduate degree.


A better known degree, like the MBA, from the University of Pennsylvania, or a lesser-known degree from Harvard, would both be considerably more advantageous. Many graduate applicants fail to include geographical transferability in their cost-benefit analyses to their own detriment. It’s a factor that every candidate should manage based on what they expect to happen in their own career as well as what is within the realm of possibility.



Costs of Attendance & Being on Campus

Most applicants view the cost of graduate school as one, big, defining number: annual tuition. This is the most direct and substantial cost of graduate school, so it’s no wonder that it’s top-of-mind. The free money we mentioned previously may mitigate some of the expense, but it’s unlikely to cover the entire sticker price. In addition, there are several smaller costs that add up when you’re not looking. Let’s examine some of these often overlooked factors:
  • Room & Board:These are your living and dining expenses. Room and board are highly variable costs that are rarely covered by scholarships, making them a major source of angst for applicants. Costs will vary based on the level of comfort you demand from your living space and the type of food you enjoy eating. This cost is often underestimated, so watch out.
  • Fees:This is any additional charge that a university or graduate school program requests from its students to cover its own expenses. This can include facility maintenance fees and material costs associated with a lab or studio course.
  • Books & Software:These are the materials that you need to rent or purchase for each course you enroll in. This category used to consist exclusively of books, but now includes any software that you may need to download onto your computer, smartphone, or tablet. These particular expenses are highly variable, but can be as costly as several hundred dollars per semester.
  • Transportation: This includes any costs related to your movement within campus, as well as your commute to work and home. Although many schools offer free on-campus shuttles, you may need an alternative form of transportation to get to classes on time, such as a bike or scooter. Working or living off campus will increase your transportation costs. And if you’re planning to go home over any major academic break, that is a costly endeavor that should be closely scrutinized as well.
  • Years to Graduate:This is the average amount of time it takes a typical candidate to graduate. It’s important to contrast this with a program’s stated duration, as some degrees have a wide range. For example, a school may state that it’s part-time MBA program is three years long, while the real average duration is four years. That extra year is an additional year’s worth of most of the aforementioned expenses, and it’s an important factor to know in order to decide which degree, if any, is worth pursuing. Additionally, there is a huge opportunity cost associated with not working at maximum capacity while you are in school, as we’ll discuss next.

Opportunity Cost of Not Working or Working Less While You Study

Candidly, many people who are considering graduate school, and even some of those who are already applying, fail to adequately understand this critical point. As the holder of a bachelor’s degree, your decision to go to graduate school involves temporarily giving up a substantial income. This is a critical factor of which candidates need to be aware.
There is a wide range in the compensation you’re opting out of by going, which is dictated by the type of undergraduate degree a candidate has and from which school, but the amount of money an applicant is walking away from is always a function of their salary and the number of years they’ve been working since receiving their bachelor’s degree.
This is precisely why it’s more difficult for older candidates to pursue a full-time graduate program. The more removed a candidate is from their undergraduate degree, the larger their opportunity cost of quitting and the more invested they are in their current careers.
If you’ve worked in a career for many years and are now earning $75K per year, the cost of attending a 3-year graduate school is already $225K before you factor in tuition and the rest of those often forgotten expenses. Of course, there are scenarios in which a degree is still beneficial, but the cost equation is much less favorable for the above example than it would be for a college senior considering the same three-year degree; they may only be forsaking $45K per year, or $135K.
Unfortunately, not only is the opportunity cost increased by being older, but the benefits are decreased. This decrease in benefit is due to the shortened work time frame after your graduate degree is earned if you go to school a bit older. As an example, a 35-year-old pursuing a 2-year Master’s in Public Policy will graduate at 37 years old. If he intends to work until he is 60 years old, he would have just twenty-three years of post-degree employment left after graduation. And he would have been penalized for leaving a higher paying job.
Neither of these would be true he was 25 when he applied for that Master’s in Public Policy. A 25-year-old candidate would likely have less opportunity cost in leaving her current job and, assuming she also retired at 60, ten more years at her post-degree salary than her older counterpart.
That’s a massive difference. And it’s clear now why the threshold for pursuing a graduate degree is significantly lower for the 25-year-old as opposed to the 35-year-old applicant. This is factor is highly relevant to the timing of pursuing a graduate degree.

Accumulated Debt

Though whether a candidate has debt as he departs from graduate school is clearly related to all of the aforementioned factors including scholarships, job opportunities, pure cost, and opportunity costs, it’s so vital to understanding the worth of pursuing a graduate degree that we will look at it in isolation.
Debt is frequently a visceral stopping point for candidates who determine that too much debt is a negative factor. This can prevent candidates from obtaining a graduate degree of a certain type or at all. Debt is a massive deterrent for many candidates, even if they will eventually earn enough compensation to pay it off in a reasonable period (i.e. 10 years). The idea of postponing the purchase of a home, getting married, building a family, and other milestones of adulthood due to massive educational debt may reshape the perceived value of graduate school even when the total return is positive.

And while the financial impact of debt is measurable and for the most part known, there may be unforeseen psychological impacts for many candidates. This is what makes it such an important factor to include in your cost-benefit analysis. 
| Updated: Sep 13, 2022 - 15:12
Stephen Oloh
Digital nomad. Founding and leading teams to build innovative mission-driven products across board.