Traditionally getting a college education has been a good investment. However the cost of a college education has skyrocketed over the last few decades. It is well outpaced inflation. In light of this fact is worth reconsidering whether or not a college agree is actually worth the money. In particular we want to examine whether a Masters degree is cost-effective.
We’re going to work with a lot of assumptions in these calculations. The idea behind this article isn’t so much to give you a solid yes or no answer. The hope is that this article will help you think about the return on investment of your education. Our little case study will provide you with something of a framework and a point of reference for examining the cost-effectiveness of degrees you may potentially earn in the future.
Let’s say you already have a bachelors degree and you’re earning $50,000 per year now. You’re considering dropping out of the workforce for two years and pursuing a Masters degree. After achieving a Masters degree you are likely to be able to earn $70,000 a year.
What’s estimate the cost of your master stream program is going to be $25,000 per year. This comes to $50,000 over the two-year period. So the total cost of getting your masters degree will be $150,000. That’s $50,000 in actual cost for the program and $100,000 in salary that you will not earn when you take two years off to go to school.
Your earning potential is expected to go up by $20,000 per year. How many years will it take you to pay back the cost of getting your degree? In this particular case it will take you 7 1/2 years. If it takes you some time to find a job after graduating from college with your Masters degree the payback time maybe even longer.
This isn’t necessarily a bad deal and it isn’t necessarily a good deal. If the costs of your masters degree program are significantly higher the program should look less attractive. If the costs are significantly lower or if you can work while pursuing your degree then the value of the program may be even higher to you because it will have a much stronger return on investment.
It is also possible that obtaining a Masters degree may allow you to earn significantly more than $20,000 additional per year. However, when you’re doing your check relations make sure you consider that not everyone makes the top salary that is possible with a given degree. Also in many cases the top salary will require moving to different area of the country. In addition to the cost of the move you may be looking at significantly more expenses when it comes to the general cost of living. Living in a rural area of America where the cost of living is low and earning a much smaller salary can be much better for your pocketbook than earning a salary three times as great a living in an area where the living expenses are extremely high. It’s not uncommon to pay more each month simply to park your car in New York then you would have to pay for an entire house payment in rural America.
A Masters degree can be very lucrative for your career. However don’t assume that simply having a degree is going to allow you to make more money. Also don’t assume that making more money is necessarily going to be a good return on investment when you factor in the opportunity cost and the actual cost of the degree. You have to be very honest with yourself and do your research to make sure that a Masters degree is going to be worthwhile.
Obviously anything you can do to lower the actual cost of getting the degree will make it more beneficial to you. For example if your current employer will pay for education this can be a great way to pursue a Masters degree debt free without having to quit your current job. In that type of scenario you get to take the classes toward your degree while someone else pays for them and you also draw the same salary that you did before.
If you are in a situation where your employer will pay for your degree you may want to consider whether or not you’ll be able to complete the degree while working for your current employer. It is possible that you may want to take a majority of the classes and finish a years worth of work over the span of two or three years. Then you may want to quit your job and go to school full time to finish up the rest of the program and begin looking for and other higher-paying job. Obviously this type approach involves some degree of risk, but it can be a good way to balance between the need to focus exclusively on your studies and the desire to minimize your risk and time being unemployed.
Is very important to understand that not all degrees are equal. Not all schools are equal. Some of the schools that are most convenient to take classes from have the worst reputation. Some of the schools that are most convenient to take classes from half the highest cost of any school. For example the University of Phoenix and compelling University both offer extremely convenient education through online classes. However, this convenience comes at a price. The cost of degree programs the University of Phoenix and through Capella University are significantly higher than what you will pay at a state school. Further, the reputation of the University of Phoenix and the reputation of Capella University may be lower than that of the state school. The reputation of the school can vary wildly depending on what degree program you are pursuing, so it may take quite a bit of research to truly understand the reputation of the school you’re interested in. Just because the school is online does not mean it has a bad reputation. On the other hand, just because the school is expensive does not mean it has a good reputation.
Another thing to keep in mind when weighing the cost benefit of pursuing a Masters degree is the opportunity cost of missed promotions while you pursue your degree. In most cases the Masters degree will allow you to be promoted more rapidly once you have the degree. The two years you spent going to school will probably not set you back much. However there may be opportunities that occur within that 24 months. That you may miss by being in school. These opportunities could be significant and you should carefully consider their possibility. For example if you work for a small company that is being run on by someone who is looking at retiring or at least not being involved as much in the day-to-day operations, you should consider whether or not you might be in the running for a large promotion in the near future. On the other hand, if you are in a position where it is unlikely you will be promoted the opportunity cost of getting a master’s degree may be significantly lower–at least as long as you stay at your current employer.