Dilemma: Grad School vs. Work

Some say a graduate degree (in the right subject) can improve your future potential earnings. But I wonder if taking 2-3 years out of my career right now would actually equal more money in the long term.

Assuming I’d be missing out on an earning potential of $100k per year (let’s call that $60k after tax) and I go to school for 2 years. That’s -$120k plus -$50k per year on school and other costs So In the course of two years I’d be out $220k, give or take.

Let’s say I manage to save half of the money I earn, or $30k a year, $60k total. In 30 years at 5% annual compound interest rate, by the time I’m 60 I’d have $259,316 just from that $60k. Ok, that’s not too impressive — in theory I could make a lot more with a grad degree such as an MBA, which is one potential route.) But I’d also be $100k in debt. Ok, so how does that really add up…

Sans Grad School,
Investing $30k per year for next 30 years:
$2,222,481 by age 57

With Grad School,
assuming -$30k savings lost per year in school
plus $100k in student loans
Income increase to $150k / year, $90k after tax
Savings start 2 years later @ 29
Can save $50k / year after loan repayments
3,066,135.60, by age 57 – 259,316 in lost investment earnings

BUT — it’s really hard to say if that’s actually true. That’s assuming a lot of other variables that are unknown. Namely, it’s quite possible for my income to go up WITHOUT a graduate degree, and for my income to go down WITH one. Over the long run I believe a graduate degree would make my yearly income a bit more predictable (but not by much) and give me opportunities to pursue better paying jobs, but that doesn’t mean I will want to take them. But the two years I am in school may be two years I could have spent at a startup that ends up having a successful exit, and thus the grad school would never be able to equal the fiscal value of those lost years (not to mention the experience may be professionally just as valuable, at least in getting a job, as the degree.)

So the truth is the choice of grad school shouldn’t be about money. Clearly if I get a graduate degree and use it to find a better paying job over the long term it could mean a larger retirement nestegg. But it’s not a certain to say the least, and right now the experience and opportunities outside of graduate study are.

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One comment

  1. Perfect Dad says:

    What is your field of study? Sounds like you did the analysis. If you make $100K now, then forget about grad school to earn another 50K. You'll probably have to work harder to make the extra money. Also, you might be able to get your employer to pay for the grad school if it's in your field.

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