The workforce can be a scary place for new joiners. Recently booming sectors like technology and finance are shedding staff. Daily headlines warn of artificial intelligence’s impact on all types of white-collar jobs. It is enough to send many Gen Zers back to the comfortable bosom of academia in the hope that a few more years and an additional degree would unlock the promises of higher education.
The truth is grad school is a terrible idea if you are using it to escape an unstable workforce, worried about finishing college during a recession, or not entirely sure what direction to take in your career.
As a 2011 college graduate, which makes me ancient by Gen Z standards, I can relate with the panicked feeling of an uncertain job market, getting mixed information about a recession, and wondering if it would be best to stay in school a little longer. Many of my high school and college friends did just that, getting graduate degrees and even PhDs in quick succession. It is not a feeling exclusive to recent graduates either. There have been several moments in my career when I felt directionless or demoralized and thought that maybe another degree would be the cure.
This is not just anecdotal. From 2011 to 2021, the number of people who were more than 25 years old whose highest degree was a masters rose by 50.2 percent and doctoral degree holders climbed 54.5 percent, according to data from the Census Bureau.
An advanced degree is a required next step for many professions such as doctors, lawyers and even teachers in some states.
However, for those who are not committed to a path with an immediate need for a graduate degree, it is important to consider the financial implications of going right to grad school or choosing to return to academia early in your career.
There is a startling contrast between average borrowing rates for undergraduates compared to graduates. In the 2021-22 school year, full-time undergraduate students borrowed an average of US$3,780 in federal loans, while graduate students borrowed an average of US$17,680, as a 2022 College Board report shows.
The question of whether it is worth the cost depends on the degree, the reputation of the university, your debt burden and ideal quality of life. Professional degrees like Juris Doctor (lawyers), Doctor of Medicine or Doctor of Pharmacy have higher median weekly earnings and lower unemployment rates than academic master’s or bachelor’s degrees, as 2021 data from the US Bureau of Labor Statistics showed. The weekly earnings difference between a master’s degree and bachelor’s is US$240, it is US$350 between a professional degree and a master’s, and US$590 between a professional and bachelor’s degree. The increased earning potential is attractive, but, unless you are privileged enough to have family finance your higher education, taking on tens of thousands of dollars in student loans can still prove to be a major financial misstep.
Sunk cost fallacy is one big issue. Let’s say you decided to go to law school, but get the sneaking suspicion law is not for you after year one. By this point, you have already taken on US$35,000 of debt, so to quit without the degree would be a painful financial burden. More than 75 percent of law school graduates finish with at least US$100,000 in student loans, according to the American Bar Association. You could decide to go the public service route to have federal loans forgiven, but that means signing up for a decade of work in a field with lower wages than your peers in private practice.
Taking on significant debt also gives you far less flexibility to explore your interests and take risks early or even midway into your career. The metaphorical shackles that are student loans can force you into a career with the most financial stability purely because you must make your monthly payments in addition to balancing life’s other financial demands.
Those who elect to get a job after finishing undergrad might unearth two competitive advantages. The first is to seek employment with a company that offers tuition reimbursement. This could enable you to cash flow a master’s degree, or at least significantly reduce the financial burden. In addition, having work experience can help with grad school applications. The other advantage is giving your adult self some space to explore the career you think you want to pursue. Getting some non-internship, hands-on experience would inform your career paths. The graduate program you would have selected out of college might not be the one that makes the most sense a year or three or ten years later. It could be that graduate school does not end up being a necessity at all. A fellowship or certificate program might make the most sense.
For those frustrated after a few years in the workforce, try test-driving a new career by taking individual classes aligned with a pivot, or getting an entry-level job in a new industry of interest before paying a hefty price tag for a full-fledged degree.
Avoid hasty decisions when faced with post-graduation scares or general early-career malaise. A graduate degree does not guarantee a high-paying job. It does not even guarantee a job. Take a deep breath and give yourself a couple of years in the job market to explore and experiment before you invest in a degree that might not actually align with the career and lifestyle you want.
Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part “Broke Millennial” series. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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