Don’t get your Ph.Debt
And you thought undergraduate student loan debt was bad.
According to a new report from the New America Foundation, the median debt load for borrowers leaving school with a master’s, medical, law or doctoral degree was $57,600 in 2012–about twice the average amount today’s typical undergrad leaves college with.
This means that half of all borrowers owe at least that amount, with half owing less.
Graduate student debt rising quickly
Not only is student loan debt rising; it’s increasing at a rapid rate. The median debt increased 43% from 2004 to 2012 when adjusted for inflation.
And the borrowers who owe more than the median tend to owe a whole lot more. The numbers for the 75th and 90th percentiles are quite staggering.
Put simply: One in four borrowers owes at least $99,614 is combined graduate and undergraduate student loan debt. One in ten owes over $150,000.
Less valuable degrees, more debt
While some graduate degrees are necessary to work in a given field and can earn the graduate more money, the study found that the debt load for student pursuing advanced degrees that did not fulfill either of these requirements–namely, those in the social sciences and humanities–was greater than that of students seeking professional degrees such as M.B.A.s or medical degrees that lead to greater earnings down the line.
In other words, the borrowers going furthest into debt were the ones who needed these graduate degrees the least–and for whom the degree wouldn’t necessarily pay off.
Don’t go to graduate school unless you need to
While professional and/or graduate school is worth the cost for some, it shouldn’t be thought of as ‘something to do’ while you figure out what you really want to do with your life.
Though you can defer federal student loans while you’re a full-time graduate student, if you’re not making payments the balance will come out higher than before due to compound interest.
Especially if you already have debt from undergrad, it’s a huge financial risk to go into debt for a degree if you’re not sure it will improve your job prospects or future earnings.
And remember what you’re missing when you go to graduate school instead of working: several years of work experience, during which you could be gaining skills, making money and paying off your student loan debt.
We’re not saying graduate school doesn’t have its merits, but if cost is a concern, you need to think hard about whether the return on investment of a graduate degree is enough to justify the time, expense, and opportunity cost before digging yourself into a deeper hole of student loan debt.