Many recent college graduates commonly think their “next step” should automatically be graduate school. They may reason that the jobs are too hard to find with just an undergraduate degree, feel that their earning potential would rise more with graduate school or they may have a legal reason such as the need for a graduate degree to practice medicine or law.

However, is graduate school worth it from a financial perspective?

If you’re thinking about going to graduate school because you believe your career and earnings potential will grow, that may very well be true. But what many don’t consider as thoroughly is the opportunity cost of those few years without full-time work and the amount of debt they would have to take on to fund their higher education.

In general, from what I’ve seen, it makes no sense to go to an expensive graduate school that will leave you with $100k+ in debt, MOST of the time. However, there are some cases that do make sense.

If you are thinking about graduate school, it might be worth it if you meet these conditions:

Going to graduate school might be worth it if:

• You are interested in the prestige of having a graduate degree and the network you’ll build (like marrying a rich person on the way, or doing business with them in some format later).
• You know for sure the field you pick is something you want to do long-term and that you will be successful in that field for the next 20+ years.
• Might be worth it if your median starting salary will be comparatively high to the debt that will be taken on.
• You are willing to work part-time while in that expensive grad school to help pay bills and build some savings.
• You are okay with delaying full-time earnings for a few years and have a plan to survive in the meanwhile without taking on too much debt.
• You accept the possibility that the future job income isn’t guaranteed and that that everything might turn out worse than expected (just like college).

Some rules of thumb are to not borrow more than your expected salary after graduation. If you wanted to get risky, I would say don’t borrow more than double of your expected salary. Otherwise, you may effectively be mortgaging off your ability to fund other goals in life like having a prosperous retirement.

Here are some reasons why you should not go to graduate school:

• You want to just “have” the degree. Why would you spend years of your life to get a degree in something you might not necessarily even use? This ties into the prestige part, if you just want the title and societal recognition, you should evaluate whether forgoing 2-3 years of full-time work + any loans you have to take on, is worth getting a graduate degree. To some it’s worth it, but I’m not sold. That time could have been used way more efficiently to achieve any goals you had taken the time to set.
• You’re not sure what to do after college, so you figure you might as well go to graduate school. This is one of the worst reasons to go to grad school. Graduate school is for people who know that they want to be in that career for a long time. Your time to test out different fields was in college. You’re in the real world now. The kind of loans you take in graduate school are usually tougher with higher interest rates and higher payments, so you need to know what you’re signing on for. If you go in with a naïve mentality that “everything’s gonna be alright”, maybe, but why would you risk jeopardizing yourself like that without really knowing what you’re getting into. How would you handle the other things in life such as buying a house or managing hundreds of thousands in savings if you ever did get up to that point.
• You “THINK” graduate school means you’re going to make a lot more money. If you can’t tell me the median salary of new graduates and the percentage of people who actually get the job you want at your graduate school of interest, you aren’t looking into this seriously enough. Some careers will pay you $40k for being an undergrad and those careers will pay you $50k a year as a grad student, after you take on $150k in loans. Do you think that would really be worth it? Any good investor knows that if you really want to take advantage of compound interest, you should have more money from the beginning than later. All your money is going to be going away to student loan payments instead if your salary doesn’t end up being high enough. Maybe that’s why so many law school graduates are struggling since they didn’t really research the industry low median salary for graduates. There’s literally an entire graphic website describing in detail how shady most law schools are and how badly they can ruin someone’s financial life with high debt and low income. All because these students didn’t know.

You need to analyze from all perspectives whether a graduate degree is worth it. Failing to make a complete analysis on your decision is the kind of stuff that gets people into trouble. Don’t be that person who knowingly walks into the abyss and regrets not looking into it closely enough.

In general, you should know how much you’re going to pay monthly for student loans after graduation before you take on any loans. And this is all assuming you’re getting conventional federal loans, private loans are a different territory. Make sure you look for whichever scholarships you can get. Negotiate your financial aid package with the schools you get accepted into, leverage the offers you have from other schools. If it’s possible, don’t do the dorms at the school, look for the cheapest housing spaces possible and handle that aspect yourself as much as you can. Finally, if your heart is still set on graduate school, consider looking into the schools with the best “ROI”, or return on investment. That means these schools have high salary and employment for their graduates and low after graduation debt. If you know you want to achieve financial success in your life, and that you are interested in having an easy time getting rich, then this would be a quick call.

For some people who are really interested in their field, it actually will be worth it to go to an expensive school. There will inevitably be winners at a lot of these expensive schools. But in terms of pure statistical chances, not even factoring the kind of raw talent, perseverance and inevitably luck, that will come into play, your ability to do financially well can be much better through other options.

Formal education isn’t necessarily the answer to your success after all. If you want an edge in your career or earning potential, you can always develop your own curriculum with books, articles, seminars, research, etc. The idea that you NEED formal education to become more knowledgeable is dinosaur-like thinking in an age when most of the answers to your questions are one google search away.

Whatever you do, make sure that you have thoroughly analyzed the reasons behind graduate school. Have serious conversations with people who are willing to tell you the truth, not just give you superficial support even though they might not at all understand or care what you are planning. Talk to multiple professionals in your field who just graduated and will be honest with you, not the ones who’ve already been doing it 10-20 years. A lot can change quickly in that time span and you don’t want to be left with hands empty because of something you didn’t know.

So, there you have it, my graduate school cost-benefit analysis.