NEW YORK (TheStreet) — Is grad school debt somehow a "better" investment than undergrad? If you’re considering taking on graduate school debt, here’s what to ask yourself first.
Will your degree take you down a definite path and increase your earning power?
Grad school is a waste of money and time if you don’t really know what you want to do when you graduate, says Reyna Gobel, iGrad curriculum development specialist and author of CliffsNotes Graduation Debt 2nd Edition.
“You can’t say, ‘I’m going to go to grad school and I’m going to find a better job.’ You have to understand the particular field you want to go into and exactly how much money you’re going to make once you get there,” she says. “Otherwise grad school is just a very expensive hobby.”
Graduate school can be a wonderful investment, but the word “investment” is key, says Ken Kamen, president of financial planning agency Mercadien Asset Management.
“The real motivation for you to go to graduate school is to increase your earning power, which means you’re defining your degree as an asset. In that regard, it’s no different from a house. The only question is, is it a good financial decision?” Kamen says.
If your student loans will cost you $200,000 by the time you pay them off and your degree will increase your earning power by only $10,000 per year, it’s going to take you 20 years just to break even on your degree.
“Is that worth it? Probably not. But if you’re going to increase your earning power by $50,000 or $100,000 per year, then that’s a different story."