June 20, 2017. By Olga Okaty: 

In working with many of our next generation clients, a discussion topic we encounter often centers around graduate school planning, and whether financing graduate education with student loans is a worthwhile or feasible option.  With education costs rising rapidly and graduate funding in many fields diminishing, many prospective students are rightly concerned with the amount of debt they would be taking on and the long-term impact on their financial well-being.

There are many reasons people pursue graduate studies, whether it’s to attain a specialty or qualify for job advancement in their chosen field, retrain in a different field altogether in order to change career paths, or simply to pursue a passion or particular area of interest for intellectual and personal growth.  Many also default to graduate school if they are not entirely sure about what career they’d like to pursue in the first place, in the hopes of finding focus and discovering their true calling.

While graduate school may be helpful in all these endeavors, if funding it at all involves student loans, it is important to have a clear understanding of what you hope to gain by this experience and how your future finances may be constrained or improved as a result of it.  What will be your job prospects upon graduating?  Will you be able to afford your monthly student loan payments?  Are you committed to paying down student debt for years while delaying other financial goals?

While every situation is different, below are a few scenarios and guidelines we encourage our prospective scholars to consider when contemplating incurring debt for graduate school:

Thorough research and advance planning are an essential first step throughout this process.  Before deciding to pursue a graduate program, clarify the purpose of an additional degree and evaluate the intended career or life path it will provide, including the realistic prospects of finding a job related to the chosen field of study or one utilizing the specific skills attained.

Ask yourself if the job you truly want requires a graduate degree in the first place.  If the answer is not clear, reach out to professionals in the field you hope to pursue and solicit their perspectives on whether a graduate degree will be useful, or if perhaps hands-on experience is more valued.  If you learn that a graduate degree would be helpful indeed, ask whether certain graduate programs or schools are perceived more favorably than others, or on the other hand provide no additional distinction at all, in which case a less expensive program may impart all the skills you’ll really need.

If these questions are difficult to frame because you’re not yet sure what you’d like to do for a living (and you’re hoping that graduate school will point the way), consider internships, networking, or simply trying out a range of jobs that pique your interests.  These can provide great opportunities to explore different directions and passions, and allow you to find your calling without the potentially high cost and time commitment of graduate studies.

If your research truly points to the benefits of a graduate degree, the next step is to run the numbers.  How much will the degree cost?  What are your realistic job prospects and earning potential upon graduating?  What will be your monthly payments and loan repayment term?  To avoid borrowing more than can be comfortably paid back, in most circumstances student loan payments should be no more than 20% of your income with a realistic repayment term of less than 10 years, so you can move on to pursuing other financial goals.  A conversation with a financial planner can help you design a repayment plan that works best for your individual scenario.

Don’t forget also to consider the emotional and psychological costs of debt.  What will you have to give up or delay, and for how long, in order to pay down your student loans?  As life happens, if you change your mind down the road, will this debt significantly limit your prospects, prevent you from changing direction, or harm your overall sense of well-being (if for example, you’re forced to take an ill-suited job to pay back the loans)?

Conducting in-depth research, considering all the angles, and designing a well-thought-out plan that projects future earnings potential, lifestyle costs, and debt obligations upon graduating will help you ascertain the true benefits and costs of pursuing graduate studies, and provide a strategic framework for deciding whether this is a worthwhile investment aligned with your overall life goals and vision.