Rising Grad School Debt Is Decreasing Students’ ROI

A recent report found that despite slight rises in wages for graduate degree-holders, debt from graduate school is still minimizing return on investment.
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  • Since the early 2000s, average annual earnings for graduate degree-holders have only risen just over $400.
  • During a similar period, average debt for graduate degree-holders has increased by more than $26,000.
  • Small increases in wages coupled with large increases in costs for graduate programs and debt incurred by graduate students have led to lowered ROI.

If you're thinking about applying to graduate school this year, you may want to think carefully before doing so.

Though students often pursue graduate degrees to increase their future earning potential or career prospects, a recent report from the Urban Institute reveals that graduate school debt is negatively impacting students' return on investment (ROI).

As of 2019, a tenth of all individuals ages 25-29 in the labor force had attained a graduate degree — an increase of 6 percentage points since 1990. Graduate degree attainment has risen for all age groups since the '90s and, with it, so have earnings for graduate degree-holders.

Between 1990 and 2019, the median salary for a full-time master's degree-holder between the ages of 30 and 34 rose by about $10,000. The median salary increased even more during the period — by about $20,000 — for professional and doctoral degree-holders in the same age group.

Despite these rises, median earnings have mostly remained steady for graduate degree-holders since 2003, when adjusted for inflation.

Ten years after graduating with their bachelor's degree, the average median earnings for any graduate degree-holder was $83,372 in 2003 and $83,778 in 2018 — only a $406 increase in 15 years.

Despite these steady to slightly increased wages for graduate degree-holders, even amid rising interest in graduate programs, pursuing a grad school degree is still deemed "risky," according to the report, due to its expense.

The average total cost of a master's degree is about $30,000 a year, but some programs can cost more than $60,000 a year. Ph.D. programs have similar tuition costs, sometimes exceeding $50,000 a year and requiring approximately six years to complete.

To account for these costs, many students end up taking out loans.

As of 2016, an average of 62% of graduate degree-holders had at least some student debt compared to 57% in 2000. When isolating loan debt from graduate school only, 54% of these students still held some debt in 2016 compared to just 45% in 2000.

During 2015-2016, the average amount of graduate loan debt that degree completers owed was $78,390, when adjusting for inflation.

According to the most recent data from the National Center for Education Statistics (NCES), between 2000 and 2016, debt for doctoral professional degree-holders nearly doubled from $96,260 to $189,590. Debt for doctoral research degree-holders more than doubled during the same period, rising from $53,860 to $112,080.

Though many students incur this debt with the hope that their degree will provide career opportunities to pay it off in time, not all graduate students complete their degree.

Completion rates for graduate degree seekers are high and continually rising, but they're not perfect. And students who incur debt to attain their degree but don't complete it are still responsible for the loans they took out.

As of 2018, 10 years after earning their bachelor's degree, 74% of master's degree seekers, 81% professional degree seekers, and just 56% of doctoral research degree seekers had completed their graduate degree, according to the Urban Institute report.

With only small increases in wages but large increases in costs for graduate programs and debt incurred by graduate students, ROI is significantly lessened.

The report's researcher, Kristin Blagg, maintains that a graduate school education still typically pays off in terms of earnings, but students should make sure they're enrolling in programs with higher earning potential and avoid taking on substantial loans to get the best return.