Upon graduating from college, many Americans are faced with the difficult decision of whether to continue their education or gain work experience. Some insist that amid the rising cost of tuition, insurmountable student loans and weak employment, a master’s degree just perpetuates indebtedness. However, many critics fail to consider the reality of stagnant real wages and distorted unemployment rates.

While U.S. unemployment is slowly falling to pre-crisis levels, many bachelor’s degree holders are overqualified for the jobs they accept. Still, the unemployment rate for graduates with a bachelor’s is 3.5 percent compared to 2.8 percent for master’s degree holders, which speaks to the value of a master’s program. Additionally, some fields, such as education and psychology, require master’s degrees and beyond just for entry-level positions. Upon completing college, individuals contemplating master’s degrees must assess a number of factors to determine whether pursuing more education or work experience is more economically sound.

The Case for A Master’s Degree

When deciding whether to attend a master’s program, one must figure out the associated costs, job prospects, salary, debt and potential impact on savings and retirement. From a financial perspective, master’s degrees with the highest returns are mathematics, computer science and engineering. Naturally, STEM majors outperform arts and humanities, with engineering and computer science students achieving a 20-year annualized return of 2 percent. In particular, the estimated lifetime earnings for master’s degree holders in computer science, math and engineering range fall between $3.5 million and $4.0 million. Comparatively, lifetime earnings for a master’s in less technical fields such as education, visual arts, and psychology range from $2.2 million to $2.4 million. (For more, see: The Benefits Of An Accelerated Bachelor's/Master's Degree.)

Besides choosing a field of study, one must decide between attending a public school, private school or an online program. On average, the difference in tuition between graduate programs from a public school versus a private university is about $12,000. However, the gap in earnings between equally ranked public and private schools is negligible. Despite equal monetary returns on investment, private universities often provide more prestigious research and academic opportunities. For example, a majority of the winners of the Nobel Prize in Economics have been affiliated with the University of Chicago and other private universities.

Recently, online degrees have become a viable alternative to traditional brick and mortar universities. Common misconceptions about online universities are that the programs are cheaper than degrees from physical schools and that they lack credibility. The average in-state cost per credit for an online program was $277 in 2013 compared to $243 per credit at a physical campus. Furthermore, since online universities and their brick-and-mortar counterparts have relatively similar costs, they also have similar returns. Assuming the online degree is obtained from an accredited university with an established brand and traditional campus, recruiters have reported no negative hiring effects as a result of obtaining a master’s online. (For more, see: How Much is a Graduate Degree Worth?)

Case for Work Experience

The primary benefit to forgoing a master’s program is saving money. On average, the cost of a two-year master’s program can range between $30,000 and $120,000. In addition to avoiding tuition payments, joining the workforce gives individuals the opportunity to earn money. The average salary for graduates with a bachelor’s degree stands at about $45,000, though this number can be significantly higher or lower depending on the major. Computer science and engineering majors typically earn $60,000 while humanities and social sciences earn $37,000. According to estimates, an additional two years of work experience will lead to average annual pay raises of 3 percent. Besides savings and salary, joining the workforce increase chances for promotions and networking opportunities.

Student Loans

Student loans continue to be one of the largest problems plaguing young Americans. For many, attending a bachelor’s or master’s program requires loans to cover the cost of tuition and living expenses. Currently, total U.S. student loan debt stands at $1.2 trillion, with 70 percent of bachelor degree graduates incurring an average $33,000 in debt. Since most undergraduate students are shouldering considerable debt, many cannot even consider pursuing a master’s program. However, those who take the plunge will find that the median indebtedness of a graduate student is $57,600. For the 90th percentile, debt can exceed $150,000. (For more, see: An Introduction To Student Loans And The FAFSA.)

The Bottom Line

Deciding whether to join the workforce or obtain a master’s can be difficult. When choosing a master’s program, it’s important to consider job prospects, return on investment and tuition costs. Quantifying these factors can help individuals calculate a cost benefit profile for a prospective master’s program or work experience.  In many cases, taking into consideration lifetime earnings and future job prospects, it is beneficial to continue education beyond a bachelor’s degree.


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