Should You Go to Grad School?

Numbers alone shouldn't dictate whether you go back to school for an advanced degree, but they sure can help you decide. On the pro side of graduate school, more education typically leads to greater income. According to the U.S. Census Bureau, the average high school grad can expect to earn $1.4 million over the course of his career; lifetime earnings climb to $2.4 million for someone with a bachelor's degree, $2.8 million for a master's and $3.5 million for a PhD. Unemployment rates also tend to improve with higher levels of education.

On the con side, reaching those upper scholarly ranks also costs more money. More than 70% of 2012 college graduates are carrying a student-loan debt, and those who borrowed took on an average of $29,400. The typical borrower nearly doubles that burden by the time she finishes grad school, pushing her combined undergraduate and graduate debt to $57,600, according to the New America Foundation. "Students need to be reasonable in looking at the relationship between the amount that they're likely to earn in a particular occupation and the amount that is reasonable for them to borrow to get that graduate degree," says Debra W. Stewart, president of the Council of Graduate Schools.

Figure Out Your Career Goal

Before deciding about grad school, first answer this familiar question: What do you want to be when you grow up? Your answer might be the same as when you were five (space cowboy!), but you need to flesh out the details now that you're older. Find out exactly what a space cowboy does, including his daily tasks, and learn his typical career path. You might find that you need a doctorate in space cowboy–autics to get started. Or maybe a bachelor's degree is fine for an entry-level space cowboy, but a master's in space-cow management can help you reach top positions and double your salary.

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Many people make the mistake of glazing over this important initial step. For example, "too many students go to law school for the wrong reasons," says Ben Kostrzewa, an attorney with the federal government who coordinates internships for his office and mentors students from the University of Washington, his alma mater. "They never find out what it really means to be a lawyer; it just seems like a safe, prestigious profession to make a lot of money."

The pursuit of such a vague idea can be costly: The typical combined undergrad and grad debt for a student who borrowed money to obtain a law degree in 2012 is a whopping $139,715, according to the U.S. Department of Education. Even the impressive median earnings made by mid-career lawyers ($127,000 a year, according to compensation research firm Payscale) would have to stretch a ways to cover that sum.

Kostrzewa recommends exploring the field after finishing college and before applying for law school. Try getting a job at a law firm; even the most menial positions will at least get you in the door and give you access to people who can show you what to expect. Also try connecting with professionals through your college alumni network or an online social network such as LinkedIn.

Choose the Right Program

You can find out more when looking into prospective schools and programs. "Virtually all programs are now prepared to give you information about the kinds of things students with that degree do when they complete it," says Stewart. You may even talk to some alumni from those programs to hear firsthand what they were able to achieve with the added education.

Learn what degree type best suits your career goals. For example, if you're interested in hands-on scientific research, a PhD is for you. But if you're more interested in the business side of science firms, you might consider pursuing a professional science master's degree, which is a relatively new two-year degree offered by more than 300 graduate programs.

Understand that not all schools and programs are created equal, so you need to compare them carefully. Dominique Verdieu, an alumnus of New York University's graduate program in public relations and corporate communication, wishes she had looked at her options more closely. She got her master's in May 2013, taking on $45,000 in student loans in the process, but has still not found work in her field. (She currently works as a makeup artist.) Her friend, on the other hand, transferred to a similar program at Georgetown University and easily found work. Comparing the programs in hindsight, Verdieu thinks the D.C. program was "a lot more proactive about helping their students find internships and work after graduation."

You should also consider the price and prestige associated with each school you're considering. Just like with colleges, public in-state options will cost you less and still offer great value (see our special report on the Best Values in Public Colleges). But, especially in certain fields such as law, a top-tier private university may be the better choice after you factor in the value of reputation. "I was fortuitous to be one of the last classes to find work pretty easily," says Kostrzewa, who got his J.D. in 2007 and secured a job at a New York City law firm in 2006, just before the legal job market dried up. "The market for lawyers now is terrible. You'll have a lot of trouble finding a job unless you're from one of the top schools. And even then, a lot of those students are scrambling to find work."

Weigh Your Payment Options

Score Free Money

Time to crunch the numbers and consider your payment options. First, look into awards and fellowships offered by your prospective department and school. And see if you have to apply for these grants separately or if the request is rolled into the admission application process. If your chosen path takes you toward a PhD, you have a better chance of scoring these deals. Only 36.9% of 2012 grads with PhDs had to borrow money for grad school compared with 55.6% of grads with masters of arts degrees, 84.0% with medical degrees and 84.7% with law degrees.

Also check for grants available through federal agencies, professional societies and private foundations. For example, the National Science Foundation Graduate Research Fellowship Program offers three years of support, including a $32,000 annual stipend and a $12,000 cost-of-education allowance for tuition and fees. The American Association of University Women offers a career-development grant of $2,000 to $12,000 to female college graduates looking to advance their careers through education. You can search FinAid.org and GradSchools.com for other options.

Your employer might also offer financial assistance. For example, Christine Dela Rosa, a 2010 alumnus of American University's film and video production graduate program, was able to get 75% of her grad school tuition covered by the nonprofit organization she worked for at the time. In exchange for this education benefit, she was simply required to continue working there for a year after graduating. Otherwise, she would have had to refund her employer a portion of the tuition.

Take Out Federal Loans

If you have to take out a loan, dear old Uncle Sam has a few options for you. The Perkins loan is need-based, administered by the school and offers up to $8,000 a year (or $60,000 total, including amounts you borrowed as an undergrad). Interest, currently at 5%, does not begin accruing while you're enrolled at least half time. Repayment begins nine months after graduation.

An unsubsidized Stafford—which offers $5,500 to $20,500 annually direct from the feds—charges 5.41% interest that begins accruing immediately. For a PLUS loan, also administered by the Education Department, you'll need a clean credit history to qualify and pay 6.41% in interest. It can cover your total cost of attendance, less any other aid. You can defer payment for both the Stafford and PLUS until six months after graduation. To apply for any of these loans, fill out the Free Application for Federal Student Aid (FAFSA), using your own financial information as opposed to that of your parents.

Remember Other Costs

Don't forget about life outside of tuition. You'll still have to pay all your grown-up bills while attending school, so factor into your budget any income you'll lose by attending school. Poorni Adikaram, who obtained her PhD in biochemistry from the University of Maryland in 2012, received a scholarship to cover all of her tuition costs and worked as a teaching assistant at the school, making $22,000 in her first year. Still, given the high cost of living in the D.C. metro area, she and her husband had to maintain a tight budget.

Another option is to keep working full-time. Dela Rosa managed to do so while enrolled in her part-time graduate program, which held classes on the weekends. Just be aware of the time-management skills this kind of packed schedule might require. The Council of Graduate Schools' GradSense tool can help you crunch all the numbers by estimating your debt and future income, as well as giving you budgeting tips to help you manage your daily finances. And you can always count on us at Kiplinger's for money-management advice.