The ROI of Graduate School

Since Kristofferson Culmer had no plans to teach, he hadn't considered pursuing a Ph.D. in computer science.

But that quickly changed once he started a master's program at the University of Missouri and realized that a doctorate is now a good way for job candidates outside the ivory tower to demonstrate the inventiveness and ability to solve complex technical problems that employers prize.

"It opens doors that wouldn't be there with just a master's degree," says Culmer, who intends to work in industry.

His decision should pay off. The tech business pays a premium for people in computer science, with median salaries of about $108,000 in a field projected to grow by 11 percent in the decade ending in 2024.

Still, Culmer, 38, has turned frugality into an art form. Even though his tuition is covered and an assistantship pays him $12,000 a year, "it's not enough to live on," he says. He supplements his income with summer jobs and has learned to live with less to avoid the perils many graduates face when freighted down by debt.

[Learn more about paying for grad school.]

The type of return-on-investment calculations Culmer made, which take into account the prospects for finding work and career satisfaction as well as the financial picture, are a key exercise for anyone pondering grad school. Advanced degrees in fields outside of medicine, law and academia may not mean an instant salary bump or career advancement.

On average, people with a bachelor's and at least three years in the workforce out-earn those freshly out of grad school, according to a report released last year by Georgetown University's Center on Education and the Workforce.

Moreover, the average graduate student now finishes up owing $57,600 -- including undergrad loans -- and that figure can easily hit $100,000 or more.

The good news is that in many fields, people with the extra degree generally do catch up eventually. And people with advanced degrees enjoy lower rates of unemployment. What's more, jobs that require a master's or doctoral degree are experiencing high growth, according to the Bureau of Labor Statistics, with anticipated increases of 18 percent and 16 percent respectively this decade.

Employers, notes Andrew R. Hanson, a senior analyst at the Georgetown center, are thus looking for highly educated candidates. That includes people with Ph.D.s, who face a shortage of tenure-track positions and are increasingly stepping out of the ivory tower.

Stanford University, which tracks doctoral alumni, has found that nearly half have parlayed their intellectual depth and critical thinking skills into jobs in business, government or nonprofits, including at places like Intel, Microsoft, Goldman Sachs and the International Monetary Fund.

Keep in mind as you weigh your options that despite the rosy-sounding averages, employment and salary prospects vary considerably by discipline. An earlier Georgetown study found that people with an extra diploma and some experience in engineering and business, for example, can command starting salaries in the very high five-figure range. But the added degree has a negligible impact on lifetime earnings for writers, editors and even computer programmers.

[See photos of the 20 top-ranked business schools.]

Here are some other factors to consider as you plot your path.

1. The purpose of getting that extra degree: Grad school shouldn't be automatically assumed to be a resume enhancer, and the cost is too great to use it as a way to mark time until the job picture improves.

Make sure an extra degree is required or desirable in your chosen field. If your ultimate goal is a leadership or administrative post, says Suzanne Ortega, president of the Council of Graduate Schools, "an advanced degree may be required."

2. Your various program options: There's been a groundswell of innovation lately as programs try to do a better job of prepping students for the real world. So it pays to look around carefully.

Many programs are adding a big dose of training in technology and big data, for instance. And "professional" master's degree programs have been spreading that combine academics with job-specific training and the hands-on experience needed in the workplace.

There's more of a focus, too, on building networks that can later be tapped when prospecting for jobs. At Michigan State University, for instance, a formal program provides mentoring, workshops and overall guidance to doctoral candidates on cultivating skills that are transferable to the business world as well as academia.

3. The true cost of attendance: The tab for tuition and fees for two-year master's programs at most public universities now runs $20,000 a year or more, and at private universities the bill can be more than double.

Even with an assistantship, which normally includes a full or partial tuition waiver and a stipend in exchange for teaching classes or doing research, your living costs can saddle you with debt. Ask yourself if the future earnings boost will more than make up for the lost income and lost retirement savings while you are in school.

4. Getting the best loan terms : The government's Stafford and Grad PLUS loan programs offer the best deals. You aren't disqualified because of a spotty credit history; payments are deferred until you're out of school; and you may be eligible for income-based repayment programs that cap monthly payments. Another advantage: If public service is your goal, any remaining debt is forgiven after 10 years of full-time employment.

[Discover four ways graduate school loans differ from undergraduate debt.]

Private loans through banks are normally a last resort because interest rates are usually higher and may be variable instead of fixed; your credit record can't have blemishes; and you may need a cosigner in order to qualify. Often, private loans won't be forgiven in the event of disability or death. Federal loans are discharged in the event of death or total and permanent disability.

5. A reasonable debt load: Research your probable first-year earnings . The rule of thumb from financial advisors is that loans stop being affordable when monthly payments eat up more than 10 percent of income; total debt at graduation, they say, should be less than your starting salary.

"Don't borrow more than you can repay in 10 years," says Mark Kantrowitz, publisher and vice president of strategy for Cappex.com, a resource for planning and paying for higher education. "Assume every dollar of debt will cost you $2 by the time you pay it back."

While the financial realities are clearly a key measure in your decision-making, they shouldn't be your only yardstick. Satisfaction counts, too.

This story is excerpted from the U.S. News "Best Graduate Schools 2017" guidebook, which features in-depth articles, rankings and data.