Five Killer Myths About Preparing for Grad School
I’m constantly surprised at the number of clients that tell me they’re considering going to graduate school if not already taking post-graduate studies. Graduate school is, according to Stanford economist Caroline Hoxby, a counter-cyclical industry — the worse the economy, the greater the interest. During the last recession, grad school enrollment increased as job seekers sought to become better paid and more marketable and existing workers added qualifications to keep scarce jobs.
A 2014 report on graduate school debt exposed a huge issue: 40% of the student loan debt outstanding is to graduate students, though they make up only 16% of the students. Of those students, over 25% of them carry debt over $100,000 and another 10% carry over $150,000. Why? Graduate study costs aren’t subsidized by states and government programs like Pell Grants so tuition costs tend to reflect the full cost of the education. In 2012, Congress stopped subsidizing interest rates on grad school loans, which tend to be 3 times larger than undergrad loans.
As someone who finished a graduate degree, I believe it gave me a boost along my career path. But was that value matched by the costs? Here are five of the biggest myths I see students believing as they speed down the graduate school expressway:
1) Grad school pedigree means everything. In some degree studies like law, medicine and business, the graduate school you attend can matter a lot. The educational program might have specialty study areas and incredibly networked alumni and professors that assure top graduates of jobs the rest of us can only dream about. But there’s more to it than that.
Not every student at Harvard Business School will be a top performer, even after making the notoriously hard cut to get in. What really matters is the connections and relationships made with the faculty, fellow students and alumni advisors. A student that might not be valedictorian can still develop the soft skills and connections to land preferred jobs.
But that can happen at state universities and small private colleges, not just in the Ivy League. Look at the education of America’s top CEO’s. Many went to Harvard, but more went elsewhere including state schools and in lots of cases, no graduate school at all!
2) You don’t need to worry about finances. I’ve talked with prospective students that think the laws of financial gravity don’t matter in the world of higher education. They are determined to get there immediately, with a fear their dream job will be snatched away by a thief if they can’t finish grad school at a top university in record time. If that takes six-digit debt and years of putting that debt in forbearance, so be it. They’re going to strike gold.
While the obsession with success is dominating their life, financial details often are forgotten. Bills from bad undergrad budgeting accumulate and when money gets tight, debt payments get stalled and credit ratings are allowed to sink. Once they’re done, some inconvenient facts stall the job hunt: 1) many employers check your credit history, so a bad one might be a factor in getting hired and 2) long stalled graduate debts have a way of morphing into mortgage-sized blobs you can’t run away from in bankruptcy. Before you finalize grad school plans, use a calculator like this one from Accessgroup.org to help you plan out the costs and how they’ll affect you now and in the coming years.
3) A grad degree always makes you more marketable. My daughter is an elementary school teacher and enjoys her career, but at times, she groans about the pay and says she’s kind of stuck if she wants to keep teaching. When I asked her if going to grad school would help, she tells me what most teachers say: “only if I can get a new job after I finish.” Since teaching has more job seekers than openings, a graduate degree implies a higher pay level than most districts are willing to pay if you’re early in your career.
But in some cases, a graduate degree can actually make you tougher to hire. My son is in IT administration and he tells me anybody who can learn to code well, whether in college, online or overseas can basically find a job. From there, certifications in software systems matter. The more you can master, the more flexible you become, and academic theory alone limits your worth. So be sure to determine whether grad study advances your real goals at work before you shell out for an expensive disappointment.
4) Grad study and work don’t mix. Although over 80% of grad students have some type of job, only about half work full-time. Most full-time graduate students see work as a distraction and delay to their ultimate goal. This is an argument that holds some merit but might end up costly.
Over half of U.S. employers have some kind of tuition reimbursement program in place for employees so the trade-off between the delay from work can be made up from tuition assistance, even for graduate school. Many employers now anticipate employee interest in these programs and offer wage incentive for successful completion. So strongly consider the income you make and the help you’ll get versus the extra time in school from attending part-time. In my case, that made all the difference in affordability for my MBA and even got me a pay increase.
5) Refinancing isn’t worth considering. It’s true that with undergraduate student loans, the numerous separate notes and lenders send a lot of debt holders to private refinancing options after school. That often leads to the financial mistake of losing some of the advantages federal student loans offer by not doing a federal loan consolidation instead. But since grad school loans are usually unsubsidized, if you’re not in a position where you need income-based repayment or forbearance of your loans, you might benefit from a lower interest rate by refinancing grad school debt.
Not every bank refinances grad student loans, but the numbers are growing. Besides the 6 leaders in this specialty, many large banks and credit unions are considering these loans if you have good-to-excellent credit. Those banks view you as a good candidate for future services, and this is a way to guide you toward using them as your primary banker. New tools such as Overture MarketPlace have emerged to help grad students find their alternatives.
Grad school is tough enough without the worry of a six figure debt. If you decide that grad school is your best option, don’t buy into these myths. By taking a few extra measures, you can make your post-graduate study worth the investment.
This article was written by Paul Wannemacher from Forbes and was legally licensed through the NewsCred publisher network.