How Much Does Grad School Cost?

(updated November 16th, 2013. Originally published November 14th, 2013. Follow-up article posted here.)

How much does grad school cost?

More than anyone wants to admit.

There are lots of ways of looking at this question, but I’d like to contribute a view I haven’t seen before: an opportunity cost perspective.

For every year you’re in grad school full time instead of working a job, you’re missing out on the chance to invest toward retirement, houses, or other financial goals. Unless you’re in a graduate program that pays you enough of a stipend that you have some money left over to invest, or you’re working a side job during school, you end up behind.

How far behind?

I decided to focus on one question: assuming that you want to invest some of your money toward retirement, how much does each year of graduate school cost you in the long term? If you want to get the same place—a similar dollar value for retirement at a given age—how much more money do you have to invest annually?

It’s probably obvious that you have to invest proportionally more for each year spent in grad school, but the amount of difference might surprise you.

My point, ultimately, is that grad school is a really expensive choice in ways that are both obvious and subtle. Everyone talks about the crushing load of student debt—paying back what you had to borrow in order to go to grad school—and how hard it can be to find jobs that pay well enough to put a dent in the loans. But most people don’t talk about what happens after that.

When you’re paying back loans, you’re spending present earnings to pay for experiences that happened in the past. But assuming you want to retire in the future, you also need to be making enough more money now that you can make up for the money you couldn’t save during grad school. Depending on how many years you spend in grad school, the amount of extra money you need can be substantial.

How long does grad school take?

Depends on your field. Some fields require Masters’ degrees of 1–3 years in length; some require post-Masters’ certifications that can add another year. Some professional doctorates can take as little as 3 years after college, while some academic disciplines and medical specializations can easily last a full 10 years.

For this discussion, what matters is the number of years a person spends without investing toward retirement.


I’d like to introduce a term: surplus. Here we’ll use it to describe the amount of money a person has available for investing once all other bills are paid: taxes, education loans, rent/mortgage, insurance, water, sewer, food, child support, health care, etc.

I’m going to talk about surplus rather than salary levels because people tend to scale up their costs of living as their income increases—and people who go to school longer tend to pay much more per year toward education loans. In terms of what a person is able to invest, surplus seems the best measure.

So, for this discussion, a person who makes $25,000 a year and spends $15,000 is the same as a person who makes $80,000 a year and spends $70,000: both have a surplus of $10,000 annually.

Surplus can change because you alter your income (how much your job pays) or because you change your cost of living (how much you spend on everything). After grad school, assuming you have loans to repay, your cost of living goes way up—meaning that your surplus goes down. To get the surplus back, you either need to economize in other areas of your life (bringing your costs back down) or get a new job (raising your income).

For example: let’s suppose your costs of living are $20,000 a year and you want to put $5,000 a year toward retirement. As long as you can find a job that pays more than $25,000 a year, you’re good. Then you go to grad school for two years, picking up a Masters’ degree that leaves you with $60,000 in debt.

Once you finish, the loan repayments for your MS come to $389 a month, or $4,668 a year. To be in the same place you were before grad school, you either need to cut your other living expenses down to $15,332 or you need to get a job that pays more than $29,668.

Predicting the returns of investments is difficult, but a lot of investors (Warren Buffett among them) agree that 8% annual returns are a pretty solid bet, over time, in the stock market. So we’ll use that 8% return in this discussion, and for the sake of discussion we’ll assume that it includes inflation and capital gains taxation within that 8%.

The scenario

Let’s create some hypothetical people for our discussion. All of them graduated from college with bachelors’ degrees at age 21.

  • Alice got a job with an annual surplus of $1,000. She invests in an IRA and continues doing so until age 65, when she retires.
  • Belle got a job with an annual surplus of $5,000. She invests in an IRA and continues doing so until age 65, when she retires.
  • Clara got a job with an annual surplus of $10,000. She invests in an IRA and a regular investment portfolio and continues doing so until age 65, when she retires.
  • Gina went to grad school. She’s our variable here, and we’ll look at different lengths of time spent in quaternary education. Depending on how many years of schooling Gina goes for, she’s going to need different amounts of surplus to match Alice, Belle, and Clara.

They’re all investing, not just putting that money in a savings account.

How much do they need?

I made a spreadsheet to help keep track of the numbers. You’re welcome to play with it if you like!

At age 65, here’s where things stand with Alice, Belle, and Clara’s retirement accounts:

  • Alice ($1,000 / yr): $386,506
  • Belle ($5,000 / yr): $1,932,528
  • Clara ($10,000 / yr): $3,865,056

So if Gina wants to end up with the same amounts as them (i.e., make graduate school a financially wise decision) she’ll need to contribute larger amounts once she finishes school.

Keeping up with Alice

Here’s how  much Gina has to contribute annually, compared to how many years she spends in graduate school, to keep up with Alice and end up with approximately $386,506 at age 65.

  • 1 year grad school: $1,085
  • 2 years grad school: $1,175
  • 3 years grad school: $1,275
  • 4 years grad school: $1,375
  • 5 years grad school: $1,492
  • 6 years grad school: $1,620
  • 7 years grad school: $1,755
  • 8 years grad school: $1,905
  • 9 years grad school: $2,066
  • 10 years grad school: $2,250

Note that Gina has to have a surplus of these amounts every year, starting as soon as she finishes grad school, or else the numbers go up even more.

These don’t look too bad, especially for the Masters’ degrees. It seems like a solid bet that most people with an MS will be able to get a job that pays at least $275 more, annually, than their previous job paid.

There’s still a concern about the loan repayments, though. If Gina MS has a $5,000 annual loan repayment, that means her new job has to pay $5,275 more than her old one.

Keeping up with Belle

Here’s how  much Gina has to contribute annually, compared to how many years she spends in graduate school, to keep up with Belle and end up with approximately $1,932,528 at age 65.

  • 1 year grad school: $5,420
  • 2 years grad school: $5,870
  • 3 years grad school: $6,355
  • 4 years grad school: $6,885
  • 5 years grad school: $7,465
  • 6 years grad school: $8,090
  • 7 years grad school: $8,772
  • 8 years grad school: $9,520
  • 9 years grad school: $10,330
  • 10 years grad school: $11,215

Note that Gina has to have a surplus of these amounts every year, starting as soon as she finishes grad school, or else the numbers go up even more.

Things start looking a little uglier here. Assuming the same amount of loan repayment for an MS ($4,668 per year), Gina MS now needs a job that pays $6,023 more than her old one, and she needs it as soon as she finishes school. If she’d gone to PhD school, her loan repayments would be higher and she’d need to contribute more because of the opportunity cost, which means that Gina PhD may need a new job, right away, that pays $10,000–$15,000 more than her old one.

Keeping up with Clara

Here’s how  much Gina has to contribute annually, compared to how many years she spends in graduate school, to keep up with Clara and end up with approximately $3,865,056 at age 65.

  • 1 year grad school: $10,830
  • 2 years grad school: $11,730
  • 3 years grad school: $12,710
  • 4 years grad school: $13,770
  • 5 years grad school: $14,925
  • 6 years grad school: $16,180
  • 7 years grad school: $17,555
  • 8 years grad school: $19,040
  • 9 years grad school: $20,660
  • 10 years grad school: $22,430

Note that Gina has to have a surplus of these amounts every year, starting as soon as she finishes grad school, or else the numbers go up even more.

Here’s where things really get unpleasant. If Gina MS wants to be in the same place Clara is, financially, she needs to find a job that pays $7,378 more than her old one. If Gina PhD finishes school in 6 years, her first job needs to pay somewhere around $20,000 more than her old one.

So what?

There are lots of great reasons to go to graduate school. The life of the mind is a wonderful thing, and graduate education opens new doors of thought and of experience that aren’t accessible through any other means.

That said, the job market isn’t what it used to be. Lots of people with advanced degrees are finding it hard to get the work they’re now qualified for—there just aren’t that many tenure-track faculty positions available.

People tend to look at the cost of graduate school in terms of borrowing: how much you’ll have to ask someone else to lend you in order to go to school. This is important, but it leaves out the larger question of lost time.

Assuming you want to retire someday, graduate school comes with a substantial opportunity cost because you lose earnings early in your career when your surplus’s future value is highest because it can compound the longest.

Too long; didn’t read

If you’re thinking of grad school, look at the jobs you think you’ll want to have someday. Find out their salaries, figure out how much your life is likely to cost including loans and everything else at that point, and see how much difference there is between those numbers. That’s your projected surplus.

Take a guess at how old you’ll be when you die, then subtract 65 from it. That’s your years in retirement. Figure out how much money you want to have per year when you retire, and multiply that by your years in retirement. Compare yourself to Alice, Belle, or Clara for this number.

Then look down the list, find the number of years you’ll spend in grad school, and compare your projected surplus to the number on that line. If your projected surplus is higher, you’re good—grad school looks like a solid economic bet for you. If it’s lower, grad school may still be a great choice, but it’s on shakier economic footing.

And remember that these numbers only work if you can make those surplus amounts—and the investments that follow—happen every year, starting as soon as you finish grad school. So you’ve got to find a good job right away. If those good jobs don’t exist, consider skipping grad school and staying in the workforce.

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Wow! Lots of people wrote comments, both here and on Facebook! I’ve responded to some of them in a follow-up post.

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16 thoughts on “How Much Does Grad School Cost?

  1. There is another variable to consider: grad school funded by employer. This probably only applies for a narrow band of “professional development” degrees, and probably not PhDs. It also involves a non-trivial time cost.

    1. Definitely, and that’s how lots of people–me included–make it work to go to grad school.

      For me, it was two years of working a more-than-full-time job plus full-time grad school. As you say, a non-trivial time cost.

      I also don’t know a ton of employers outside tech fields (and odd little non-profits like mine) that offer tuition reimbursement plans as benefits. But yeah, it’s a rockin’ option if your employer offers it and you can swing the time commitment!

  2. I’m surprised by two basic assumptions here: that a typical person graduating with a bachelors degree has *any* surplus at all for their first several-to-many years; and that grad school necessarily costs as much as you imply. (Perhaps I know a disproportionate number of gradschool students/alumni whose graduate educations were cost-free.)

    1. Looking at those in order, with thanks for commenting:

      1) Lots of people do surplus with a BA. Some do it by living with family or in crowded multi-person apartments; some by cutting food expenses to $15 a week; some by starting side businesses; some by cutting entertainment and travel out of their lives, and yes, some by getting higher-paying jobs.

      At the lower end of the salary scale, people tend to achieve surplus by cutting expenses. At the higher end, they tend to get there by seeking higher-paying jobs.

      A side effect of these numbers is that they show that, as in Alice’s case, there’s a real benefit to saving even $20 a week early on. That leaves Alice with enough retirement savings to keep her $20,000 standard of living until she’s almost 85 years old, and $20,000 goes a lot farther in retirement because of things like tax exemptions and the fact that mortgages, etc., are usually paid off by then.

      2) Grad school doesn’t *necessarily* cost as much, in terms of loans, as I imply. But it often does. Cost-free schooling is almost always limited to PhD-level programs, which have a much higher opportunity cost. It’s also mostly limited to science programs, which not everyone studies.

      But even if your grad schooling costs you nothing in the sense that you don’t write any checks to Impressive-Sounding University for tuition, it still costs you in opportunity cost unless you’re getting enough income (from stipend or side work) that you can and do actually invest some surplus starting at the beginning of grad school. If you don’t do that, you still get whacked with the opportunity cost.

      I know a lot of grad students/alumni whose educations were free, but I suspect that’s because I tend to hang out with people who are extraordinarily smart and went to prestigious undergraduate institutions like ours. We’re desirable commodities so people tend to make things easier for us.

      I also know and work with a lot of grad students/alumni who haven’t gotten anything for free, who’ve put $150,000 into a medical education just in time to have the rural medical work loan forgiveness program get cancelled, who’ve spent $60,000 on a teaching or psychology degree, etc., and not gotten jobs in their fields. I know PhDs in hard science fields with degrees from top-tier schools who can’t find work in their fields.

      All this by way of saying yes, you’re right: I’m assuming that people *can* have a little surplus with most BA positions if they’re able to be creative about it, and I’m assuming that grad school costs a lot for most people. But even if it doesn’t, the opportunity cost thing still applies.

      Am I getting at what you were thinking about with your comment? (Which, by the way, thanks for writing!)

  3. You should just show a graph with various exponential functions on it that make your point about starting to save early in life. All of the other over-generalizations about grad school (e.g. comparing across disciplines, institutes, degrees) are not very strong.

    1. Ryan, could you help me understand: are you saying that I’m putting in over-generalizations about those things? I tried fairly hard to remove those variables and just look at how much people have available to invest.

      Part of why I didn’t just go for the graph approach is that you can find that perspective lots of places–the people for whom that approach is compelling have already figured this stuff out. I’m trying out a different approach for helping people see the long-term costs.

      I’m *not* trying to say that those costs are a bad choice. Not at all! But I think people make better decisions when they understand what they’re getting themselves into, and I observe in my students at Clarkson U, Saint Lawrence U, and SUNY Potsdam that virtually none of them think about grad school taking these costs into their consideration.

      Then they finish school and look at the debt and the costs and the amount they’ll have to save toward retirement and they freak out. I know they freak out because I’m the person they call. So I’m trying to help people to have the freakout earlier in life so they can still make different choices if they want to.

      1. It just that you’re making ridiculous generalization about how much people have to invest. It’s not very informative to lump all PhDs together and all BAs together. For example if you’re doing your PhD right, you get paid to do it and can live modestly during that time and save . You should not be viewing a PhD as “school”-if you treat it like an apprenticeship type of employment you should come out with no debt and should be able to invest during that time. I work in a dept. with ~ 100 PhD trainees, zero of them pay tuition, and the range in their annual gross salary is 18K – 33K. But again, the opportunities vary across geography and discipline.

        You’re just using a near worst case scenario for grad school compared to an idealized case for post BA employment. There are many many problems with education and academic careerism, but the one you’ve pointed out is often not relevant to many of us in the system.

        1. For the record, Ryan, what field was your no-debt PhD in?

          “For example if you’re doing your PhD right, you get paid to do it and can live modestly during that time and save.”

          I believe there’s no basis for this assertion unless your definition of “doing it right” includes only studying a science field at an institution that can get you grants and a stipend. If that’s your definition, I won’t argue with it.

          It is not a definition that’s compatible with a world that has doctors and dentists in it, though.

          I’m not using an idealized case for post-BA employment. If you’re going to tell me that most people with BA-level jobs could not, ever, invest $20 a week through any combination of economizing and seeking employment, well… I guess we’ll have to disagree on that.

          What I presented was a series of people who had made life choices (at whatever salary level) to invest a certain amount of money per year toward retirement. That’s not incompatible with what you said about how grad students in your department “can live modestly during that time and save.” Why are you attacking it?

          If you’re arguing that all of your PhD students *do* invest at that level, and that my argument about the opportunity cost of a PhD is therefore invalid, good for you. Tell me how we can make more departments like yours.

  4. Hi Hollis,
    You have missed something important: education is not only (or even) about getting a higher paid job; spending time in education can change a person’s perspective on life, make them more interesting (to themselves and others), change the people they spend time with (by meeting a wide variety of people), and help them find the life that really makes them happy. There are other ways to do these things, but everything costs money. How much is happiness worth?

    1. I’m not missing it. I buy those arguments. I just think that people look at those arguments and miss the economic ones, and I get enough late-night crisis calls from people in that situation to believe that not all of them saw clearly what they were getting themselves into.

      How much is happiness worth? Lots. It’s an intangible. But if happiness is worth more than you can afford to pay for it, how much does it matter?

      (Also, hi Paul! Long time no see! I hope things are lovely in Leicester!)

  5. Something else I’d like to throw in is that not getting your target salary right out of grad school shouldn’t be a major deciding factor. So what if it takes you a year or two to get the job you’re really looking for–as long as you’re keeping up with expenses and not going further into dent, you can just delay your retirement for a year or two. That might be worth getting a job that you really enjoy for the duration of your working life.

    1. Darren, I think your assumptions hold water as long as you *do* get the job you’re really looking for within a year or two, and as long as you get a job you really enjoy for the rest of your life. But a lot of people entering the job market after grad school don’t have that experience.

      Again, my point doesn’t really disagree with yours: if you’re looking at the real, long-term costs and deciding to go for it anyway, you’ve already made a conscious value choice. But a lot of the proto-grad students I talk to have never thought about long-term financial costs besides those of loans, and I hear my students say (all the time) things like “I got free ride to [grad school]! It’s not going to cost me anything to get my PhD!”. They’re not aware that unless they’re investing during grad school or planning to contribute way more after their PhD, it does cost them.

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