Navigating the workforce with a college degree can deliver a lifelong payoff. A Federal Reserve study that looked at median household earnings from 1989 through 2016 found that when there was at least one person with a bachelor’s degree, earnings were 100% more than households without one. The gap was 175% for households with a graduate degree.

Yet, a graduate degree can be an iffy financial move when borrowing is thrown into the mix.

For undergraduates, the federal student loan program comes with a built-in safe-borrowing cutoff: Annual borrowing is no more than $7,500 and total federal borrowing to earn a bachelor’s degree can’t be more than $31,000 for students claimed as a dependent on their parents’ tax return.

Student-loan expert Mark Kantrowitz said aiming to emerge from school with total debt no greater than what the borrower will earn in the first year of his or her career is a solid target. At that level, the debt should be able to be repaid in 10 years without eating up more than 10% of pay.

Where overborrowing becomes more of a risk is when the baccalaureate pursues an advanced degree.

The federal loan system for graduate school has no borrowing limits.

According to a think tank report, graduate students in the 2017-2018 academic year accounted for 15% of all students in college yet took out 40% of all federal student loans.

Moreover, federal graduate-school loans cost more. The fixed-interest rate on loans taken out for the 2019-2020 school year was 4.53% for undergraduates vs. 6.08% for graduate-student loans

Students who completed their graduate degree emerged with total average debt (including undergraduate borrowing) of $84,300 in 2016. For medical degrees the average was nearly $250,000. For Ph.D.s (excluding the field of education) the average debt for graduates was nearly $100,000; for non-Ph. D. doctorates, the average debt was more than $132,000.

At those higher debt levels, it’s not a given that starting salaries will be as high. That’s where the value of a degree can begin to break down: If you take on so much debt for undergraduate and graduate school and then land a job that doesn’t pay at least an equal amount right to start, you are looking at some unpleasant financial stress.

The simple yet vital corrective is to study up on expected starting salaries for a graduate degree before you accept a slot in a program and borrow. Don’t focus on a national average. You need to get actual starting salary info from every program you’re considering.


Carla Fried writes for