Not All Graduate Degrees Pay Off

Higher education has long included graduate degrees in the United States. But over the last decade or so, the number of students seeking degrees after earning their bachelors has been on the rise. The assumption is that more degrees results in higher salaries, but is that necessarily the case? And is the cost of the degree worth the salary and employment afterwards? A new study from the Postsecondary Education & Economics Research (PEER) Center at American University explores these very questions. 

The PEER Center used administrative data from the Texas Education Research Center (ERC) to explore the effectiveness of various graduate degree programs in terms of earnings over time. While graduate degrees often provide much-needed skilled labor (i.e. doctors and lawyers), they also often result in an increased debt burden. Among US adults aged 35-39, the percentage of those with a graduate degree has increased from 31% in 1993 to 42% in 2022.

The average graduate degree results in a 17% increase in a student’s earnings. While this is definitely positive, it varies widely based on the field of study. Many may assume any old graduate degree will result in higher earnings over time. That is definitely not the case. Pharmacy degrees yield a 114% income boost, medicine yields a 110% increase, law a 59%increase, and business a 16% increase. Master’s degrees in curriculum and instruction or clinical psychology result in only around 4% increase in earnings. 

These numbers also do not take into account the loss of income during the education as well as the cost of the degree itself—the ‘adjusted return’. After factoring in these circumstances, it is no surprise the medicine comes out on top, offering a 173% average increase in earnings over the lifetime of the graduate. Meanwhile, pharmacy degrees offer a 68% increase, and law degrees generate a 41% increase. Those that earn a negative cost adjusted return include psychology, clinical psychology, curriculum and instruction, and social work. 

One surprising finding—graduate engineering degrees do not offer as high a return on investment as one might expect. More specifically, computer engineering degrees generate an 8% return, mechanical or electrical engineering degrees generate a 10% return, and even civil engineering degrees manage only a 21% return. Importantly, these numbers do not reflect the adjusted return. This is likely at least partly due to the fact that bachelor’s engineering degrees already offer a pretty high return on investment.

Your choice of major—or graduate degree—matters. This may seem like common sense to the casual observer, but many students seem to have the attitude that if you graduate with a bachelor’s and do not know what to do, simply returning to school for a graduate degree is the answer. These data clearly show that students need to have a plan. Students should consider all the income they will not be able to earn while in school, the cost of the education itself, and the return on investment they can reasonably expect once they graduate. 

Students and policymakers alike need additional quantitative measures so that we may properly understand a given program’s value. Our tax dollars support higher education, and it is a shame to fund schools that are not actually improving their students’ employability and long-term success. After all, the decisions of these schools in terms of educating and preparing students directly affect, and are funded by, society as a whole. We should all be paying more attention to these sorts of data. 

Grace Hall is a communications assistant at the Martin Center.