It's a Tough Job Market for New College Grads. Is an Advanced Degree Worth It?

Hindustan Times

4 days ago

​The current job market is making a good case for recent college graduates to consider going to graduate school. But is it really worth it?
Uncertainty around the potential impact of higher U.S. tariffs is tamping down hiring. And even before tariff stress hit the job market, new college grads faced headwinds.
The unemployment rate for recent graduates (those ages 22 to 27) was 4.8% in May, the latest data available for that age group, according to the Federal Reserve Bank of New York. That's up from 4.3% in May 2023. The overall unemployment rate, meanwhile, rose to 4% from 3.5% during the same period. (The overall employment rate stands at 4.2% for July.)
Add to that the growing debate over whether artificial intelligence might eat a chunk of entry-level, white-collar jobs, and tacking on an advanced degree seems like a sound competitive strategy. The Georgetown University Center on Education and the Workforce projects that the number of jobs requiring graduate degrees will be 14% higher in 2031 than it was in 2021.
The question is: Will the potential for improved employment prospects and higher long-term earnings outweigh the cost of obtaining a graduate degree, especially if you have to take on debt to pay for it?
The answer depends on what specific degree you are pursuing—and how much of a salary boost you can expect from it—and how much of a burden your total debt load would be.
'It is totally valid to go to grad school when the job market is not great, because we know that it does make a difference when you enter the labor force,' says Artem Gulish, senior federal policy adviser at Georgetown's education and the workforce center. 'But you still have to exercise due diligence that it is going to be beneficial and not just a way to stay out of the labor market.'
An earnings premium, but…
There is an alluring earnings premium that typically comes with a graduate​ degree—18% on average for someone with a master's degree compared with someone with just a bachelor's degree, according to the Georgetown center, and more than 60% for medical, law and doctoral degrees.
The problem is the earnings premium has pretty much stayed around 18% over the past 30 years, while​ median borrowing for graduate school has increased by nearly 50% (in inflation-adjusted 2022 dollars) between 2000 and 2020 alone, according to the Georgetown center. That means if you intend to take out loans to pay for grad school, more of any additional earnings are likely to be eaten up by debt repayments.
So where should students draw the line on borrowing? The Georgetown center recommends that student-loan repayments should be no more than 10% of discretionary income, to make it possible for borrowers to juggle debt repayment with current living costs and savings goals.
But that may be a tough mark to hit. While only a minority of graduate​ programs report detailed earnings and debt information to the federal College Scorecard database, the Georgetown center found that among those programs that did report,​ 41% of master's-degree programs and 67% of professional-degree programs (doctor, dentist, lawyer) sent graduates out into the job market with repayment burdens above the 10% benchmark.
Students are feeling the pain. In a 2023 survey of 1,000 graduate students by the Third Way think tank, nearly half of borrowers said their final borrowing tab was more than they expected going in, and more than half said it was going to take more time to repay those loans than they expected. On the earnings side, nearly 75% of respondents said the prospect of earning more was a major motivation for going to graduate school. But among those who had​ graduated, less than half felt their school did a good job in helping them toward that goal.
Changes to federal loans
Another factor to consider is the changes to the federal college-loan system under the tax and spending bill recently signed into law by President Trump.
The new rules, which take effect July 1, 2026, limit the amount students can borrow from the government for graduate school ($100,000 for master's degrees and $200,000 for professional degrees), eliminating the popular Grad Plus program that had allowed loans for the full cost of a graduate degree. They also impose a combined lifetime limit for all federal undergraduate, graduate and professional loans, and cap the amount parents can borrow for their children. And the sole income-driven repayment plan is less generous than prior options.
Mark Kantrowitz, an expert on student financing, says the new borrowing limits mean many prospective doctors, dentists and lawyers may need private loans to help pay for their degrees. Some master's-degree students who attend high-cost programs also may need to borrow more than they can from the government. Private loans require either a strong credit score or a cosigner, and their repayment terms generally are far stricter.
They also often have higher interest rates. And, says Ann Garcia, a certified financial planner in Portland, Ore., the new limits on federal graduate loans mean less competition for private lenders, which could drive up the interest rates on many private loans.
The debt you already have
Some young adults also don't fully take into account the cost of their existing undergraduate debt when thinking about graduate school. Payments on federal undergraduate loans generally can be deferred while the borrower is in graduate school at least half time, but if the undergrad loan was unsubsidized, interest continues to build. Some private lenders offer this type of deferment, but interest usually also continues to build in those cases.
'You left undergrad with​ $27,000' in student loans, Garcia says, 'and in grad school that same debt grows to $41,000 because interest accrues, and that's on top of what you're borrowing for grad school.'
Kantrowitz suggests limiting total borrowing (undergraduate and graduate) to no more than what you can expect to earn your first year working. To get an idea of what that will be, you can search employment sites including salary.com and payscale.com, which provide general salary ranges. You also can check if a graduate program reports median earnings and debt for graduates to the federal College Scorecard database.
If you are pursuing an advanced degree that you expect to qualify for public-service loan forgiveness,​ borrowing more may be OK, Kantrowitz says. But he cautions that an executive order signed this past March aims to limit the types of businesses and organizations whose employees would qualify for public-service loan forgiveness. The Education Department is working out specific rules.
New Orleans certified financial planner Ryan Frailich says a common mistake he sees with clients who took on a burdensome amount of debt is that they tended to 'make the grad decision first and how to pay for it later, as though they are two separate decisions.' He suggests moving the repayment question into the decision process.
'It's not a 'Should I go to grad school' question,' he says. 'It's a 'Should I go to this grad school if I have to repay X dollars.' '
Carla Fried is a writer in Tenerife, Spain. She can be reached at [e-mail].