Is the Cost of Master’s Degree Worth the Risk?

Not All Degrees Are Created Equal

There is widely held belief among experts: not all degrees are equal. In fields such as business or engineering, a master’s degree can typically boost income by more than enough to justify the cost. But a master’s in anthropology or art will probably have less earning power.

On their website in August, Forbes released a list of the 10 best and worst master’s degrees in terms of long-term opportunities and salary and employment outlook. Topping the list of best degrees were those in physician assistant studies, computer science and electrical engineering. The worst master’s degrees belonged to library and information science, English and music, respectively.

There aren’t any major surprises in the results. Many students pursue literature, art or music because of a passion rather than a pay cheque. But what did stand out was the absence of a business administration master’s degree (MBA) in the top-10 best master’s degree list.

Further research shows even the most trusted of master’s degrees from the past are starting to lose their luster.

Is an MBA All It’s Cracked up to Be?

Business schools have long sold the promise that an MBA will set students up with future success. But as Philip Delves Broughton, the author of What They Teach you at Harvard Business School and a Harvard MBA holder, explains:“More and more students are finding the promise of business schools to be hollow. The return on investment on an MBA has gone the way of Greek public debt. If you have a decent job in your mid- to late- 20s, unless you have the backing of a corporate sponsor, leaving it to get an MBA is a higher risk than ever.”

Employers are starting to ask the question if an MBA is essential or if it produces employees who are simply too overqualified for the current working force, says Broughton. Some worry an “overeducated” candidate might demand too high of a salary or be dissatisfied with what’s being offered.

“When you look at today’s most evolved business organisms, it is obvious that an MBA is not required for business success. Apple, which recently usurped Microsoft as the world’s largest technology firm (by market capitalization), has hardly any MBAs among its top ranks,” says Broughton.

Student Debt Woes

According to the 2003-2004 National Postsecondary Student Aid Study, another two years of school averages $37,000 in debt. Peter Coy, Bloomberg Businessweek‘s economics editor, says: “In 2010 student debt exceeded credit-card debt for the first time. In 2011, it surpassed auto loans. In March, the Consumer Financial Protection Bureau announced that student debt had passed $1 trillion.”

Those numbers are staggering, and unfortunately the stress of paying back student loans weighs heavy on many graduates. Ten years is considered a reasonable period to repay one’s student loans, but many students take 20 or 25 years under extended repayment plans.

Another panelist on the Room for Debate forum, Liz Weston, a personal finance columnist for MSN money, says: “Student loans typically can’t be erased in bankruptcy court, and student lenders have extraordinary powers to pursue borrowers, up to and including taking a portion of their Social Security retirement checks. I hear from too many readers who have six-figure student loan debts and $40,000 incomes. They can’t save for retirement or buy a home; some can’t even pay the minimums they owe on their debt.”