Special Edition
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The Back-to-School Decision

By Erin Burt
Kiplinger's Personal Finance

An advanced degree could be your ticket to a better-paying position, faster advancement, or a new career entirely. But are the costs and rigors of grad school really worth it?

Whether you're still in school, a recent graduate or have been working in the "real world" for a few years, the New Year is a good time to evaluate your career goals. Are you satisfied where you are and where you're headed? Or do you want to make a change, move up the ladder or pursue a different interest?

As you explore your career options, the thought of attending graduate school may cross your mind. An advanced degree could be the ticket to a new career or a stepping stone to faster advancement in your current job. But it could be a complete waste of time and money if you don't use it as a means to a well-researched end. Not all grad students find their dream jobs or snag a dream salary.

The sooner you make your decision, the sooner you can start the application process, which can take up to a year for traditional graduate programs. But if you're anxious to start your studies, check out the growing number of programs with rolling application deadlines and flexible admission dates. If you start the application process now, you could be in a classroom by this fall.

Examine your motivation

The first question you should ask yourself, says Peter Vogt, president of Career Planning Resources, is "Are you going to graduate school for a purposeful reason or are you falling into grad school to get away from other things?"

Let's break it down. If you're going to graduate school because:

  • Your firm won't promote you to the position you want unless you have an advanced degree: right reason.
  • You're waiting for the job market to improve: wrong reason.
  • You want to pursue a different field of study: maybe the right reason.
  • You want to buy time because you aren't sure what you want to do with your life or you don't feel ready for the working world: wrong reason.

If you're tempted by any of the wrong reasons, save yourself the time, money and stress and get a job instead. Breaking out of the routine of school for a while could help you gain greater perspective about your skills, interests and career goals. Besides, you can always go back to school later.

In fact, even if it's not in your field of study, working for a year -- or two or three -- after college before applying for graduate school is a huge advantage, says Vogt, especially if you're plotting a career outside academia. Business schools and some other programs won't even consider you unless you've worked a few years outside of college.

When you're certain that graduate school is the right move, ask yourself if you have the time and energy to be a successful student.

Also assess the impact on your home life, and your job performance if you plan to continue working. Could you quit or work part-time? How would this impact your family budget? Do you need to move or can you attend a school close to home?

Money, money, money

Only you can decide if graduate school is worth the time and lifestyle changes. But what about the cost? A higher education doesn't come cheap. My husband and I basically have a mortgage -- but no house to show for it -- thanks to his medical school loans.

But in his case, the expense was worth it. There wasn't much he could do (or earn) with a bachelor's degree in zoology. But as an M.D. his earning power has risen exponentially. This isn't, of course, the case in every field.

Research salaries of different career levels and then evaluate the value of a higher education.

As a graduate student, you'll pay higher tuition than undergraduates attending the same school. And you'll need to factor in years of lost income (if you plan to quit your job and attend full-time) plus the inevitable student loans. Use our calculator to help you weigh the actual costs and benefits.

Your choice of school can have a big impact on your bill. And for the most part, says Vogt, when it comes to getting a job, the difference between a graduate degree from a big-name (expensive) program versus a smaller (cheaper) state school is minimal. There are, of course, a few exceptions, so talk to people in your area of study or target career to determine the best grad school programs in the field. But the possibility of saving tens-of-thousands of dollars could be the tipping point to make your higher education pay off.

While attending graduate school can put quite a strain on your current and future finances, don't forget to budget for the cost of actually applying.

Resources to pay the bill

You'll probably have to take out some student loans to foot the bill, but loads of free money are also available if you know where to look. When researching grad programs, check out the three "ships":

  • Assistanships. Look for programs that pay you. Many graduate students, especially after the first year, become teaching or research assistants earning a stipend. This allows you to earn money while gaining experience in your field. Some schools even reduce or eliminate tuition for assistants. These opportunities may be awarded every student in the program, or limited to those with superior academic performance.
  • Fellowships. These typically cover part of all your tuition and may pay a stipend for your living expenses. These are handed out through the specific program you apply to, and are designed to attract students with excellent academic records. Obviously, fellowships are the most sought after aid and you'll probably face fierce competition.
  • Scholarships. Many graduate students make the mistake of thinking undergrads have cornered the market on getting free money from outside donors, but there is plenty available for those seeking advanced degrees too. You can search scholarship databases online at FastWeb.com or Mach25. (A recent search for "graduate student" among scholarships on Mach25 yielded 1,841 hits.) Or, head to the library and leaf through the Chronicle Financial Aid Guide (usually in the reference section). You shouldn't have to pay for a scholarship search service.

If you're already working, check with your employer about tuition reimbursement benefits. General Motors, for example, awards about 900 scholarships every year to employees or spouses and children of employees. Make sure you understand the rules of such gifts. Your employer may limit your study to a field related to your job, or require you to work for the company for a set period of time afterward to reap the full benefit.

And even if you expect to exhaust the resources above, you should still plan to apply for loans. You can borrow up to $18,500 a year ($8,500 subsidized, $10,000 unsubsidized) in federal loans. But if you already have student debt, you cannot borrow more than $138,500 total for undergraduate and graduate degrees combined. Learn more about federal loans and how much you can borrow.

If you're approaching the limits for federal loans, you may have to consider a higher-interest private loan.

Back to the Special Edition: The Best Business Schools.

 More at Kiplinger Personal Finance
 Grad School Timeline

You've made up your mind: You're going to grad school! Great. You'll want to make sure that your applications to the different schools -- and for financial aid -- are on track.

January: Evaluate career goals and decide whether to go to grad school.

Spring/Summer: Take standardized admissions test (GRE, GMAT, LSAT or MCAT). Research programs and financial aid options. Secure letters of recommendation.

November/December: Submit entrance applications. Fill out applications for fellowships and other aid.

January/February: Apply for federal student aid.

March/April: Receive acceptance letters. Make your choice.

The application process can take up to a year for traditional programs. But if fall 2006 is too long for you to wait to start your studies, consider one of the growing number of programs that allow you enroll any time of the year. You may be able to take weekend, night or online courses to get started on your degree sooner. These types of programs are usually available for the most popular degrees, such as an MBA.

Your application time will be greatly compressed, but if you start now, there's still time to enroll by fall. For example, apply for financial aid by Februrary, take your exam in March and turn in your application by May to start classes by September.

Get tips on earning your MBA online, or search Peterson's Distance Learning database for flexible programs in various fields of study.

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