When you’re making financial decisions, it’s important to remember that you can improve your cash flow not only by cutting your expenses but also by increasing your income. Going back to grad school for an MBA or other professional degree can be a great way to increase your earning potential. At the same time, going back to school means sacrificing other opportunities, especially in the short-term.
Before taking the plunge, it’s a good idea to weigh the opportunity costs and the benefits you’d get from earning a graduate degree. In most cases, the choice to return to school pays off big in long-term dividends.
Cost of Lost Salary
A big reason that people in business choose not to get their MBA is their concern about foregoing pay. For example, someone who decides to start an MBA program might assume that going back to school requires taking time off of work.
Although taking a year or two off to pursue an MBA is an option, most people earn their MBAs while they’re working. Because they recognize that many students want to continue working during grad school, universities have made adjustments to their programs. Many universities offer online MBA programs, or they offer traditional evening classes to accommodate students’ work schedules. You can also choose part-time programs to keep your class loads light.
If you decide to take time off or to work part time during graduate school, then compare the income you might lose now to the improved income you’ll probably earn after you have your degree. Your graduate degree could mean a significantly larger salary in the future, so making a short-term sacrifice could provide a big return on investment. Also, many companies recruit people with advanced degrees, particularly MBAs, by offering lucrative signing bonuses. For these reasons, grad school is usually a risk worth taking even if you take a short-term salary hit.
Cost of Going to School
Grad school is a big financial investment. When you already have loans from your undergraduate degree, adding more to your loan balance might seem like a huge burden. Evaluate whether the salary increase from earning your graduate degree would offset the costs of the school you choose. For example, although an MBA from Harvard might sound ideal, you’ll still get a great salary boost with an MBA from a non-Ivy League school that offers a strong curriculum and great networking opportunities.
Loans aren’t the only way to pay for graduate school. In fact, your current company may reimburse all or part of your tuition, so ask your human resources office about this benefit. Also, take the time to investigate scholarships, and apply for as many as you can. If you do take out loans, consider paying the interest on your unsubsidized loans while you’re in school. Also, continue paying your undergraduate loans if possible, since interest continues to pile up during a deferment.
Cost of Lost Work Experience
If you cut back on work while you’re earning your graduate degree, you’re giving up the experience that you would have earned during that time. You may miss out on promotions within your current company, and you could miss out on networking opportunities. Although what you learn in graduate school can help you perform your current job better, studying does consume a lot of time and mental bandwidth. Therefore, juggling work and school could affect your job performance.
Again, remember that grad school might cost you some short-term work opportunities, but the long-term payoffs are usually worthwhile. Before you start your degree, be realistic about your capacity. If you’d be better off working part time and working well than working full time and working at half-capacity, then cut back your hours so that your performance remains excellent. Also, remember that a graduate degree should open doors both at your current company and at other companies. The promotion you miss during your grad school years might hurt, but it’s likely that even better opportunities lie ahead of you.
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Should You Take the Plunge?
Richard Branson, founder of Virgin Group, once said that business opportunities are like buses because there’s always another one coming. Successful people position themselves to encounter the best opportunities, and a graduate degree could expose you to options that you never thought were possible. That’s why, in most cases, grad school pays off in spite of the short-term opportunity costs.