Which Graduate Degree Gets You Out Of Debt The Fastest?

Tyler Durden's picture

Via Priceonomics.com,

If you’re one of the 29% who feels their choice of major in college didn’t prepare them to secure the job they wanted after graduation, you may be considering graduate school as a shot at a do-over. Those seeking higher income may indeed find themselves better equipped after earning a graduate degree. But this second chance can come at a steep cost.

But is it worth it? And moreover, does it matter financially if you attend a prestigious graduate school or not?

One way of answering this question is to look at how much income you make after grad school compared to the amount of debt you've now accumulated. We decided to analyze data from Priceonomics customer Earnest, a financial services company, to see which advanced degrees produced graduates with the the most (and least) student debt and how that compared to their actual earnings after school. 

We looked at the following graduate degrees: MDs (medicine), DDS (dentistry), Pharm D (pharmacy), MBA (business administration), JDs (law), Masters in Science or Engineering, Masters in Arts, and other masters degrees.

We found that medical professionals take on the most debt - even when their high salaries are accounted for - while MBAs enjoy a low debt burden relative to their income.

We also looked at the question of does the prestige of the school matter.

We found graduate program prestige comes with tangible financial benefits: for all disciplines except medicine, graduates of top-100 programs enjoy lower debt relative to their income upon graduation. This trend continues after graduation, with the exception of engineering graduate students, where students from less prestigious schools have more favorable debt to income ratios six years after graduation than their counterparts from higher ranked schools.

***

We first asked how much debt the typical graduate degree holder carries. This data is supplied by respondents looking to refinance their debt, so while it is self-reported, users must be reasonably accurate if they wish to receive realistic rate estimates. Average student loan debt - which comprises debt accumulated in college and graduate school - is reported for each degree type below.

Data source: Earnest

Future medical professionals - a category that includes doctors, dentists, and pharmacists - can expect to take on the most debt to finance their degrees. Future lawyers, too, take on six-figure debt to finance their degrees. Masters programs of all stripes are the cheapest, though graduates’ debt still ranges from around $60,000 all the way up to nearly $90,000.

This ranking lines up with degree program duration: MD programs typically take 4 years to complete, JDs 3 years, and full-time masters programs 1 or 2 years. 

Even with a hefty price, a degree program may be worth it if it confers earning power to match. If we account for income, do doctors still have the highest debt compared to other graduate degree-holders?

To answer this question, we divided average debt by our respondents’ average self-reported income to calculate a debt-to-income ratio for each group of graduates. Debt-to-income ratios below 1 mean these degree-holders make more than they paid for their degree in one year. Values over 1 mean the degree cost more than what the typical graduate makes in a year.

Data source: Earnest

Even if we take income into account, medical professionals bear the greatest burden when it comes to paying for their degrees. These graduates make a solid income, but it’s not enough to balance out their formidable debt.

Graduates with Masters of Arts degrees take second place in our debt-to-income ranking despite paying the least for their credentials. These graduates can expect relatively low starting salaries that handicap their ability to pay down debt.

At the other end of the spectrum, MBAs enjoy the lowest debt-to-income ratio. These degrees are relatively affordable and confer high earning power. 

The relationship between income and debt changes over time as graduates climb the career ladder and pay down their loans. We wanted to see how debt-to-income ratio changes as graduates establish themselves in their careers, so we broke our sample down by years post-graduation to chart a debt-to-income trajectory for each degree type.

Data source: Earnest

Graduates with all degree types experience a decrease in debt-to-income ratio after graduation, but in some professions, those ratios come down faster than in others.

Medical professionals have the highest debt-to-income ratio immediately after graduation. This is likely because MDs begin their careers in residencies, which are essentially low-paid apprenticeships lasting 3 to 6 years. Once residents become practicing physicians, they can expect comfortable six-figure salaries and subsequently make fast progress on their debt. 

In contrast, MBAs have the flattest trajectories toward debt freedom. Though they have the lowest debt-to-income ratio across the entire post-graduation time period we considered, they  make the least progress between years 1 and 11 after graduation.

The chart below zooms in on the last data point in our chart, ranking debt-to-income ratio for midcareer professionals 11 years removed from graduation.

Data source: Earnest

Even in the middle of their careers, graduates with Masters of Arts degrees earn relatively little compared to their debt. Costly law and medical degrees hold debt-to-income ratios near 1 for lawyers and doctors, as well. 

Professionals with degrees in business, science, or engineering fare comparatively better, making comfortably more than the cost of their degree in one midcareer year.

Of course, all degrees aren’t created equal. Stanford’s Graduate School of Business, for example, grants its MBA recipients access to a higher-powered network than does the average public college. This advantage could translate to a real difference in earnings and, in turn, debt-to-income trajectory. 

To see the difference grad school reputation can make, we broke our sample down based on whether a graduate’s degree program landed in the top 100 for their field, then charted debt-to-income trajectory over 11 years post-graduation.

Data source: Earnest

School reputation matters. Across a variety of disciplines, professionals who graduate from higher-ranked schools begin their careers with less debt relative to their income. And for the most part, this trend is still apparent a decade after graduation. 

There’s one exception: medical professionals have more or less the same debt-to-income trajectory regardless of their school’s reputation. With respect to student debt, all medical degrees are created equal.

***

So if you’re seeking an affordable graduate degree that will boost your earning power, what should you do?

The “rich doctor” stereotype makes medicine look appealing, but it doesn’t do justice to the burden of financing an MD. Medical professionals take on an average debt near $200,000 to finance their degrees, and early in their careers, their income does little to offset their debt. Attending a more prestigious school doesn’t mitigate their high debt-to-income ratio; graduates of top schools pay just as much relative to their salary as grads from lower-ranked programs.

In contrast, the average MBA makes six figures after spending one or two years in graduate school. They typically take on around $90,000 in debt, but consistently enjoy a low debt-to-income ratio. This is doubly true for graduates of top-100 business programs, who enjoy the high income that comes with access to a high-powered alumni network.

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Urban Cohort's picture

No college debt here...sucks to suck I guess

Creepy_Azz_Crackaah's picture

Womyn's Studies is the way to gp. Big Gubmint job with BIG pay and HUGE (unpayable) pension. And you get to screw the people who pay you. The larger the screwing, the higher the promotion.

Laowei Gweilo's picture

data is skewed probably...

a lot of MBAs already have significant work experience and therefore re-enter job market at far above entry-level salary

most medical grads are enterting job market at entry-level

 

....i dunno, just saying that seems relevant -- more accurate 'average income' would probably be their income between ages 25-40 to better account for the low wages MBAs make pre-grad studies than are more akine to the post-grad wages of medgrad students (at a simiar age in life)... i dunno just throwing that out there lol

Joe Sichs Pach's picture

It's not the degree but who you know.
Real world life experience trumps college in damn near every case.

DeadFred's picture

What's wrong with these people? They make 100K+ and eleven years out they still have most of their debt unpaid? And MBAs are the worst of them? Just forgo the fancy car and the toys for a few years and pay it off.

Delving Eye's picture

Like the world needs more MBAs. Or lawyers.

LyLo's picture

My husband back a few years ago briefly worked in an office full of business degree yuppies (apparently it now takes a college degree to check emails; they were all barely functional retards, btw). 

You're "it's so easy" is actually literally why it didn't work.  My husband and I are extremely frugal people, and it's noticeable.  If one doesn't know us, one would think we're poor.  He spent most of the social time there getting hassled about how old his car was or his out of style jackets, when they weren't excoriating him for eating sugar or smoking or not buying a gym membership.  (He was actually hired by one of the European higher-ups that was never at the office: the guy was a metal head from the projects covered in tattoos, but brilliant.  I'm pretty sure if he wasn't the boss, the Americans would have railroaded him too.)  He was let go as he just "didn't fit in with company culture."

That's the thing though: this IS their culture.  I have no sympathy for these people anymore, as I personally watched them do it to themselves all to impress their peers.  I don't understand how they think they're any better than the ghetto idiot with an Escalade he can't afford, as that's all they are.

On that note, I'm all for these people to get a debt jubilee...  Right after I get handed $100k, no strings attached.  It's only fucking fair.

Blankenstein's picture

+1000

"On that note, I'm all for these people to get a debt jubilee...  Right after I get handed $100k, no strings attached.  It's only fucking fair."

 

AGuy's picture

"They make 100K+ and eleven years out they still have most of their debt unpaid? "

To get the +100K job, one usually must work in a very expensive area. Much of the income goes to pay for rent, food, commuting, and taxes. I recall reading that a person making $120K in the NYC area is not much better off than some one making $30K in a rural area. For instance a small one bedroom apartment in the NYC area is about $3K/month or $36K a year. Taxes are also crushing. For $120K salary, there is a 28% in Fed Taxes, 7.65% in FICA, 7% to 9% in State income taxes & perhaps a local income tax (city/county) that be between 0% and 3.8%. If we add all of the taxes up, the minimum is about 42% and the max is about 48%.

gn28's picture

200k debt for a medical degree where you kill people with chemicals that have never been properly tested or proven to work and you wait till you're 40 to reak even vs zero debt from day 1, get a few top industry certifications with online exams and courses for 10k, work those 4-6 years to build up some experience + cash and spend 10k on a distance learning bachelors degree that allows you to save all your time, you can have a family because you're not under an insane amount of debt and renting a place allows you to move to where the better jobs are.... it should be a no brainer... WAKE UP!

 

these frockers are making you waste your youth and build up insane amounts of debts.. fake digital debt (you loan someone an apple and return an apple... you loan a digital transfer you should be able to repay it with a digital transfer... just like a text message, because it is no different).. WAKE UP !

erkme73's picture

Or, you can do what wife and I did.  I worked to pay for her med school as we went along.   By the time she graduated, we'd amassed only $20k in debt - which was paid off in the first year.   Her last W2 showed $350k as an ER doctor.   If you have persistence, determination, and dollar smarts, the profession is certainly rewarding.  

I am now 'retired' living off of her paycheck (since 2010).  Her hourly rate allows her to work 10 shifts per month, and take the rest of the month off.

She works with doctors who are well into their 10th year of practice, who are more in debt now than when they graduated with their full student debt.   There are all kinds of fiscally challenged people in every profession.  Unfortunately, the with each graduating class of med students, the selfie-obscessed, entitled snowflakes interns and residents are getting perpetually more financially illiterate.

Delving Eye's picture

I know several ER doctors in Metro NYC. Not one of them makes close to $350k. More like $150-200k and that's working way more than 10 shifts per month. Where does your wife practice? Mar-a-Lago?

erkme73's picture

Unless your ED MD's are residents or fellows, there is something very wrong with their pay rate.

http://www1.salary.com/NY/New-York/ER-Doctor-Salary.html

How much does a Physician - Emergency Room in New York, NY make? The median annual Physician - Emergency Room salary in New York, NY is $309,634, as of March 31, 2017, with a range usually between $263,887-$362,680 not including bonus and benefit information and other factors that impact base pay. However, the salary for someone with the title Physician - Emergency Room may vary depending on a number of factors including industry, company size, location, years of experience and level of education. Our team of Certified Compensation Professionals has analyzed survey data collected from thousands of HR departments at companies of all sizes and industries to present this range of annual salaries for people with the job title Physician - Emergency Room in New York, NY.

To put that into perspective, my wife's pay for last year was inclusive of all bonuses, profit sharing, and incentive pay.  Working at a level 1 trauma center generally does not pay as well as smaller hospitals, since the demand to work at a L1 TC is high - and those that work there do so for the experince and marketability (looks great on a CV).

 

BandGap's picture

If you get a PhD in a science (Chemistry, Biology, Physics, etc.) the universities pay you, and they waive tuition.

Cost me nothing to get a PhD in Chemistry, I actually had enough for a savings account.

Didn't get a graduate degree for money.

American Psycho's picture

yep. just finished my dotoral program in chemistry. if you are smart you can finish debt free unlike other phd programs where you are paid next to nothing (probably says something about the field).

divingengineer's picture

Engineer makes half of what a lawyer does.
Tells you a lot about our "economy".

Creepy_Azz_Crackaah's picture

Shakespeare has a great line about lawyers .

Blue Balls's picture

If I could do it again I would join a biker gang and sell drugs.

College was a complete waste of time and money. 

bpj's picture

I know three people that dealt coke for about 20 months in the 80s, all are fat cats now. 

 

Vilfredo Pareto's picture

Lol.  I know a guy who paid all his expenses at a private school selling weed.  He was a good businessman.   Prices were high but product always available, especially after Friday afternoon happy hour when you were at your weakest moment lol.  "My kingdom for a baggie."

 

He went into real estate afterwards.  I should look him up.  

 

Selling only to active students at a small private university was the perfect business model.  Everyone could verify everyone else.   No way to slip in a narcotics officer.

sinbad2's picture

Exactly, lawyers do an arts degree, most of them can't count past 10 unless they take their shoes off.

And that is why the US has no scientists or engineers anymore.

It's also why Russia's weapons are so much more advanced than American weapons. The Russians value education and engineers are highly respected.

Concentrating on advertising lawyers and movies, is what has done America in.

pitz's picture

America has plenty of scientists and engineers.  But 2/3rds of them aren't allowed to work in their professions.  The employers hell-bent on hiring foreign nationals and under-staffing science and engineering functions in their business.  Allowing people like accountants and lawyers to make decisions that really should be made by scientists. 

 

Trump is right, other nations are basically laughing at America for allowing such an appalling state of affairs to exist. 

BandGap's picture

Depends on the engineering field.

AGuy's picture

"Engineer makes half of what a lawyer does."

Lawyers rarely make more than an engineer. The majority of lawyers end up doing low level document review. Because of automation in doc review, a lot of lawyers got laid off. Before automation was available, corporate law firms had floors of lawyers reviewing documents 8+ hours a day making about $24/hr (about $48K per year). FWIW: most of the manual document review has shifted to India, where the Doc review lawyers make less then $10/hr.

khnum's picture

If I had my time again id do a trade like carpentry or plumbing much less assholes and sociopaths to deal with

LetThemEatRand's picture

Real #1.  Being born rich, degree from Ivy League in whatever.

HRClinton's picture

A Masters of Bulls_hit Administration is very valuable, with the right Rollodex.

You pay for the Networking, not the education.  Same goes for all Ivy League colleges. 

Obvious, really. What an obtuse lot some of you are.

Delving Eye's picture

Are you calling me obtuse? Okay. Just don't call me Shirley.

sinbad2's picture

That probably applies in the US, but in most countries, they are more interested in your academic performance, than your ability to perform blow jobs.

Killdo's picture

I know a few of those - they mostly feel guilty about their un-earned degrees (they get them because their grandparents were US Ambasadors or they donated lots of $$ to Ivy League colleges). I know a few who overdosed and died young - famous parents, yet no happiness and an ugly death in their 20s

 

Vilfredo Pareto's picture

A lot of money in plumbing, especially for a reasonably intelligent guy with some business sense who could have gone to college.

BandGap's picture

We need residential electricians more than plumbers. But both are in high demand.

Lumberjack's picture

I'd run for congress. Those fuckers get elected then end up fabulously wealthy a couple of years in on simple gov salary!

It's such a great deal that even doctors and lawyers quit their careers to do it! And best of all, it's basically a part time job with crazy benefits and you don't even have to show up to work!

sinbad2's picture

Well if your not to bright can lie convincingly and keep a plastic smile on your face, politics can be very rewarding financially in a country like the USA.

Killdo's picture

especially if you are a psychopath so you cannot love anyone and all you have in life are lies and games of power and $$

Thom Paine's picture

MBAs are total bullshit. People already positioned in the arse-sucking hierarchy get them to tick the box.

Killdo's picture

all they learn is how to talk so they appear to be knowledgable (without really knowing anything or having any meaningful experience)

Tugg McFancy's picture

The one you don't study.

bpj's picture

Go to Orange County Ca. Become a court baliff and make six digits. Retire and draw 90% of your salary starting at 50 years old.

IronShield's picture

Good for those in the past but not so good when pension bomb explodes.  Then they will try to tax their neighbors to cover their pay, only to end up on pikes or dangling from light posts.  But you're right until you're not; so far so good, however.

cpnscarlet's picture

This is a technological society. Engineers rule. It has always been the best career - the pay to debt and pay to frustration ratios are the best. Engineers are only dissed by technicians and machinists - it's part of the "guild" mentality. Everyone second-guesses doctors and hate lawyers. And an engineer who builds bridges, airplanes, or spacecraft is damn-near a demigod in the eyes of the public. And we are seen as putting efficiency first (another one up on lawyers and doctors). Do I have to keep going?

Stevens Tech Grad and AFIT Grad - AAS, BEME, MSAE

GooseShtepping Moron's picture

If you really want to gild the lily, get an engineering degree and an MBA. Then you'll be one of those highly sought after project manager types and you can basically write your own ticket.

pitz's picture

Good in theory, but in reality, engineers face high unemployment, and MBA's don't typically help that situation very much as they'll be considered overqualified.  Most engineering types can do a MBA in their sleep anyways. 

AGuy's picture

"Good in theory, but in reality, engineers face high unemployment, and MBA's don't typically help that situation very much as they'll be considered overqualified. Most engineering types can do a MBA in their sleep anyways. "

That depends. Engineers usually have the ability to be more entrepreneurship career, and don't necessary have to be locked into a rigid career. An independant minded engineer probably has the best options for career/salary advancement. Its much easier for an engineer to develop a new product, reduce process costs, etc than for most other career professions. Rarely do Lawyers, Accounts, MBAs have techinical skills to solve technical problems.

FWIW: MBAs are a dime a dozen as there was a tidal wave of people seeking there MBA over the past 20 years. Middle Management is being widdled away as companies outsource labor and down size labor force as IT automation and cloud services replace workers.

I think the only group of workers that have the ability for wage growth are people with technical skills. But this isn't limited to engineers, but also includes maintanence\construction type workers (ie the electricians/plumbers/plant technicians, etc). I think Medical service jobs will have some wage growth until the heathcare system completely breaks which could happen at any time.

Law: dead unless you have friends/contacts that can land you a corporate role.
Medical: Dying. Will continue to grow until it breaks and when it breaks it will like being a real estate agent or Mortgage officer after the 2008 meltdown
Accounting: Mixed Accounts that handle taxes will continue to do well, but other areas (procurement, invocing, etc) are doomed by IT automation.
IT: Mixed: Programming/Automation will do well. HelpDesk/Desktop/Administration/DBAs/etc are all doomed as cloud and automation consume their jobs. Jobs in Desktop support/helpdesk will revert to low pay jobs.
Sales: Dying, being replaced by Web/Cloud based sales systems. People are using online web portals to make purchasing designed and no longer need a salesman to get the information they need.
Business management: Dying. Middle Managers are on the way out as companies reduce workers being replaced by IT automation/cloud systems. At best some middle managers will be retained to administrate Cloud, IT Automation systems.
HR: Dying, Companies are hiring fewer workers, and when companies need to file a position, the are turning to cloud based options to find candidates. Other roles that are handled by HR staff (Administration, Benefits, Compliance, etc) are being transistion to automated cloud based services

Thom Paine's picture

They dont have degrees in human trafficking?

IronShield's picture

Without a doubt, Engineering Degrees are far more competetive and offer more opportunity than any other program.  Try taking any other degree and apply for an Engineering program; you're pretty much starting from scratch.  Now take that Engineering Degree and venture into other areas; no, you won't be starting from scratch and you will likely be way ahead of your 'peers'.

However, as I was told during indoctrination, if you really want to make money, then you'd better be a tradesman: plumber, electrician, etc...

pitz's picture

Good in theory, but in reality, once most employers see that an applicant is an engineer, for a non-engineering position, the application goes into the round file.  The perception being that there's lots of engineering jobs around (which there most certainly is not!) and anyone seeking to leave engineering must be somehow defective.

AGuy's picture

"Good in theory, but in reality, once most employers see that an applicant is an engineer, for a non-engineering position, the application goes into the round file."

Companies hire sales engineers when customers need a technical resource to spec out a solution. They also find roles in legal (ie Patents, Spec liability risks), project budgeting\cost analysis, etc.

If a Engineer applies for a HR, Busines Admin, or some other job that has no technical skill set requirements, than the application ends up in the waste bin.

That said, I think "IronShield" was referring the the mobility of an engineer to become a business owner, become self-employeed/entrepreneur or jump into management role, not to become administrative assistant or some low skill job.