What does graduate school cost you?

I want to talk today about opportunity costs. This phrase might sound familiar if you ever took an economics course.

Put plainly, the opportunity cost represents the potential benefits of action B you miss out on when you choose action A. This gets discussed at length in personal finance circles: those $100 shoes could have gone towards a debt repayment which is still accruing interest, meaning your $100 shoes may ultimately cost you $115.

I want to talk about the opportunity cost to your career. Going to graduate school is a choice (you are CHOOSING to go, right? You aren't going because you like school and it's 'something to do'?). Every choice has obvious or hidden opportunity costs.

Consider what you could get out of the year following graduation. If you deffer a PhD for a year, you could take on a job or short-term contract. You will almost assuredly make more money in this job than you would with a grad student stipend. Say you are able to save up $2,000 from this one year of working, you throw that money into the stock market, and you don't touch it for the next 5 years as you pursue a PhD. At the end of your PhD, if your money has grown at about 6%, you'd have $2,676.45. That's $2.6k you wouldn't have otherwise!

BUT, what was the opportunity cost of taking a year off of school? Perhaps your math skills would get rusty and you'd do worse on the GRE, missing out on a merit-based scholarship. Or you want to have children after finishing school, and those plans are now pushed back a year. Maybe you're already in a cutting-edge field, and taking a year off would ruin your chances at being competitive in that research space.

Let's say that in our scenario your PhD qualified you for a job making $50,000 more a year than the job you'd have without a PhD! $2.6k looks small in comparison now. IF going straight to graduate school was the momentum you needed to finish, or you work in a new field like gene editing where a single year off could leave you far behind your peers on the job market, then an economist may say you made the correct choice based on the known opportunity costs.

(An economist might also crunch the numbers on if you never went to grad school in the first place, choosing to work and build your savings, earning promotions, putting equity into a home, and so on. If you're purely money-driven, you've probably done these calculations already.)

We aren't machines, of course, and money isn't the only motivator. It's important to consider all aspects of your life when making the monuments decision to go to graduate school.

I'm not advocating for one choice over the other. I'm advocating for taking a good, long look at your life goals and take your best guess at what the opportunity costs are for your career choices.

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Here's a list of considerations to get you started:

• When do I want to have children?
• What's my plan for paying back student loans?
• Will I need to care for an elderly parent/relative in the next 5-10 years?
• Am I prepared to be long-distance with my partner?
• How does this fit with my financial goals? (ex: want to FIRE by 35)
• Would taking a job now help me stay connected with an industry I want to re-join after graduate school?
• Do I need to forge connections with my target industry now?
• Do I want to spend more time with a dying relative?
• Do I need a job with a 401k to start saving now, or can I work retirement savings into my financial plans on a graduate stipend?
• Do I need to save more money for graduate school's up-front costs (instead of taking out another student loan). Costs can include computers, parking passes, down-payments/deposits on housing, relocation costs, student fees, and health insurance
• Do I need to take a year in a low-stress job to figure out personal matters, including mental health, physical health, relationships, addictions, etc?
• Do I have a dream that's most doable in my 20s (ex: hike the Appalachian trail, wait tables in LA trying to catch my 'big break', start a business, live in a commune)