Nearly half of master's degrees have a negative financial return, according to new research by the Foundation for Research on Equal Opportunity, an economic research organization.
The study indicates that many graduate degree programs do not increase lifetime earnings enough to be worth it.
While 23% of bachelor’s degree programs yield a negative financial return on investment, 43% of two-year degrees and master’s degrees fail to deliver a return, according to the study by Preston Cooper, a senior fellow at FREOPP.
Cooper assessed the return on investment for 53,000 degree and certificate programs to determine whether a student’s lifetime earnings outweigh program costs and the risk of not completing their degree.
His findings show that a student’s field of study was the overriding indicator of return on investment at the undergraduate and graduate level.
Engineering, computer science and nursing bachelor’s degrees have high financial returns on investment, while programs in education, fine arts, psychology and English usually have low returns.
Graduate degrees in medicine and law tend to have strong payoffs. But a large share of master’s programs, including the MBA, frequently have low payoffs, according to Cooper.
Although workers with master’s degrees earn 16% more than those with only bachelor’s degrees, Cooper says the figure fails to account for students who had “higher preexisting earnings potential.”
“MBA students typically have high preexisting earnings potential, having often chosen high-ROI undergraduate majors such as finance and economics,” Cooper writes. “So the MBA adds little value on top of that.”
The study indicates that high starting salaries are predictors of high returns on investment. Degrees with starting salaries of $57,000 a year or more deliver the best lifetime returns.
But the return on investment of a degree can vary depending on the educational institution.
“Students interested in fields with low average pay can still find some schools that do well transforming those fields of study into high-paying careers,” Cooper writes.
The quality of an institution also matters, said William Tierney, professor emeritus of higher education at the University of Southern California.
“An MBA from Harvard is a likely ticket to a good job,” Tierney told VOA. “An MBA from the University of Phoenix, less so.”
But students pursue graduate programs for more than just financial reasons.
“Some degrees open up careers in fields that students may enjoy, such as in the performing arts,” Robert Kelchen, head of educational leadership at the University of Tennessee, Knoxville, told VOA.
“Others can help gain access to social networks or simply help students learn about a topic that is of interest,” Kelchen added.
Cooper told VOA that it might make sense for students in degree programs with low returns on investment to switch majors if they can still graduate on time.
He found the worst outcome for a student’s return on investment is dropping out of college “because they must pay for one or more years’ tuition and spend time out of the labor force.”
Lawmakers who fund higher education have a responsibility in ensuring “higher education delivers on its promise of economic mobility,” Cooper said.
Nearly a third of federal funding, including Pell grants and student loans, pays for higher education programs that fail to provide students with a return on investment, according to the study.
Cooper’s view is that “some schools should shut down low-ROI programs and reallocate institutional resources to programs with a better return.”
“There's definitely this narrative out there that higher education is always worth it, and you should always try to get that extra degree because it will increase your earnings,” he told VOA. “That's reinforced by colleges who make lofty promises regarding their graduate degree programs' outcomes, which all too often fall short.”
