When I was growing up, there was never a doubt that I would go to college. My mother made that a priority. I also knew pretty much from junior high on that I would receive an advanced degree. I wanted a really good job. That was how I thought you got one. Over the past few years, I’ve begun to wonder if an advanced degree or any degree at all is necessary for financial success. We’ll look at myself and my husband as examples.
Health Professional Degree
My undergraduate degree was in biology. Luckily, I received scholarships to cover tuition and living expenses. I came out with no debt, but a biology degree doesn’t really get you very far. Unless I wanted to teach, I can’t think of many other things where this degree earns a decent salary. Even to go into university teaching or research, you’d have to get at least a master’s degree or Ph.D.
Medical, dental, optometry, chiropractic, and pharmacy schools are all four year programs. As with any degree, costs vary according to things like state vs private schools or in state vs out of state tuition. Unlike DC at Young Adult Money’s post about MBA’s you don’t have to go to Harvard to get a good job with a medical professional degree. I rarely get asked where I went to school, and even when I do, it’s usually because I have a funny accent that makes people wonder where I came from.
I graduated from optometry school owing $60,000 in student loans. Most graduates have around $100,000 in debt, more if you went to an expensive school or had undergraduate loans. The average starting salary for an optometrist is around $80,000. The mean income is around $95,000. I’ve know optometrists who’ve made a bit less and a lot more, depending on the area and how hard they worked.
My original loan term was for ten years, and the payment was $600 a month. I also had a HPSL that was about $100 a month for five years. $700 a month was certainly doable, but I consolidated and went crazy with spending I still have loans to this day. If I’d been smart, I could have doubled or even tripled payments and been done in a few years. A payment of $1000 or even $1500 per month is certainly reasonable for this income if you don’t feel the need to buy lots of other things with your new salary.
My husband teaches fifth grade. He did not go to college right out of high school. In fact, he barely graduated. His family did not make school a priority and expected that he would get a job after graduation. He tried one semester at a huge university in downtown Denver, but ended up with failing grades and had to drop out. He then joined the military. After that, he worked a variety of jobs, topping out at around $30,000 as a pharmacy tech at a large hospital. He then moved to the boonies, near where we are now, and couldn’t get any sort of a job that matched his former salary.
He worked as a ski instructor, did landscaping, and sold shoes at JC Penny, but was barely getting by. He decided to go back to school. It took a year at community college to erase his first attempt at higher education, then he enrolled in a four year university and got a bachelor’s degree in history with a teaching certificate. With his new found motivation, he made the Dean’s list every semester. After his first year of teaching, the No Child Left Behind Act became reality, and he decided to obtain his master’s degree when a weekend program opened up locally. After that first master’s, his salary was right around $30,000, the same as he was making without a degree in Denver, but he now had $35,000 in student loans. His payment was around $400 per month, still doable even on a teacher’s salary.
What if We Hadn’t Gotten Degrees?
What if I’d gotten a nursing degree with my four free years of college instead of going to optometry school? Let’s say I got a job with a starting salary of $50,000. For the five years it took to get through optometry school and residency, I would have made an additional $250,000 as a nurse. If you add the loan, getting the nursing degree would have had a $310,000 starting advantage. Over a 20 year career, however, optometry will have paid around $2 million in salary vs about $1 million for nursing. While I did not do this, let’s assume that I had invested 20% of my income and that my salary never changed. At 8% ROI, the nurse would have $2.2 milllion invested, while the optometrist would have $3.4 million. Add to the fact that I would hate to be a nurse, I think my degree was worth the money.
My husband could have continued working as a pharmacy tech, and maybe made a bit more in salary, but he was pretty topped out. (Also, he would have never met me!) His teaching salary, with a master’s degree was about the same. Right now, he is completing another master’s degree in administration. It will cost around $10,000. If he gets the position he is hoping for, it should increase his salary to around $50,000, which would easily pay for the second master’s in one year. This was the only way he could see to substantially increase his income while remaining in the same school district. If he doesn’t get a higher paying position, he has a very expensive teaching job. However, he does receive free health insurance that is amazing. He gets over 3 months off per year, and has a pension after about 22 years of service. He also loves what he does.
Just for kicks, let’s assume he never went back to school and made $30,000 from ages 25-60 and invested 20% of his salary at an 8% return. He would still have over $1 million in investments.
What is the Point?
My point kind of changed while writing this post. A degree is worth it if it allows you to have a job you love or at least don’t hate, and if your salary allows you to make the payments. Making Sense of Cents also agrees with my conclusion after getting her own advanced degree. However, getting a $150,000 bachelors from a prestigious university doesn’t do much good if you can’t find a job or end up making $30,000 a year.
That is not to say that you shouldn’t pursue what you love doing, but it is important to be realistic in the process. After all, college is a massive investment. Take a look at some statistics related to the degree you want to pursue and compare and contrast that with the average price of tuition at the school you wish to attend. Those who graduate with business degrees, for example, experience lower unemployment and have higher salaries on average than those who graduate with degrees in the arts. So if it’s an MBA you’re after, you can worry a little less about paying off your student loan debt.
It seems the take home point to me is isn’t about degrees. Whatever your job or salary, you can retire pretty well off if you continuously stay employed and contribute around 20% (or 16.6% according to My Money Design) toward good investments. Perhaps this is what they should be teaching in school.
Do you think advanced degrees are worth the money?