Follow Comments Following Comments Unfollow Comments

This is one half of a two-part story on whether graduate school is worth it. Check out the companion piece, “How This Lawyer Ended Up With $350,000 In Debt And Near Poverty-Level Income .”

People go to graduate school for various reasons. For some professions, like medicine, law and academia, a higher degree is required. For others, the question of whether or not to go is not so cut and dried. Factors like knowledge, skills and prestige come into play, as well as personal reasons like wanting to switch into a new field.

But the other big impetus is to earn more money. The problem, as demonstrated by the lawyer earning $20,000 a year and trying to pay more than $300,000 in student loan debt. is that the cost of those extra letters these days calls into question whether they actually bring a return on investment. We’ll look at how you can evaluate a grad school program’s potential ROI.

1. Find out cost and job prospects.

As noted by my colleagues John Wasik and Lucie Lapovsky. the advertised price for college can be quite different from what you actually pay, since colleges price tuition the way airlines do. Not so with graduate school. “The cost proposition for graduate school is significantly different. Financial aid for graduate school is predominantly debt,” says Mark Kantrowitz, senior vice president and publisher of Edvisors. publishers of more than a dozen websites about planning and paying for college.

Yale Law School courtyard (Step/Flickr)

To help with costs, some students could get teaching assistantships, research assistantships or even employer tuition assistance. in which your current employer will pay for your graduate degree in exchange for some number of years of continued work with them (this is especially common with MBAs).

Use the net price calculator on the school’s or program’s website to find out how much your graduate degree might cost, and call the school to find out more details, such as the exact amount of a teaching or research assistantship or the likelihood of getting one.

Also, look into the job prospects for people with this degree. Is it an obscure field where a PhD will relegate you to trying to get one of the handful of professorships in that field in the country? Is it a law degree from a mid-tier school, at a time when recent law grads of all stripes have been having a hard time finding jobs? (In June, the National Association for Law Placement found that the employment rate for recent grads fell for the sixth straight year.) Then it may not be the best idea.

2. Conservatively project your first-year salary post-grad school.

While no crystal ball will give you an exact figure, try to figure out how much you’ll earn your first year out by checking out Payscale.com. Salary.com and Glassdoor.com. to see what people with your experience make with the job title you would expect to get upon graduation. Go with a conservative estimate, at the 10 th or 25 th percentile for your calculations. “Better to be pessimistic so that even in a worst-case scenario, your decision is going to be financially beneficial,” says Kantrowitz.

Don’t let a rotten economy spoil your goals. Use the career and money advice in The Millennial Game Plan to get and stay ahead for good.

3. Make the first cut: undergraduate debt + grad school debt – first year’s salary.

Another good rule of thumb: “You should borrow no more than you can repay in 10 years or than you can repay before you retire,” says Kantrowitz. If this particular degree and field doesn’t pass those guidelines, that doesn’t necessarily mean you should skip grad school. Maybe you look into a different type of degree that will increase your earnings enough to justify the cost, or you find another way to fund your tuition so it’s not debt.

4. If your debt won’t be higher than your first-year salary, then c alculate your lifetime earnings if you go and if you don’t go to graduate school.

Take your current salary and project, with whatever your annual raise currently is, how much you’ll earn every year from now until you retire. Add the numbers up. You can easily do this in a spreadsheet, and for illustration purposes, I’ve created one with formulas that you can copy for your own use. For instance, if you are 25 and you’re currently earning $50,000 a year, assuming 2% raises every year until you retire at 65, you’ll make just over $3 million in lifetime earnings. (This doesn’t take into account any unforeseen circumstances like periods of unemployment or bumps in salary you get from moving to a new company or being promoted to a new position.)