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With a possible recession looming, going back to school is often considered a good way to boost your career prospects and earnings potential.But inflation and higher interest rates are complicating the usual return on the investment equation.

An economic downturn usually sparks a renewed interest in picking up new skills at school.

Historically, enrollment in graduate school picks up amid recession as workers take the time to “skill up” or pivot to another industry with better career prospects or pay.

“When the economy goes down, the interest in graduate schools goes up,” said Eric Greenberg, president of Greenberg Educational Group, a New York City-based consulting firm. “The education umbrella is kind of a hedge.”

But this current economic cycle is unlike any other.

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A wave of layoff announcements has raised concerns that the job market is finally cooling as recession fears take hold. Yet government data shows the U.S. labor market is still strong, with a record low unemployment rate of 3.5%.

Still, a recession may be looming, some experts say, which raises the question of whether going back to school makes more sense than trying to weather a potential period of unemployment.

But there are many factors, including cost and a larger debt burden, to consider that could erode the financial return on investment for a graduate education, Greenberg said. “There are subtle nuances in play.”

Here are some of those key considerations:

This is not your average economic cycle

History is often the best guide, but in this case the usual patterns may not apply. 

In 2020, nationwide enrollment in graduate school initially sank but then quickly rebounded the following year, only to slump again in the fall of 2022. This year’s 1% slide reversed the previous year’s 2.7% gain, according to a report by the National Student Clearinghouse Research Center based on data from colleges. 

In 2023, enrollment rates could likely pick up once again, in part because this time, a recession isn’t likely to be as short-lived as it was during the pandemic, explained Doug Shapiro, executive director of the National Student Clearinghouse Research Center.

There’s usually a lag time of up to a year after the economy slows before workers return to school for retraining, he said.

“Without that expectation of a quick rebound, that could lead to the increased enrollment response that we’re used to seeing,” Shapiro said.

There’s better access to advanced degrees

Susan Ragan | Bloomberg | Getty Images

Students walk past Stanford University’s Graduate School of Business in Stanford, California.

With more programs available remotely, getting an advanced degree is also more manageable than it was before the pandemic.

Now tech workers, for example, who have been laid off can boost their resumes with additional graduate qualifications and certificates that they find online, Shapiro said.

To further expand access, some schools, including Northwestern’s Kellogg School of Management, MIT’s Sloan School of Management, the Tuck School of Business at Dartmouth, Duke’s Fuqua School of Business and UC Berkeley’s Haas School of Business, have waived testing requirements, fees or extended application deadlines for recently laid-off employees.

“There’s an influx of exceptionally talented individuals in the labor market right now who may have been considering business school someday down the road, and the road just took an unexpected sharp turn on them,” Lawrence Mur’ray, Dartmouth’s executive director of admissions and financial aid, said in a statement.

The potential return on investment

Going back to school typically pays. Workers with master’s, professional or doctoral degrees have the highest earnings overall and experience lower levels of unemployment, according to the U.S. Bureau of Labor Statistics.

But in addition to the economic payoff, there is also a higher cost. In less than two decades, the median debt among borrowers who completed master’s degrees has nearly doubled as the cost of a graduate degree, particularly in the form of student debt, spiked, according to the Urban Institute’s Center on Education Data and Policy.

“The financing aspect profoundly influences the decision-making,” said Allen Koh, CEO of Cardinal Education, a California-based tutoring, test-prep and college-admissions firm.

The interest rate on federal student loans taken out for the 2022-23 academic year rose to 4.99%, up from 3.73% last year and 2.75% in 2020-21. For graduate students, the rate jumped to 6.54%, from 5.28% last year and any loans disbursed after July 1 will likely be even higher.

At the same time, inflation has also caused the cost of living to soar, making rent and daily expenses even less affordable on a student’s budget.

To that end, some master’s programs have particularly high debt-to-earnings ratios, such as social work, counseling, music and fine arts, the institute also found.

The growing availability of tuition benefits  

A growing number of companies may be willing to pick up a portion of the tab to ease the burden of affording education.

Coming out of the pandemic, education benefits played a big part in the competition for workers, and as a result more companies are now offering opportunities to develop new skills, according to the Society for Human Resource Management’s recent employee benefits survey

Almost half, or 48%, of employers said they offer undergraduate- or graduate-tuition assistance as a benefit, according to the survey.

Of course, employers paying for their workers to get a degree is not new. For decades, businesses have picked up the tab for white-collar workers’ graduate studies and MBAs.

However, many companies are now extending this benefit to hourly and part-time employees as well as heavily promoting it more so than they have in the past.

Even if there is a strong desire to go back to school, less than half of employees said they have been able to pursue educational goals in the last several years, mostly due to the time commitment and financial obstacles, according to research by Bright Horizons.

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