I recently had a conversation with an MPS applicant who was attempting to calculate the financial benefit she might realize from attending the MPS program. In other words, she wanted to know how much better off she would be should she join the MPS program rather than enter the workforce straight out of college.
Essentially this student was grappling with Return on Investment, which is a measure used to evaluate the efficiency of an investment, or to compare the efficiency of a number of different investments. ROI measures the return on an investment relative to its cost. To calculate ROI, the benefit (or return) of an investment is divided by its cost, and the result is expressed as a percentage or a ratio.
Ratios are good for comparing different investment opportunities, but a student considering graduate studies really needs to know the benefit of investing in a graduate education versus entering the workforce and not investing in anything – and she’d probably like to know the dollar figure rather than a ratio.
This is a topic I cover in general terms during the information sessions I deliver on campuses across the country. I show Powerpoint slides detailing average salaries for the various degree types (B.S., M.S., MPS, and Ph.D.), and the MPS degree comes out looking very good. The potential boost in salary resulting from the MPS degree is real and significant. When coupled with the short duration of the program, the MPS program is among the more efficient ways to increase employability and boost lifetime earnings.
While I know this to be true, I have never worked up the numbers to determine just how good a deal the program is. This seemed like a good time to do just that.
In order to create a model, some assumptions need to be made. In my presentations, I assume that the student is graduating with a B.S. in Food Science. Without graduate school, she will earn approximately $44,000 annually (IFT, 2015). She will enter the workforce immediately after graduation and will work her entire career without pursuing a graduate degree.
Should she earn an MPS degree, I’ll assume she’ll earn $70,000 annually (2015 average). I’ll also assume that the salaries in both scenarios will remain constant over time. I won’t delve into income tax rates, inflation, loan interest rates, or other intangibles. Instead, I’ll take a crude but useful look at the financial benefit of attending the MPS program. And I must provide the caveat that there is no guarantee that a given MPS student will obtain employment in her field at a particular salary.
- Salary without graduate school: $44,000 (IFT, 2015)
- Salary with MPS degree: $70,000 (2015 average)
- MPS Program Duration: 1 year
- Pay during MPS internship: $25/hr x 400 hours = $10,000 (estimate)
- Tuition and fees: $24,000 (estimate)
- Living expenses: $1,200/month x 9 months = $10,800 (estimate)
- Lost salary: $44,000 (no employment during program)
- Total Costs = $78,800
- Pay during internship: $25/hr x 400 hours = $10,000 (estimate)
- Salary differential: $26,000/year ($70,000 – $44,000)
Years to recoup investment = $78,800 (cost) – $10,000 (internship) = $68,800 net cost / $26,000 salary difference = 2.646 years
10-year benefit = 7.354 years x $26,000 difference = $191,200 benefit (assumes break even after 2.646 years)
20-year benefit = 17.354 years x $26,000 difference = $451,204 benefit (assumes break even after 2.646 years)
From the numbers, we see that it would take about two and a half years for the student to recover the cost of earning an MPS degree, and after that, she would be ahead by approximately $26,000/year. This is an amazingly quick payback, due in equal parts to the salary bump, the program’s paid internship, and its short duration. After 20 years, our student would be nearly a half million dollars ahead.
But these numbers likely understate the benefits of an MPS degree. The advantages associated with earning any graduate degree don’t end with beginning salary. The difference in salary between those with graduate degrees and those without increases over time. Employees with graduate degrees tend to rise higher and faster within an organization. What’s more, unemployment rates for those with graduate degrees is 4-6 percent lower than it is for those with undergraduate degrees only, or essentially half the rate in the current economy.
I encourage you to think of a graduate degree as an investment in your future. Your job is to assess the attractiveness of this investment opportunity. Play with the numbers above. Poke holes in my assumptions and come up with your own conclusions. I think you’ll agree that the MPS degree is an efficient way to boost your career and is among the more sound investments choices you can make.
Questions? Call, text, or email me anytime. I look forward to hearing from you!