The true cost of taking up graduate studies
By Dr. Johnny Noet Ravalo
INQUIRER.net
First Posted 08:50:00 11/28/2007
Question: I just graduated with an Economics degree last March and have been working at a company in Makati since June. Compared to many of my batchmates, I think I have a lot to be thankful for in terms of the opportunities my job provides and the pay that I receive. My parents though are suggesting that I take up graduate studies as soon as possible. When would be the right time for taking my Master’s degree in Economics, maybe even a Doctorate degree? — RED
I really can’t believe that it has been that long ago when I asked the same question. This is one of those questions that make me wonder what exactly have I done the past 25 years!
When I graduated from the UP School of Economics (UPSE), I knew that I would eventually take graduate studies. Late 1983 was a difficult time to be looking for your first job. The financial market remained very passive in response to the politically charged atmosphere then. I decided to apply to graduate school.
After starting at UPSE, I transplanted myself into a foreign environment at 23. I did not know anyone in Boston and the grand total of Filipinos entering the Graduate School across all the programs at Boston University was two. I was very young compared to my classmates who were government officials in their mid-40s and early 50s (you can imagine how they dominated the class discussions).
I approached my Boston degree program just as I approached life at UP. Armed with intellectual arrogance embedded by years of being a “Skolar ng Bayan” (admit it, UP grads herd like an exclusive fraternity/sorority), I was very confident that I could handle graduate studies. This was, after all, just the next level of “studying”.
Oh, how wrong I was.
The biggest mistake people make with graduate school is seeing it as an extension of college. We treat it as “studying some more,” putting in the long hours because having the degree is what is required by the sophisticated job market. In my view, that short-changes the truth.
The pressure of grad school isn’t only about mastering techy tools. It is a process where students attempt to become colleagues of people who used to be their mentors.
I do not know if it was to scare us or keep our feet planted on the ground but we were constantly reminded that in the US experience 92 out of every 100 individuals who start the graduate program do not complete the program. I had the privilege of studying under, working on projects with and having both Larry Kotlikoff (adviser to President Carter) and John Harris as my dissertation advisers. They both said a college degree in economics does not make one an Economist and people only remember the eight who were conferred the degree by the faculty.
Red, the title is “conferred” and it is done so by a specific faculty from a specific institution; a graduate student does not achieve this rank on his own simply by passing written tests.
A graduate degree in Economics is not about timing but rather one about choice. To enter into the program, you are choosing to eventually become an Economist. This means that you have specific professional skills in specific fields. It also means that generating tables, calculating values or finding information on the web are not what being an Economist is all about.
It may interest you Red to know that top-ranked US institutions no longer offer stand-alone Master’s degree programs in Economics. The trend when I left Boston was to identify the promising college students, give them a tour of the campus before they graduated from college and invite them into the PhD program. Those who cannot make the cut (for whatever reason) are given a “terminal Master’s degree”. You can’t use this degree in fulfilling a Doctorate degree; to go for a PhD, one has to start all over from a qualifying Master’s program.
In the end Red, becoming a PhD over-qualifies you for many tasks but prepares you for particular specializations. Also, you should not downplay the impact on your budget. Unlike an MBA, graduate programs in Economics require you to be a full-time student. That means that you have to stop working if you’re going to take this seriously. The classroom requirements are good typically for four semesters (sometimes five if you include electives and add-on subjects). That translates to two to three years of lost income potential, lost office promotions plus the sunk cost of tuition and related expenses. The first two items are notional stuff but the school expense is very real.
The temptation is to work part-time while doing your doctoral dissertation. During my time, some of the better students had been in the program between eight to 14 years just because the part-time day-job became a full-time distraction.
The bet you are implicitly making Red is that the foregone opportunities while in school and the actual expenses of enrolling in a school can be offset by higher pay down the road.
The truth Red is that the answer is a “maybe”. It works out for some, it may not be as lucrative for others while others don’t put the payoffs as their measure of success.
This is the part where you do a lot of planning and visioning, something akin to preparing for retirement. How it will work depends on how you prepared for it years in advance, given the years that must lapse in between and how you manage the cash flows.
If you plan to stay in the financial market, you need to decide what type of job you want to be doing in maybe 10 to 15 years. Then the graduate degree becomes a question of “fit” given the costs and the potential of what you want to become as a professional.
The good part is all these are fairly calculable. At your present salary, project a 5.0 percent to 10 percent annual increase and that gives you your opportunity cost. Surf the web and get a sense of school fees. This will give you an actual cost just to have a valid school ID. What you spend on (housing, food, clothing, transportation) is highly dependent on the environment of the school, particularly if you’re looking at a foreign institution. Whatever total figure you get is the price of taking the degree. This is the amount to be recoup by future employment.
That is the finance part. Of course, there are many who take the challenge of achieving the degree “just because” without even going through the math. After all, eight graduates out of every 100 candidates should somehow count, shouldn’t it?
In the end, it’s about perspective. For as long as you know what you want, know what you’re doing and you’re willing to pay the price, there is considerable satisfaction at the end of the process.
(Have a question for Dr. Noet? Email personal_finance@inquirer.net)
(Noet Ravalo is a macro-financial economist by practice and profession. He was chief economist of the Bankers Association of the Philippines until 2002 and has since been doing consulting work for multilateral and foreign agencies. His current engagements are with the Bangko Sentral ng Pilipinas and the PDS Group. Over the past 12 years, he has been asked to provide technical inputs to both the Senate and the House of Representatives on various economic and financial legislation, some of which will have big impact on Filipinos’ personal finances.)
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