A Warning for New Grads

Earning a bachelor’s degree this spring comes with a challenge. It’s harder to get a job these days, as employers are trying to make sense of the tumult unleashed by the tariff war, and growing concerns that we may soon be headed into a recession.

When the job market is rough, graduate school becomes more popular. And there are early signs that more students who have completed their bachelor’s are now applying to graduate school.

Slow down.

I totally understand the reasoning: if it’s hard to get a job, why not just go straight to grad school, pick up the credential, and then, hopefully, when you’ve got that degree in your pocket, the job market will be better, and you will be an even better catch.

Makes total sense.

But it misses out on one crucial data point: how will you pay for grad school?

If you are a parent or grandparent (or aunt/uncle) reading this, I need you to stand in the truth: being able to support yourselves throughout your retirement must be your priority. Please don’t put that at risk by helping to pay for grad school.

And please counsel your children to be extra careful borrowing for graduate school. The federal student loan program for graduate students sets very high borrowing limits, and that can be dangerous. The Direct Loan program allows grad students to borrow up to $138,500 combined for their undergrad and grad studies. The graduate version of the PLUS loan program allows students to borrow up to the full cost of attendance. And neither program asks or checks if you will be a good candidate to repay the loan.

That is crazy.

Please follow the advice of Mark Kantrowitz, an expert on college financing. His rule of thumb is that all borrowing (undergrad and grad school combined) should not total more than you are likely to make in your first year of work. Limit yourself to that amount, and you will be in good shape to have your school loans paid off within 10 years. (It is easy to research salaries online; just be sure to look for starting salaries, not what someone with 5 or 10 years of experience might earn.)

If a solid first-year salary in a chosen field pays $80,000 or $100,000, borrowing $138,500 or even more isn’t setting you up for success. If you are pursuing a field where a $65,000 starting salary is the norm, then that’s what your self-imposed total borrowing should not exceed.

Blow past that safe borrowing target, and you not only could be repaying it for many more years, but it is going to become a burden that might force you to pursue work you aren’t really committed to.

That doesn’t mean grad school is a hard no. It means you need to be financially smart about what schools to consider. The goal must be a school that will offer enough grants and work opportunities that there will not be a need to borrow too much. Or it may mean working for a few years and saving up money to help pay for grad school. I also think that work experience can be extra helpful in helping you learn more about what sort of career you really want. And at that point, an affordable grad degree could be a valuable pursuit.