There are nearly 20 million college students in the U.S., 65% of whom will leave school with a diploma in one hand and student loan debt in the other. 

If you're among the college graduates with debt, the question of continuing your education is complicated by how much more you'll have to borrow to earn another degree and how long it will take you to pay that degree off. There's also the question of whether you'll be able to afford student loan payments on your expected annual salary.

young woman with laptop and textbook taking notes.

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There was a time when a bachelor's degree guaranteed attention from hiring managers, but not anymore. Today, you have to take the bull by the horns and decide for yourself if you need a graduate degree to stand out from the crowd. Then, because debt matters, you must calculate whether going back to school is a smart financial decision. 

The more you learn, the more you earn (roughly speaking)

It's impossible to put a value on the personal and intellectual growth that come with education, but we can measure how each level of education impacts average incomes. The more educated a person is, the more money they're likely to earn, reports the Bureau of Labor Statistics (BLS). BLS findings from 2017 broke earnings down by level of education attained. Here's what they came up with: 

Bachelor's degree: $1,173 per week, or $60,996 per year

Master's degree: $1,401 per week, or $72,852 per year

Professional degree (including attorneys, doctors of medicine, psychologists, and veterinarians): $1,836 per week, or $95,472 per year

Doctoral degree: $1,743 per week, or $90,636 per year

Figure out your ROI

ROI stands for return on investment, and it will help you determine whether or not grad school makes sense for your financial future. Take these steps to get a better sense of the cost and reward.

Investigate job prospects. If you're hoping to become the world's greatest seal trainer, you may be disappointed to learn that your job prospects are limited. If, on the other hand, you grew up dreaming of a career in actuary science, your prospects are better. From an ROI standpoint, there's little reason to spend money training for an non-existent job.

The BLS's Occupational Outlook Handbook is a fast, easy way to learn more about the expected career opportunities for hundreds of occupations and can help you decide if your fantasy job will be waiting for you.

Estimate first-year salary. To get an idea of the average salary for your chosen career, visit the wage report, also from the BLS. It offers the median salary across the U.S. for each job. Remember that the median is the middle of the range, and when you're fresh out of school, you can expect to start below that figure.

Calculate the cost of your new degree. The net cost of graduate school includes tuition, books, supplies, fees, and housing (if you need it), minus any scholarships, fellowships, or other financial breaks you receive.

Compare cost to income. A common rule of thumb is that you should not borrow more to attend grad school than the amount of your expected first-year wages. For example, if you're borrowing $80,000 to take a job that begins at $50,000, then paying for graduate school is likely to be a hardship. As with all rules of thumb, though, there are exceptions. The next step will give you a better idea of how having a graduate degree may play out over your career. 

Evaluate lifetime income potential. Use a lifetime earnings calculator (such as Navy Mutual's) to get a clearer picture of how much you're likely to make over the course of your career with (and without) a graduate degree. Plug in your current age, the age you plan to retire, your annual income, and your projected annual salary increases (2% is a conservative bet). Run the calculations using the expected income with a bachelor's degree, and then again with a graduate degree.

For example, the median starting salary for a chemist with a bachelor's degree is $40,000. A 24-year-old who makes $40,000 and receives annual raises of 2% can expect to earn $2.7 million by the time she retires at age 67. With a doctorate, her median starting salary would be $62,900. It will take her approximately five years to complete her doctorate, meaning she will begin to work as a chemist at age 29. Even after postponing her career by five years, she'll be on track to earn $3.5 million by age 67. That's $800,000 more than she would have earned with a bachelor's degree alone.

Factor in the cost of education. Add the predicted cost of grad school to any loans you have from undergrad, and run that total through a loan calculator. Let's assume the chemist in the above scenario had a total loan amount of $52,000, including undergrad and graduate school. If she repaid the loan at 6% interest for 30 years, she would pay $60,236 in interest for a total loan cost of $112,236. Now, rather than expecting to earn $800,000 more over the course of her career, she can expect to earn $687,764 more.  

The right path for you

Money is not the only factor worth weighing as you decide whether to continue your education. There's the intrinsic value of learning for learning's sake, as well as pursuing your passion. The goal is to find a way to do that without digging a financial hole you can't climb out of. Maybe it means taking part-time and online programs that could lower the costs while allowing you to continue to work. Perhaps it means taking the long road and only signing up for as many classes as you can afford without taking out a loan. 

The fact that you're even considering graduate school means you're a thinker -- a good sign that whatever you decide to do will likely turn out well.