Lifetime Returns

Author: Michael Hooper (QAMO ’25)
Publication Date: April, 2025.

Introduction

Over the past 30 years, enrollment in graduate education programs in the United States has grown substantially. Between 1994 and 2024, the percent of middle-aged Americans with a graduate degree rose from 9.3% to 17.5%. This growth is largely driven by the high salaries earned by individuals with advanced degrees and expansions in graduate programs offered by universities.

As graduate enrollment has risen, so has graduate tuition. The average cost of a graduate program rose from $8,248 to $19,314 between 1990 and 2019. The increase in tuition is large, eroding the returns to a graduate education for many students. Importantly, salaries and tuition vary substantially by field, meaning that the returns to a graduate degree vary substantially depending on the type of degree.

In this brief, we examine the returns to graduate education (specifically master’s degrees), accounting for field-specific salary premiums and tuition costs. Using data from Preston Cooper (2022) on the returns to graduate programs in the United States compiled from the College Scorecard and American Community Survey, we show that the return on investment (ROI) to graduate education is high in some fields and small — even negative — in others.

Figure 1

Data source: IPUMS CPS, Annual Social and Economic Supplement 1992-2024 and The National Center for Education Statistics (NCES) 1990-2019

Methodology

ROI is a metric used to determine the profitability of an investment. We utilize Cooper’s measure of graduate school ROI, which is:
ROI= Change in Earnings-Graduate Tuition-Foregone Earnings

The components of the ROI calculation are:

  • Change in Earnings: Lifetime earnings with a master’s degree relative to lifetime earnings without a master’s degree in the same field.
  • Tuition: Average out-of-pocket cost of graduate program in the field.
  • Foregone Earnings: Wages that are not received while attending graduate school. Graduate school not only has explicit financial costs in the form of tuition, it also has significant opportunity costs as students forgo working and advancing their career while enrolled.

Returns by Degree Field

Figure 2 shows the expected increase or decrease in lifetime earnings from attending graduate school in several representative fields, net of tuition and foregone earnings.

Figure 2.

Note: Expected mean Return on Investment for master’s degrees in top fields of study in the United States, measured in U.S. dollars. Source: Cooper’s graduate ROI data.

Broadly speaking, STEM programs lead the way in producing the highest returns, with business programs being somewhere in the middle, and social sciences along with the arts often producing lower, or even negative, returns. Nursing produces the highest ROI at $1,017,161 followed by master’s degrees in Computer Science and Math, at $731,321. The ROI on these programs tends to be high because these degrees lead to high-paying fields, the course of study is relatively short (reducing the opportunity cost of earnings), and tuition costs are modest.

Master in Arts have the lowest ROI at -$364,338, for several reasons. First, the average increase in earnings between individuals with a Master in Arts relative to what those students would have been expected to earn otherwise is small, limiting the upside. Second, tuition at Arts programs tends to be relatively high, particularly among popular programs at expensive, private universities; the average tuition paid for a Master in Arts is nearly $47,000, compared to an average of $26,000 across all other degree fields. Finally, forgone earnings while students are enrolled is relatively important when compared to low expected earnings post-grad.

ROI Varies by Institution within Degree Fields

These data above are aggregated at the national level by field, but ROI also varies within fields across universities.

Figure 3 provides a more detailed look at three specific master’s degrees: Master in Arts, Business Administration (MBA), and Nursing. These fields were chosen because they are popular degrees and represent the low, middle, and upper ends of the ROI spectrum when averaged across all universities. This plot allows us to see the variation in expected ROI within each of these degree fields at different universities.

Figure 3.

Note: Box and Whisker plot shows the distribution of expected ROI for master’s degrees across institutions within three chosen fields: Arts, Business Administration, and Nursing. In these plots, boxes represent the 25th to 75th percentile range and the whiskers represent the 10th and 90th percentile range. Singular data points are “outliers.” Source: Cooper’s graduate ROI data.

This box plot begins to show the extreme variance in ROI based on the different institutions that one might choose to attend in any given field. In the Arts, for example, whereas most programs have a negative ROI, a handful of programs (mainly regional public and private institutions) still boast a relatively high ROI.

The MBA is one of America’s most popular master’s programs. Interestingly, the typical ROI on MBAs is only slightly positive. There is, however, a concentration of outliers which produce outcomes that are competitive with the best programs from all other fields. Nursing is an example of a field where, generally speaking, the vast majority of programs generate positive returns.

These data show that there is significant variability in expected outcomes within master’s degrees in any particular field. Indeed, value-generating options can be found almost anywhere. What is important to consider, however, is that it matters much more what program you attend in some fields compared to others.

What characteristics of universities generate high ROIs? When seeking a master’s degree are people better off at the well-accredited but expensive ivy league school, or the public state flagship institution, or the local community college?

Figure 4.

Note: Estimated returns (measured in dollars) for each dollar spent on tuition for a master’s program in a given field. Data source: Preston Cooper’s graduate ROI data. Values are obtained by linear regressions of ROI on tuition costs for each field individually. The reported returns to an additional dollar of tuition are the beta coefficients from the regressions.

One salient factor is tuition cost. Figure 4 shows the incremental earnings associated with a $1 higher cost of tuition, by field. A higher value implies that more expensive programs produce graduates with higher earnings, while values close to 0 imply that outcomes do not vary much between expensive and inexpensive graduate programs in the field. A value below 0 represents an inverse relationship between cost of attendance and expected outcomes.

For example, on average, MBA programs that cost $1 more tend to have graduates whose ROI is about $11 greater — an indicator, perhaps, that more expensive or elite programs produce higher earning students (whether this is because they are more selective or provide more value is unclear). In contrast, in fields like Arts, Psychology, and Education, the association is negative, suggesting that students may be better off attending cheaper programs. In other words, it may be worth it to go to that Ivy League school for a STEM-focused graduate degree, but better off to stay at the cheaper state school if for social sciences or humanities.

There are several reasons this may be the case. Take Education, for example. Generally speaking, educators with a master’s degree earn a relatively similar amount regardless of where they got their degree. Likewise, Nursing has the highest average ROI of all fields, but we see here that the cost of the program seems to matter little to that return.

Conclusion

The decision to pursue a master’s degree involves a complex set of considerations, many of which extend beyond financial metrics. While economic return is a relevant and measurable factor, it cannot fully capture the intrinsic value of intellectual fulfillment, personal interest, or alignment with long-term professional aspirations. Moreover, elements such as program specialization, faculty expertise, institutional reputation, and geographic location can play a critical role in shaping one’s decision.

Our data cannot account for many of these more personal preferences when weighing options for education and career. What it does suggest, however, is that a master’s degree is not universally associated with positive financial returns, and it is important to consider the implications of a desired field/institution before committing time and resources to a degree. In conclusion, this discussion underscores the importance of a holistic evaluation of both economic and non-economic factors when determining the value of graduate education.