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An economic downturn usually sparks renewed interest in retraining.
Historically, graduate school enrollments increase in the midst of a recession as workers take the time to upskill or move to another industry with better career prospects or better pay.
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“As the economy slows, interest in graduate schools increases,” said Eric Greenberg, president of the Greenberg Educational Group, a New York-based consulting firm. “The education screen is a kind of hedge.”
But this business cycle is unlike any other.
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A spate of layoff announcements has raised concerns that the job market is finally cooling amid recession fears. However, government data shows that the US job market is still strong with a record-low unemployment rate of 3.5%.
Still, a recession could be looming, some experts say, raising questions about whether going back to school makes more sense than trying to weather a potential spell of unemployment.
However, there are many factors to consider, including costs and a greater debt burden, that could erode the financial return on a college education, Greenberg said. “There are subtle nuances at play.”
Here are some of those key considerations:
This is not your average business cycle
History is often the best guide, but in this case the usual patterns may not apply.
In 2020, nationwide graduate school enrollment initially fell, but then recovered quickly in 2021, only to plunge again in the fall of 2022. This year’s 1% decline reversed last year’s 2.7% gain, according to a report by the National Student Clearinghouse Research Center based on data from colleges.
Enrollment rates could likely pick up again in 2023, in part because this time a recession wouldn’t be as short-lived as it was during the pandemic, said Doug Shapiro, executive director of the National Student Clearinghouse Research Center.
There is usually a lag time of up to a year, after the economy has slowed, before workers return to school to retrain, he said.
“Without expectation of a quick recovery, this could lead to the increased signup response that we are used to,” Shapiro said.
There is better access to higher degrees
Students walk past Stanford University’s Graduate School of Business in Stanford, California.
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With more programs available remotely, it’s also easier to get an advanced degree than it was before the pandemic.
Now, for example, tech workers who have been hit by a recent wave of layoffs could enhance their resumes with additional college degrees and certificates they can pick up online, Shapiro said.
To further expand access, some schools, including Northwestern’s Kellogg School of Management, MIT’s Sloan School of Management, Dartmouth’s Tuck School of Business, Duke’s Fuqua School of Business, and the Haas School of Business UC Berkeley waives testing requirements, fees or extends application deadlines for recently fired employees.
“There is an influx of exceptionally talented individuals into the job market right now who may one day have considered business school, and the path has just taken an unexpected sharp turn for them,” said Lawrence Mur’ray, Executive Director of Admissions and Dartmouth financial support said in a statement.
The potential return on investment
Going to school usually pays off. According to the US Bureau of Labor Statistics, workers with masters, graduate degrees, or doctoral degrees have the highest overall earnings and experience lower unemployment.
But alongside the economic viability, there are also higher costs. In less than two decades, the median debt of master’s degree borrowers has nearly doubled as the cost of a college degree, particularly in the form of student debt, has skyrocketed, according to the Urban Institute’s Center on Education Data and Policy.
“The funding aspect fundamentally affects decision-making,” said Allen Koh, CEO of Cardinal Education, a California-based tutoring, test prep and college admissions company.
The interest rate on federal student loans taken for the 2022-23 academic year rose again to 4.99%, up from 3.73% the previous year and 2.75% in 2020-21. For graduate students, the rate jumped to 6.54% from 5.28% last year, and any loans disbursed after July 1 are likely to be even higher.
At the same time, inflation has also pushed up the cost of living, making rent and daily expenses even more prohibitive for a student’s budget.
To that end, some master’s programs have particularly high debt-to-income ratios, such as B. social work, counseling, music and visual arts, the Urban Institute also noted.
The growing availability of coursework
A growing number of companies may be willing to pick up some of the bill to ease the burden of funding education.
Post-pandemic, educational services played a big part in the competition for workers, and as a result, more companies are offering opportunities to develop new skills, according to the latest Society for Human Resource Management survey.
According to this survey, nearly half, or 48%, of employers said they offer tuition assistance to undergraduate or graduate students.
Of course, it’s nothing new for employers to pay for their employees to get a degree. For decades, companies have been charging employees for graduate degrees and MBAs.
However, many companies are now extending this benefit to hourly and part-time employees and are advertising the offer more than before.
Even though there is a strong desire to go back to school, according to a study by Bright Horizons, fewer than half of employees have been able to pursue educational goals in recent years, mainly due to time commitment and financial barriers.
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