Q&A with Marc Scheer

There is a chapter in the book called "Greedy Grad Schools" that deals with more money-making schemes universities try to hit us with if we decide to go back to school. What are some pitfalls to keep an eye out for, and how do you identify "less risky" programs?

College degrees are risky because the short-term costs often outweigh the short-term benefits, and graduate schools raise the stakes even higher. Graduate school usually requires even higher costs, higher debt, and more years of sacrificed income while in school. Some programs offer particularly risky combinations of high debt and relatively low salaries, including lesser-tier law schools, Psy.D. programs, primary care medical specialties, and, these days, MBAs (especially in finance). Many Ph.D. grads are also finding that full-time academic positions are nowhere to be found.

There are some things that students can do to identify less risky programs. First and foremost is to verify what their starting salaries will actually be when they graduate, and that their student loan payments will require less than 15% of their monthly salaries to pay (even better if this debt takes up less than 10% of salaries). In addition, students can: ask schools where their recent grads are now employed; ask to talk directly to recent grads; ask employers about the quality of the programs and if they would hire someone from them; verify graduation rates and actual number of years until graduation at each program; and talk with people in the career field right now to see if they think the program offers good value. Every graduate program should be required to provide this information to students, but right now students need to do their own homework.

What is the biggest "myth" about graduate school?

Probably that it will always lead to a great payoff. If you believe that, then you should talk with some unemployed lawyers, Ph.D. grads, and MBA grads, and some highly indebted Psy.D. grads and primary care physicians. Higher education can offer great financial advantages, but the costs and debt also present some great risks. Students need to be cautious and pick programs that will have low costs and/or high salary potential. No payoff is guaranteed, so don't take anything for granted.

Any other advice for recent grads trying to invest their money wisely?

We're living in a time of tremendous financial illiteracy. And the downside of this is that our country has been thrown into economic turmoil. I encourage grads to do everything they can to learn about money. Read books; my favorite field is the area of behavioral economics, which combines economics with psychology and illuminates all of the basic irrational financial mistakes that people tend to make. Read newspapers and magazines. Seek out non-traditional information sources outside the mainstream. These days, I've found that blogs offer some of the best information around. I've been reading one fantastic blog, HousingPANIC.blogspot.com, for the past two or three years and it completely predicted our current meltdown way before any mainstream source. CalculatedRisk.blogspot.com is another good one about the economy. I'd also recommend that people try to live below their means, resist the urge to keep up with the Jonses, start thinking entrepreneurially, keep learning skills that employers and clients will find valuable, invest for the long term, and remember that get-rich-quick opportunities are extremely rare (if not non-existent). Good luck out there!

Check out Marc's blog here.