Theological Education Bubble IV: Is a PhD a good investment?

Let’s consider the costs of doing a PhD:

(1) Tuition and living expenses:  My guess is this is going to be in the range of an average of about $55K per year for a family; 45K per year for a couple with one PhD student, and 35K for a single.


(2) Minimum of three years lost wages for British PhD; average of six years for North America.  The average salary is $40,000.

=$120,000-240,000 lost wages; but if the above numbers living expenses would have to paid for in any case, so let’s subtract 50% for living expenses and 25% for taxes = $30,000-60,000

(3) Interest costs on student loans.  Let’s say you need to borrow only $50K at 5% and payments start only after graduation.  This calculation counts only PhD debt and assumes that the Master’s level education is already covered.

The first monthly payment (interest only): = $200.  Let’s conservatively say that the cost of interest loan will be $8000 over the lifetime of the loan.

So now, let’s see where we are, adding up these expenses; realistically a PhD will cost between $140-370K.

Suppose you were about to do a PhD and you had that kind of money available to you.  So instead you invest it, and for argument’s sake you put it in an average TSX dividend stock that pays 4%.  You started your PhD in 2004 and you graduated in 2010: the TSX has gone from 8300 and 13400 = 60% gain.  So now those funds would be worth between $224,000 and $592,000, and they would have provided a modest investment income at 4% of between $5600 and 14,800 per annum.  So at the end of a six year PhD you start with a negative equity of $50,000 instead of positive equity of between $260,000 and $680,000.

Now some have likened getting an academic job to winning the lottery.  The fact is that for the most part, most jobs, except academic jobs, a PhD is superfluous.  Of my friends that did PhDs while I was at Cambridge, only 50% landed jobs in academics.  Those jobs on average pay less well than if these men of considerable talent had applied themselves to some other professional occupation such as law [update:  well maybe not], medicine or engineering, and I don’t know anyone I would call well-off working in academics that wasn’t already well-endowed with family wealth.

Suppose I come to you and say I have a great investment idea.  You put up $150,000 dollars and at the end of six years you will have $50,000 in debt, and at the end of ten more years, you will get your money back–oh, but wait, there’s another catch: you have a 50% chance of losing the initial investment permanently .  Doing PhD degree would seem to have a very bad risk to reward ratio.

“Ah!” you say, “But you haven’t dealt with the intangible (non-renumerative) benefits.” Ok there are benefits, I agree.  But there also other intangible risks.

Intangible Benefits:

(1) Bragging rights:  with a PhD you have a great accomplishment behind your name and the right to brag and lord it over others who don’t have one.  People might even call you “doctor”.

(2) You may learn how to do research at a highly specialized level and to solve problems, for you get to spend three to six years researching a subject about which you are passionate. Of course, you might be in a bubble without realizing it.

(3) You remain attached to the academic world the whole time you are studying, meet some interesting people, perhaps learn a foreign language.

(4) If you are lucky, your marriage will survive, your children will love you, and you will write several books that will make you a household name throughout the world. But of course you don’t need a PhD to do this.

(5) If you do land that elusive job in academics, your self-esteem and future career will now be determined by 18-22 year olds who fill out teaching evaluations (oh, wait, that should perhaps be in the category below).

Intangible Risks:

(1) You may have to deal with the bitterness of failure if you don’t complete your dissertation or if after completion it is not accepted.  I knew one lady who went into a 25 year cycle of depression after failing her Oxford dissertation (due to no fault of her own).

(2) You may feel isolated and detached from society during your years of focussed research on a subject about which few people know and fewer still care.

(3) You may have to deal with resentment towards the academic community for letting you spend so much of your life and financial resources for a degree that doesn’t land you a viable job.  While you are waiting on tables during your day job, that resentment manifests itself in poor tips from your customers.

(4) You may end up in adjunct hell, i.e.,  the work of teaching post-secondary education for less than minimum wage without the respect that comes from being a real professor.


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