Is an Engineering PhD Worth It, Financially?

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Annual wages over time during a typical STEM PhD.

Have you ever thought about doing a PhD in STEM (science, technology, engineering, or mathematics), and wondered how much money you make? Having gone through the grind myself, I thought I’d take a look at the numbers. I dug through my old W2s and found my net income during grad school. I wanted to answer the question: Is doing an engineering PhD worth it, financially?

How PhD students are paid

PhD students in STEM are typically fully funded – their tuition is covered and they are paid a small stipend. In return, PhD students work as research assistants and occassionally as teaching assistants. The money to cover the stipend and tuition comes from their professor’s research funding, which in turn comes from various sources, such as the National Science Foundation or the Department of Defense. The amount of the stipend is typically set by the school based on local living costs, and is public information that can easily be Googled. In general, it’s around $20-25k for the 9 months of the academic year. In the summer, students can continue to work as research assistants for additional pay, or look for summer internships.

This is different from a professional school like law or medicine, where you are paying to attend school. Getting paid to do your PhD sounds like a sweet deal, no? But professional schools usually win out in the long-run in terms of earning potential.

Income during grad school

The numbers I’m showing start from my first year of graduate school and end with my first year of full-time work. The average grad student salary for the full year (including summer) is about ~$30k, with a small bump during my 2nd and 3rd years when I did a summer internship at a company. Companies pay better than grad school, boosting my income to ~$40k. In my last year of grad school, I graduated and started working halfway through the year, so my income got a big boost. Finally, in my first year of full-time work, my wages jumped to their current value.

$30k per year as a PhD student is livable! (especially if you’re single) Minus taxes and other deductions, that’s ~$2000/month. My typical monthly budget as a graduate student was:

  • Rent + utilities: $1000
  • Food: $500
  • Entertainment + shopping + travel: $250
  • Savings: $250

It’s enough for eating out fairly often, a reasonable amount of entertainment, and some savings. Of course, I wish I had saved more, but I think the above numbers are a pretty accurate reflection of my expenses as a grad student.

Comparison to not doing a PhD

While the grad student stipend is livable, there’s a significant opportunity cost, especially in engineering, where a PhD is not really required. Unless you want to work in a research lab or become a professor, a Master’s degree is probably enough. For example, my friends came out of the same undergrad program and started working for $80k. What’s the financial benefit of working directly after undergrad? I looked up the median salary of my field ($95k) and plotted the cumulative wages from starting work at that salary directly after undergrad, compared to doing a PhD for 5 years and working in academia afterwards:

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Cumulative wages of doing a PhD vs working.

As you can see, there’s a significant dip in during the first 5 years, while I was in grad school. After that, once the PhD graduate starts working, the gap starts narrowing. 13 years after undergrad, doing a PhD finally catches up to working directly out of school. 13 years is a long time! So, financially speaking, doing a PhD and working in academia afterwards is not the best choice. I think the trend would be similar for someone receiving their engineering PhD and going to work in industry afterwards. From my PhD friends’ experiences, the salaries for PhDs are not significantly higher than salaries for fresh undergrads – maybe $10-30k more.

There are lots of caveats to this graph, of course. It depends on the working salary directly out of undergrad. It depends on the working salary after a PhD. And most importantly, money isn’t everything – I learned so much during grad school. It helped me grow as a person, both professionally and personally, which will hopefully contribute to my future success. Then again, I probably could’ve learned a lot from working too. Just keep in mind that the numbers I’m showing are from one data point, from my particular case, and from a purely financial standpoint.

Do you think doing an engineering PhD is worth it? Is a professional school worth it, despite the high tuition, because of the higher salaries? Or is it better to gain hands-on experience by entering the workforce directly?

6 thoughts on “Is an Engineering PhD Worth It, Financially?

  1. 13 years is definitely a long time and is much longer than I plan on being in the workforce!

    I can’t speak for all fields, but for software I’d rather take the self-taught candidate with work experience than the kid fresh out of school. You can learn a lot from school, but the true reason I see for school is to get your foot into the door. Once you have your foot in the door then your degree becomes worthless.

    There’s a world of difference between an intern who is on their first internship and an intern who is on their second internship, even if they’re at the same academic stage. What bewilders me is that sometimes when I find a really great intern and when offered a full time position they often decline because they want to finish school first. When you do the math you’re much better off dropping out of school and accepting the job offer. I have come across one intern who well understood this math but since he was not American his best option was to finish his degree for immigration purposes.

    This is coming from a highly-paid university dropout with no regrets. However, some people really enjoy school and obtaining a PhD. I know data scientists who love school and wish they could go back. Those people are also highly paid but their path to the same compensation was much longer.

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    • I totally agree with you that skills are more important than a piece of paper! I think that school can help you realize your potential, but some inherent qualities for success (like curiosity, communication) are inherent to the person, and if you can convince an employer that you are capable, good for you. Going to school doesn’t automatically make you smarter or more capable. After your first job (or even an internship like you said), nobody cares about your GPA or what school you graduated from.

      There are a few jobs where a PhD is necessary, like research labs or faculty. I think in the past, standards were more lax – I’ve seen successful senior people in research labs with only a Master’s, but all the new hires have PhDs. But if your goal is to work in industry and make money, skipping grad school might be faster, as you pointed out. I’ve also come to the same conclusion after going through the grad school grind 🙂

      Thanks for sharing your thoughts!

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  2. Especially today, I think it’s really important to question the value of post-grad (PhD, Masters) and even under-grad study; the average value of education has gone down and – depending on the path you choose (and whether you even know what you want to do!) and where you study – college/university may or may not be worth the cost, in time and money!

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    • I think you make some good points – college tuition in the US is sky-high, and I’ve heard there is a need for more people to pursue trades (and make a good income) rather than going to college. Undergrad seems to be the default desire but it might not be the right choice (personally, in another life, I think I would’ve liked to do something more “hands-on”). One good thing about going to school is that it gives you a bit more time to try different things and work out what you want to do, or at least that’s one way it helped me!

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      • It’s a similar situation in the U.K. Sure, that makes sense. After 3 years of studying, there are some that then jump into a Masters only because they don’t know what to do work-wise, which I don’t think is always the most sensible thing. One of the advantages of going to university, I feel, is the independence/personal growth aspect (i.e. if you move and live away). That said, there’s cheaper ways to get this – and I, personally, struggled a lot being in a new place at that time.

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      • I’ve definitely seen students whose mindset is higher degree = smarter = life goal (myself included, at the time). I agree with you about living independently – it helps develop your character without the baggage of your childhood life. Maybe people are looking for that independent experience deep down, but school just seems like the safest option to do that.

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