Samantha Stainburn

Graduate school looks like a cozy place to hide out in times like these. Instead of taking a McJob while waiting for the economy to pick up, you could be working toward a degree that will help you jump the employment line when companies start hiring again. A worker with an advanced degree makes substantially more than one with a bachelor’s — from 15 percent with a master’s in engineering to 54 percent with an M.B.A. to 175 percent with an M.D., according to census data.

But buyer beware. Grants and scholarships for graduate students are limited, and most are based on merit, not need. That makes loans the predominant form of financial aid. While undergraduates can borrow only a fraction of the cost of their degree from the government, grad students can usually cover it all with federal loans — up to $20,500 a year in Staffords (with interest capped at 6.8 percent) and the rest via Grad Plus loans (at 8.5 percent).

Yet it has never been clearer that borrowing money is a risk. Law school graduates, many shouldering more than $100,000 in loans, tumbled into the job market this spring to discover that high-paying firms were not hiring. M.B.A. graduates found themselves returning to their previous employers and pay grades because so many lucrative consulting and banking jobs had disappeared. And that new grad with a master’s in creative writing? She’s pouring coffee rather than poring over book proposals at a publishing house.

So how do you decide if you can afford the grad school gamble in this recession?

“Higher education remains an incredibly good investment,” says Sandy Baum, a senior policy analyst at the College Board and professor of economics at Skidmore College. “You just have to realize there’s uncertainty in the outcome, so it’s better to underestimate your projected earnings.”

Ms. Baum and Prof. Saul Schwartz of Carleton University, in Ottawa, researched the question of how much debt is too much. Income, of course, is key. “When student loan repayments are above 12 to 14 percent of income,” Ms. Baum says, “people start saying, ‘This is really a problem.’ ” Ms. Baum’s study suggests that borrowers earning the median salary, $33,400, will struggle if they spend more than 10 percent of their income on debt repayment, while the wealthiest borrowers will suffer if payments exceed 18 to 20 percent.

The rule of thumb is that you can afford to repay your school loans if the total debt for your education is about the same as your expected starting salary. You can also handle a higher debt-to-income ratio if you are younger, don’t have a family and reside in an inexpensive area.

You may need to be frugal, as it is likely that you will borrow more for a graduate degree now than in boom years. That’s because the pools of money into which grad students have traditionally dipped to help finance their education are evaporating in this dismal economy.

In 2007-8, the National Center for Education Statistics reports, 21 percent of master’s-degree students received some type of financial support from their university, including fellowships (9 percent of students), partial tuition and fee waivers (7 percent), teaching assistantships (5 percent) and research assistantships (4 percent). The average aid package totaled $10,179.

These days, however, state budget cuts and endowment losses are putting the squeeze on institutional aid. For example, the University of California, Los Angeles, with reductions in state financing, is hiring fewer teaching assistants this year. “We simply have less money, and our priority is regular faculty who have tenure and need to be paid,” says Claudia Mitchell-Kernan, vice chancellor for graduate studies.

Universities, anyway, direct a lot of the merit aid and assistantships they do offer to international students. Foreign students don’t qualify for federal loans, and many cannot attend without support — and graduate departments, especially in the well-financed sciences and engineering, are eager to draw top-notch candidates from abroad.

The system has evolved based on the assumption that graduate students have saved some cash in the workplace, or are able to get reimbursed by employers, especially for part-time business programs. A quarter of master’s students get at least some tuition reimbursed by their employer, collecting $5,245 on average. But according to a January survey by Challenger, Gray & Christmas, an executive placement firm, about 11 percent of large companies have cut back tuition reimbursement. Some companies have moved to a lottery system in divvying up benefits.

Students are also coming in with reduced savings or accumulated debt from undergraduate degrees and underemployment, says Lisa A. Tedesco, dean of the Graduate School at Emory University: “As jobs have dried up, they are not able to sock away a starting nest egg, so they might be borrowing earlier and more in their graduate career.”

Thanks to the recession, the M.B.A. that Edward Bayer is earning at the Owen Graduate School of Management at Vanderbilt University, in Nashville, is costing him more than he anticipated. After working at Merrill Lynch as a financial adviser, Mr. Bayer, now 25, decided to go back to school “to better his skill set” and set himself up for new challenges, including starting his own company. He planned to pay for his education with a combination of federal loans and a summer internship at a large company that he expected would generate $12,000 to $15,000.

In normal years, 98 percent of first-year M.B.A. students at Owen spend their summers in such internships, says Joyce Rothenberg, director of its career management center. This year, however, financially strapped companies canceled or shrank their internship programs, leaving business students across the country in the lurch. Only about 80 percent of Owen students found paid internships this summer, and the pay is lower.

Mr. Bayer, who is doing an unpaid internship for college credit at the uniforms division of the VF Corporation, has borrowed from his I.R.A. and taken an additional $6,600 in federal loans to get him through. But he thinks he’s getting his money’s worth from his M.B.A. experience.

“I’m managing a seven-person team at my internship,” he says. “This will be a great thing to have on my résumé.” He sees a silver lining even in the struggle finding work this summer. “I interviewed with so many more people than usual,” he says. “I’ve ultimately built a bigger network.”