I think $40K/year is pretty steep, but should be earned back quickly after graduating from such a prestigious conservatory.  I have an MM, and know it gives me an advantage to have a rigorous training.  I play both classical music and Balkan/Middle Eastern music, and notice that my non-classical colleagues really struggle (and often have to have non-musical day jobs) because they can't play classical music, sightread well, or accompany singers easily, despite the fact they are incredible musicians.  I play over 100 weddings a year, and mostly clients ask for classical music, even though I offer Celtic and Jewish music too.  A music degree sets you up for teaching, which earns me $65/hr. - easy work at home.  Having a period of time to exclusively focus on your improvement while getting pushed in unexpected areas (not just what is commercially or locally most popular) is invaluable, too.  

I think there are only enough gigs out there if you can play classical & popular background music, and are willing to do so, plus teach.  I think not everyone should be encouraged to pursue this line of work, since competition is tough and you need to be a flexible person.  I believe you need to have a passion for music.

I know I have gotten gigs over someone else who didn't have a degree (have been told so by clients), but this is also because a lot of clients don't have a musical background and can't judge musicians by themselves - they go for the credential instead because they lack confidence in their own judgement.

People with degrees are definitely not always better musicians than non-degree holders, in my experience.

I would encourage my child to pursue music as a career if: they showed a passion for it, they practiced a lot, they had a tough skin, and were a self-motivated kind of person.

Just some thoughts, and I look forward to hearing others.  I don't think music degrees are the only way to go, but I also don't think they're overrated.

I don't have a degree in music, but I play 100 gigs plus a year, and I'm a champion sight reader.  I wish I had gone ahead and got the degree, but in the final analysis, I work because people ask me to because I give them what they want!  I play trombone, to boot!  No guitar and keys for me.