just curious - for those guys in MBA programs or starting soon - how much savings did you have prior to starting? i can't tell if i've been fiscally irresponsible - but will have about 50k after 4 years working in nyc - 1 yr in banking, 3 at a startup. i definitely made less than my finance friends but traveled a ton etc/ lived well. just curious as i think about what i need to take out in debt.
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ill be able to pay mine and have six figures but im a bit diff than most haha
i'm in a similar situation. savings is highly variable and it really depends on prior industry, age and lifestyle. not many people I know saved a lot until they were older than 26-27.
I've also saved enough to pay for grad school, but not sure I'm going to do that. I think taking out at least some money in loans makes sense in leaving options open.
Anyone have thoughts on this?
I'm wondering why you would want to willingly pay horrendous interest rates on student loans when you don't have to.
First of all, there are loans available at 6%, which isn't that bad. You can gets loans @ closer to 3-4% (depending on cosigner, collateral, credit score, etc.), so definitely not horrendous. And if you think you can make more than that on your capital, then obviously a loan makes sense.
That said, even a "horrendous" (6.8% to 7.8%) loan makes sense in certain cases. There are loan forgiveness programs for people who accept jobs in the public / non-profit / service sectors, so obvious how taking out loans would be necessary to take advantage of those.
It's not about what you have to do, but being smart and taking advantage of what's out there.
I think this really depends how much you have saved up. If you are on the border of 200k, then I think taking a loan is a must just in case you need a buffer.
If you are more in the 500k region, then a loan makes a lot less sense.
If I had the cash, I'd love to lend to the class of top 10 programs at a slightly reduced interest rate. I expect the default rate is pretty low.
This actually is a really interesting idea. (referring to M7 [etc.] P2P lending)
I'll be entering my MBA program with a few hundred thousand in the bank (six years of experience). If you're a finance guy making >$150k/year, saving up the ~$150-$175k to fund the MBA program shouldn't be too difficult. Add on top of that any scholarships received and the threshold is reduced even further.
Phantombanker -- I thought about going down that path. I ultimately decided it would be more hassle than it was worth. My guess is it will not be worth the headache unless you're taking out a meaningful amount and have definitive plans to join a startup after graduation.
my expectation is that the cost will be closer to 250k vs. 150k-175k (I do pray your estimate is the right one though). Unfortunately, I did not receive any scholarships (I'm not sure if showing my tax statement/salary for the scholarship app had any bearing on that).
I believe you can apply for loans at any point during the program, so if things start to get tight there are options.
To put some numbers behind it: Two years of tuition is approximately $100-$110k (which will be tax deductible for some). Add on $1,500/month in rent for 21 months and you're up to ~$135k on tuition and rent alone. I would think that another $40-$65k would sustain you over the 21 months, even after you've included food, health insurance, books, travel, and the like. Don't forget that you've got a summer internship in the middle of your MBA program where you can expect to earn ~$30k (blind estimate, pre-tax) that will offset part of your costs. Many firms also offer a sign-on bonus (consulting / banking) that will further defray the cost of the program. In the end, if you can't make ends meet with $200k, I'd say that you're living an above-average lifestyle.
I've also managed to save enough (~$200k) to cover the costs and considered loans to maintain flexibility and b/c it kills me to see that balance I've worked so hard to build up dwindle, but CRE is right, interest rates on student loans are killer. With the exception of the Sallie Mae variable, I haven't seen anything less than 7%. I think I could draw on margin in my brokerage account and get more favorable rates. Not doing that though., of course.
Somebody please let me know if I'm just looking in all the wrong places.
I would kill for 7% on mine from undergrad. -____-
For the sake of the OP's sanity it should be noted that the people who have posted so far are absolutely the exception and not the norm. The VAST majority of students attending an MBA program do not have multiple six-figures saved away in cash. Just look at the student loan numbers. Most students are graduating with between $85-105k in student loans. If you figure $10k/year in financial aid/scholarships and $20k in summer internship income taken out of the ~$200k in tuition that's aout $160k in expenses. So if you are starting next year with around $50k in the bank to put towards school you are actually doing alright. Don't let the minor fraction of people with $300k saved at 27 years old scare you too much.
Sorry, forgot to quote. That was in response to CRE:
"I'm wondering why you would want to willingly pay horrendous interest rates on student loans when you don't have to."
My mental estimate for living solid above average is in the 200k range but I'm hoping it may fall a bit short of that only time will tell !
I would guess that the average student living in Chicago or New York (and maybe even Boston) spends around $190-200K during the 21 months of business school. This is roughly 5-15% higher than the schools' estimated budgets.
It's also easy to exceed that figure if you take time off work before school or after graduation.
As far as loans, I went into school with a some savings ($50-75K) but still took out the max loan amount through Sallie Mae at a 2.25% variable rate.
Yup -- last I heard CommonBond offers ~6.24% with 5.99% for consolidation loans, and not sure about SoFi, but probably similar rates.
I would like to pursue MBA few years down the road ideally, but the insane level of opportunity costs/ debt scares me. I probably won't be able to attend MBA due to financial reasons, and the cheaper ones that give large scholarship moneys aren't worth attending in the first place..
So, what are your guys' reasons for pursuing MBA? I'd like to ask. What kind of cost vs benefit analysis did you guys do before committing to b-school?
I'm looking into financing options now, thanks for the insights
I found this website helpful when going through the process last year: http://www.finaid.org/loans/privatestudentloans.phtml
It's a comparison of virtually all the commercial private lenders.
great site, thanks
Awesome thanks alot
thanks guys - to the person who made the point most people not having these six figure salaries - absolutely correct. i left that world after my first year since i couldn't stand doing it.
i will likely have have $100k-$120 k in debt by graduation - effectively borrowing all tuition and living expenses off my savings. a little scary to think about given i plan to stay in the startup world - but ultimately view it as a long term investment (wharton)
regarding loans, my sister just started at sloan - and after about the standard $20k in traditional loans - at 6.8% (ouch), my dad helped co sign and the remaining $40k is the variable at 2.25% - something to consider for other people in a similar position.
Get your parents to pay? -Mitt Romney
Hoping to revisit this conversation specifically re: variable loan rates.
As I mentioned earlier, I hadn't planned on taking out any loans, but with the variable rates Sallie Mae and others advertised I figured I may as well see what rates I'm offered. Well, despite submitting proof of current income and liquid assets I was quoted at over double the advertised rate. Unlike many, parents aren't likely an option for getting co-signers.
Has anyone had any success getting relatively low rates with variable loans yet that is in a pretty solid "independent" financial situation and has not used a co-signer?
Thanks in advance.
Average savings in an MBA student's bank account before joining MBA (excluding loans) ? (Originally Posted: 07/16/2014)
Hi All,
I was wondering what is the general $ savings that an MBA student has (excluding loans) prior to joining MBA? Also, does this affect the size of the MBA loan and interest rates that one gets?
Thanks in advance.
The amount of money doesn't have any effect on the interest rates you can get for the student loans (as far as the government ones go) and it will only effect how much they borrow to pay for school if they want to use those savings to pay for schooling/living expenses while in school.
This figure would obviously be skewed by a rich kid supported by his family or the banker/consultant who has saved a few years of bonuses.
Higher Leverage = Higher Return
I have around $20k saved
Highly variable. Some will have 0 (or negative even, with outstanding debt), others will have $250k+ From their IB/PE stint. Still others will be enjoying family wealth in the hundreds of millions, so their tuition bill isn't even an annoyance.
If I had to guess, most people come in with 20-100k to their name.
Financing your MBA - loans vs savings (Originally Posted: 08/12/2012)
So how do you plan on financing your MBA? I'm debating about how much of my savings and stocks to cash out in order to take less loans. I don't want a huge debt burden but at the same time I feel like keeping some stock and cash savings would be a smart idea for those out of the blue expenses. I've also heard from a handful of people that the Student Budgets schools advertise often don't actually cover the real cost of attending but that is the max loan amount you can get.
U will need more than the school tells u to budget.
Why not do half/half?
I think financing from savings while leaving a cushion is probably the way to go, if you can (assuming you aren't paying a penalty on withdrawing your savings). The rates you pay on graduate student loans are higher than you could reasonably anticipate earning on stock/bond investments right now. Add to that the fact that financing with cash savings saves you a guaranteed 7%-9%/year while returns on your investments are uncertain - and I think the optimal strategy is pretty clear.
dont use federal loans, use sallie mae or discover or a credit line through your investment brokerage (only UBS does this that i know of) collateralized vs your loans for it
i have friends as low as 2.25 percent through sallie mae and i have a 3.98 percent line through UBS, id say if you get 5 percentish or higher and you have the cash it may be better to pay cash.. maybe more like 5.5 6 percent for sure.
That 2.25 percent is an adjustable rate loan and I can't seem to find details on their website as to how often they reset the rate or how high the rate can go. That to me is a big red flag. They do have fixed rate loans as well that could potentially be better than the Federal Loans.
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