Hi Fellow Monkeys:
I am considering a full-time 2-year MBA and reviewing the cost of attending schools I will be applying to (a number of top-10 schools).
For purposes of discussion, I'll use Columbia as an example. They're saying ~$80k/year for tuition and "mandatory fees" (oh boy...sign of what's to come) and then another $30-35k/year of room/board/insurance/personal expenses/what have you. Let's call the all-in cost ~$115k/year for your average MBA program, acknowledging that NYC is a high cost of living city. So the full two years costs me ~$230k.
For those who are in b-school, about to enter or have attended in the past - and had enough cash / liquid net worth to fund the whole thing out of pocket - did you still take on student loans? What considerations did you go through when deciding how to fund the degree?
Apologies in advance if this has been asked in prior years. That said, with the dramatic collapse in interest rates this year (e.g. 10 year at ~70bps), I think it warrants a fresh discussion.
Cheers!
Not sure if this is remotely possible for you, but if money is a serious issue for you look into the national guard. Qualifying for the partial GI bill is really easy and gives minimum a 50% discount off your school.
Not sure if this is remotely possible for you, but if money is a serious issue for you look into the national guard. Qualifying for the partial GI bill is really easy and gives minimum a 50% discount off your school.
I've seen a combination. I personally just paid it all in cash to avoid the headache but considering how low rates are, I think it makes sense to borrow as much as you can, especially if most of your money is tied up in investments and you have to liquidate / pay capital gains taxes / etc.
Thanks James G! Yup, that's what I'm primarily thinking about .. 15% cap. gains tax given my holding period and filing status. Plus I don't want to sell some of the companies I own (I partially manage my own PA).
If I am not mistaken, the effective rate is 0% at the moment. May be wrong, but obviously would only apply to subsidized.
I paid all cash starting in 2013 when interest rates were pretty low but not rock bottom. My considerations were primarily:
1) I like the mental peace of mind that comes with being debt free. Absolutely ridiculous as a PE investor, I know, but knowing that I don’t owe a cent to anyone is a pretty liberating feeling.
2) Using the cash didn’t influence my ability to take part in any experiences. I could still afford to live where I wanted to live, take all the trips I wanted to take, eat out when I wanted, and generally not feel like a poor student during school. If paying cash made the numbers tight and I had to check my bank account before making these decisions, I think I would have preferred to take out a loan.
3) The argument to taking on debt is that you make more money investing the cash and pocket the difference between the investment gains and the interest rate. So if you take on a 3.0% loan you’ll need to have investment gains of 3.0%, after fees / expenses, to break even. From my perspective, having a 3% hurdle to break even combined with the time needed to invest the money just wasn’t worth it for such marginal gains. At $100,000 of debt, a 7% return would only net me $4,000/year pre-tax, which just isn’t a meaningful enough amount.
Maybe I was jaded, but I was working during The Great Recession and watched a lot of people’s investments get wiped out. I was fortunate enough to go all-cash in 2008 and avoid losses. In 2013 - 2015 we had no idea that the stock market rally was going to last for more than a decade. There were routine talks about the next recession being “imminent” so I took a cautious approach to taking on debt and plowing my savings into the market during business school.
Lastly — while this was my approach, I did have some PE classmates who went the debt approach. I imagine they fared better than I did financially given the way the market has performed.
Thank you CompBanker! I appreciate the perspective.
Is Columbia really 80k tuition now?!
Holy.mother phuck. What an absolute racket. 160k in tuition to gain access to on campus recruiting and networking (let's be honest, mba classes are pretty pointless)
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