AHHH!! Booth (180K) + 60K from Undergrad Debt
Hello guys,
I just got into Booth with no scholarship, and I am trying to fathom how I will be able to pay everything off in an reasonable amount of time. In addition, I still have about 60K of undergrad debt. This means, I will have over 240K of debt by the time I graduate from Booth. I would like to hear your guys' thoughts on this, and whether or not you think a Booth degree is still worth it.
I am very happy I am in, but it is still a terrifying though having to pay over 500K (including interest). Look forward to your comments.
In my opinion, it really depends on three things: (1) how much you make now, (2) how much you enjoy your current job, and (3) what you'd like to do after school. If you're planning to do consulting or banking after school and are able to live frugally after business school, you should be able to make a huge dent in those loans within the first 2-3 years.
Thanks for your reply!
1.) I make about 55K now. 2.) I do enjoy my current job, but I would like to try something different. 3.) I want to join an MBB and then, after a few years, start my own business.
I'm thinking about making 2000/month in loans payments, but it seems it will take me more than 15 years to pay off the loan and interest.
When you do begin paying down the loan, make two interim payments each month that equal the monthly payment. This cuts into the interest more quickly at no additional cost to you. Then make discretion payments when you are able.
It's a big debt load, but you can do it - however, it would make sense to consider some trade-offs, such as living in the South Loop while in school (far from the worst thing in the world), and possibly staying there rather than moving to Lincoln Park after school - or recruiting in a lower COL city like Houston, Dallas or Atlanta. And sharing the apartment with someone too. If you work for MBB, your city is just somewhere you'll hang your cap on weekends.
For you, business school is a lifetime earnings decision, not a quick path to riches. It will give you a one-off launch-pad into tripling your salary, but you'll "pay" for it; by the time you're done paying for it (which won't be a 2-3 year deal), you'll be well into the $200k-a-year-and-growing territory, which you may never have reached in your previous path.
You're going to have to aim higher than that...
Putting aside insurance and retirement, $55k less state, federal, and FICA taxes is 'round $40k net.
A conservative (below median) estimate for a starting consultant's salary is $130k + $20k signing + $20k year end = $170k. That's $95k net after a max 401k contribution. If you take a median offer and drop the 401k a bit, you could easily net $105k. In any case, you're looking at $40-50k / yr more than you make now.
With a bit of discipline, making loan payments of $3,000-$4,000 (plus whatever your current payment amount is) should be doable your first year out.
You'll also make more in a 10-week summer internship than you make in 6 months at your current salary. If you end up with a firm (e.g. Deloitte or Accenture) that comps second-year tuition or get a fellowship for 2Y, you're even better off.
I'm taking $150k in loans to go to Booth. I figure loans paid in 2-3 years and break-even (loans, lost salary, time-value) in 5-7. After that, it's all gravy.
If it makes you feel better, I know people with more.
I think you'll be okay. The debt burden is undoubtedly high but you'll be able to pay it off rapidly after graduating. Once you do, you'll be in a far better position than you would have been if you had foregone your MBA. Not saying it will be easy, but it will be very doable.
I don't know. I mean you will hopefully be making at least 2-3x what you are now post grad school. That being said, $2K per month for 15 years is frightening. Assuming you live in Chicago (lower COL) you can figure on say $1,500-$2,000 a month in rent. So you have a baseline of $4,000 going out every month before anything else. That is essentially a $70,000 job just in rent and school payments.
I'd start firing off scholarship essays or considering what kind of SA you can get. Do you have a 401k? Might be worth pillaging that to help offset some of these costs.
Why don't you model it out? You know where your finances are now, where they will presumably be when you start/end school, and can look up the median income of people coming out of that school in the field you want to go into. Add in your projected expenses and then figure out when you'd have it paid off by.
That’s a lot of debt, but given your path, it’s really not all that crazy. I’m not really an expert in student loans, but I think that most lawyers graduate with approximately that much debt (at least like ~$200k). Whether law school or not is a good investment generally is another discussion for another time, but assuming you went to HLS and got a nice firm job, you’d be making approximately the same (actually a little less with bonus and everything else) than what you’d be making at MBB. And then there are doctors that are even worse off with a long timeframe until they start earning.
You will likely more than triple your salary coming out of b-school (even assuming Tier 2 consulting instead of MBB) with a significantly higher earning trajectory than where you are now (assuming that one).
I will add one question: what were you thinking when you applied? Did you just count on getting scholarship money? If so, did you apply to anywhere weaker than Booth that gave you money? I just feel like most people that apply to b-school count on paying full price, and if they don’t, they apply to a couple schools that they’re relatively sure will give them money.
To be honest, I wanted an MBA business schools ">M7, and Booth, Stanford, and HBS topped that list for me. I didn't get into HBS and Stanford (two schools that would have offered me need-based scholarships). I only have one-shot to for an MBA, and I want my MBA experience to be one that I will not forget. I felt that would happen for me at Booth, Stanford, and HBS based on my visits and speaking to alumni. In addition, I am a career switcher, and I needed a school that would have gotten my foot in the door of a variety of different industries; I felt an MBA business schools ">M7 school offered me the best opportunity for that.
I'll say that I was hoping for some sort of scholarship based on my experience within the non-proft sector, but that obviously did not work out. In addition, my thinking was that I'll first apply to the schools I want to go to, then, if I get in, think about how I am going to afford it.
What're your interest payments now relative the percentage of your income? What will they be after business school? Your take home is like 3200 a month right now, maybe slightly less. You're probably paying 800ish/month in student loans. 25% of your income out the door to loans for the foreseeable future.
2k/month post-mba w/ gross pay at 200k and take home at 120ish means your loan payments are closer to 20% of your income and you have a shitload more to spend on life necessities. 25k in loan payments + 25k rent, gives you 50k+ play money. Granted, this includes bonus.
I'm doing Kellogg almost all debt (I have $20k saved, but I have about $20k outstanding from undergrad debt). You'll be fine, just realize you'll need to be somewhat frugal the first 2-3 years after graduations. You won't be model and bottling, but if you're okay living in a cheap loft for a few years to pay down your debt, you'll be fine in the long run. M7 business schools have a very high floor....even if you f*ck up, you're not going to be starving in the street. Worst case scenario is your standard of living is slightly lower than it is now, but you still get a strong network and 2 years of fun experiences out of it...plus that long term salary progression.
If you actually plan out the expenses versus compensation, you should definitely attend Booth.
Rough numbers below, adjust accordingly to figure it out
Without MBA (assume 5% compensation increases, assume 20% of compensation goes to loans) Compensation: $55k - 58 - 61 - 65 - 69 - 74 - 80 - 87 - 95 Total Debt: $60k - 49 - 38 - 25 - 12 - 0 - +15 - +33 - + 50
With MBA (assume 15% compensation increases, assume 20% of compensation goes to loans) Compensation: $55k - 0 - 30 (internship) - 160 - 185 - 210 - 250 - 290 - 340 Total Debt: $60k - 150 - 200 - 170 - 130 - 90 - 40 - + 20 - +80
In 7- 8 years from now you are going to be in an exceedingly better position.
To echo everyone else's comments, I think you'll be alright. If you live smartly during school (e.g., live with roommates, bring your lunch, cook dinner at home, take public transportation), you may be able live below the budgeted amount. I am at an MBA business schools ">M7 school (not Booth) and I've been able to do just that. That said, if you have a wife or kids you'll be supporting while you're in school, that completely changes the equation.
Secondly, I agree that you should model out what you expect to be earning and spending. If you end up doing consulting and can live frugally for a few years and have no spouse/children, I would imagine you will be able to pay way more than $2K per month towards your loans. I'm planning to pay $5K+ per month towards mine when I graduate, but based on my classmates, I'm more conservative with my spending than most business school students.
To anyone in B-school right now: Do you wish you had pocketed more cash for an MBA business schools ">M7 early on in your career, or do you not regret living it up and treating yourself once in a while?
Not there yet, but I'm going to be more towards living it up now. I don't see the point of having an extra 100k at age 30 and missing out on a lot of great times during my 20's. Assuming we hit career assumptions, anything we save in our 20's will be extremely marginal compared to our earnings during our 30's and 40's.
A bit. I regret the times I wasted money....expensive clothing I never wore, $1000's in taxi's because I wanted an extra 10 minutes of sleep, $20 cocktails for the sake of $20 cocktails, taking girls out on $150 dates when a $50 date wouldve impressed them just as much, ordering from seamless daily for $20 a pop because I didn't feel like going outside in the cold/learning to cock, etc. I could've saved another $20k or so without reducing my aggregate happiness at all.
I don't think I'd go beyond that though. All the vacations I spent a ton of money on were totally worth it. And living in Manhattan as opposed to Brooklyn was also worth it.
I think they people who really regret their spending habits the most are the people who spend $600 a week on a table at a club, which most of the time isn't even an enjoyable experience, they just do it because they think they are supposed to be doing it. Doesn't really seem to help them get laid.
Consulting recruiting isn't 100% success in any school. So just prepare well. Even if you want to maximize b school experience, taking all the fancy trips might be difficult if you want to keep debt in control. Also consider going for a lower cost of living city (e.g. Atlanta over NYC). They all get the same salary coming out.
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I agree with everyone else on here. It will more than pay for itself in the long run, and the math shows that you actually won't be living much worse, even in a non-best case scenario. Plus, it sounds like you genuinely want a career that you cannot get without b-school, and a top MBB placer at that. You'll have to fork over the money eventually to get to where you want to be, so I absolutely think it's worth it.
The only way this equation changes is if you have kid or a spouse that can't work (Visa issues). Having just a wife actually makes the process cheaper - I will be living off my wife's salary next year for living expenses, which means all my savings can go towards tuition.
Just a note, some consulting firms also pay for your second year of business school if you accept an offer with them post-summer internship or have very generous loan forgiveness programs.
Just wait until you whiff on MBB and are making 130 in corporate finance paying 15 to 20k a year post tax in just interest payments. Woof. I think from where you are though it's probably worth it.
And to the eat at home and not really go out - kills a lot of the b school experience
Glad someone threw that out there. I think any top 10 program is a good bet in the long run, but hope you at least consider some "what-if" scenarios. i.e., what if I get there and decide I am not interested in consulting, what if I get laid off a year into my $200k gig and still have $200k+ to pay off, etc. I'm sure you have considered this, not trying to be a wet blanket, but best to go in with eyes wide open.
@shorttheworld I agree generally, but even the pay at non-MBB consulting is pretty damn good. Obviously, Deloitte and Accenture have similar pay packages (smaller bonus), and pay the second year of school, which would be great for OP. Other boutiques, like ZS Associates or LEK or Parthenon also have competitive pay (if not better) than MBB. Even Tier 3 firms like PwC have comprable starting salary for MBAs.
I do agree though that OP should consider worst case scenario pay when making the final decision and running the numbers. You will get a job out of Booth, but there's definitely no guarantee that it will pay as much as you want. Would definitely make sure you're comfortable with the lower end of the range before doing it.
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