Best career to pay off MBA loan
Hi,
Would like to know what is the best job option after MBA to pay off the MBA loan. IB or Consulting? I prefer consulting but I think its possible to pay off a 100K loan with 3 IB bonuses after tax (in 3 years) However in Consulting will probably take 6 years of saving every penny.
So should i look at doing IB for 2 years out of MBA and then shift to consulting? Is it possible to make that leap?
What do you guys think?
Assumptions
1) min amount of loan is paid off every month
2) Estimated post tax bonus for IB at 55K in NYC
3) Estimated base salary for IB at 130k pa and Consulting at 150k pa for first 2 years
How about two years of IB then PE?
I'm guessing you aren't at an M7?
Consulting would probably be your best bet IF you get a job in LA/SF(California) where the cost of living is considerably lower than NYC/Boston.
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Another thing, you're sacrificing something by paying off your loans so quickly.
Besides the last decade, the stock market has done relatively well, 8-9%. You'll benefit yourself in a number of ways by paying your debt off over time. Since the interest rate is about 6%, you'll save some money by paying off your debt over time, for example 10 years. In addition, you're able to write off your student loan interest. So overall, you'll be saving some money and you'll also have a higher standard of living in your beginning years.
Hopefully, the latter half of the loan, the remaining 5 years, you'll be earning a more comfortable wage, right?
I can understand your willingness to pay off your loans more quickly but the market and tax laws benefit you more if you paid it off over time. But my recommendation is to not lock yourself into the 25 year program, instead opt for the 10 year plan. Another thing you've got to think about is $150k salary in NYC can be blown very quickly. You probably already know that because you might have lived there after undergrad.
Anyways, best of luck
SF is now more expensive than NYC and has been more expensive than Boston for 15 years. Also, you should be able to pay off your $100K loan in 18 months max in IB. Signing bonus of 60k (35k post tax), stub of $40k (25k post tax) and end of full year bonus to easily take care of the rest.
San Francisco is still less expensive than New York City.
Signing bonus isn't $60k bro
You cannot deduct student loan interest when making over $75k
Good point. My student loans were paid off by the time I started on my phd.
I'm confused, can't you put some of your base salary into it? Are you expecting to spend all of it? .....
I have a two friends whose consulting firms basically paid for their second years of business school when they committed to said firms after their summer internships. Anyone know how often this happens?
i heard that deloitte does that.
Four important measures for Yuppies:
1.) What is the cost of a mid-range domestic beer (Sam Adams, Yuengling) at a bar? In NYC, the cost is typically $7.
2.) How much does a recently constructed highrise 1 bedroom apartment rent for? In NYC, this is about $3500/month.
3.) What does a box of Lean Cuisine cost? In NYC, this is typically $5.
4.) How much does a gym membership with a pool cost? In NYC, it's $90-$150/month
Lean Cuisine? Really? Also, I think $7/beer is pushing it.
On a slightly related note, how does Equinox always have such physically attractive members? It's like a goddamn good-looking convention every time I walk by one.
Maybe they all workout or something?
Regards
Just to clarify the questions raised. I'm planning for an MBA (not at an M7, unfortunately) Yes, I will be paying the minimum on the loan every month, but plan to use the entire year end bonus to clear off a chunk of the loan at one short. Since there is no tax benefit, as mentioned by SHORTmyCDO, the only reason to stretch the loan to its full tenure would be the opportunity cost. But considering that the student loan would be around 7%, i feel its safer to first payoff the loan, and then begin investing the rest. @islandergold - Signing bonus of 60K? Unlikely even at at M7 unless maybe the person was already in IB preMBA and is being hired at VP level
Banks don't vary your sign-on based on whether you're M7 or not. Almost nobody enters as a VP post-mba regardless of whether they were an associate prior to b-school. $55-$60K was standard this year across most BBs.
Any color on whether it's the same for associates hired out of the MFin programs for IBD work?
You're lumping a whole bunch of shit together there guy. First, it isn't a "performance bonus" from your summer. It's an incentive to sign on early and that's typically an additional $5k. The actual signing bonus itself is $40k as I said. You're trying to lump a whole bunch of shit together that are distinct and separate things. You are also extremely aggressive on your end year bonus assumption and stub bonus. Even if you are getting a bonus in that neighborhood, a large chunk of it in the present climate is given in deferred equity.
Making it sound like paying down a $100k loan in 18 months is simple is simply misleading.
Stubs were typically ~$35k last year.
I'm lumping together the cash received after signing an offer. Banks break that total amount up, fair enough, but it's all the same thing - a signing bonus. Like I said, 5 people, 5 banks, varied between $55-$60k. And you are correct, some of the incentive pieces were $5k and some were $10k. Not sure why you're having so much trouble on this.
Base for BBs across the street is $100K, some boutiques pay $110-120K, sign on bonuses for certain BBs are $50K + $10K if you sign very quickly ($60) but at some BBs it is less. Stub bonuses are between $20-40K and end of year bonuses could easily be $0 (example UBS).
Base consulting $135K (next year will be $140K), sign on bonus between 20-25K, some pay for part of school if you summered. End of year bonuses between $20-$40 (mostly between $20-30K).
Neither option is the best to pay off your MBA student loans.
Don't forget that most banks bump up the base salary at the stub date... typically to $125k
Whatever, they also pay half of your bonus in stock...... Disclosure: I don't care about either field.
Yeah I mentioned that... not typically half, but if your bonus will break a certain threshold (currently I think this is ~100k for many firms) they will give you 80 / 20 cash and equity... though not all split it up the same.
How's about paying cash for your MBA? This way, you would avoid raising debt per se, hence wouldn't be faced with a debt repayment problem
How many people have $180,000 sitting around to pay cash for their MBA and living expenses for 2 years?
Oh, quite a lot of those whom I personally know could do. Ironically, NONE wants to waste money and 2 years of work experience/track record/salary/bonus.
Maybe you are unaware, but there are IBs, consultancies etc outside the US. With higher after-tax pay (due to lower taxes and comparable gross pay) and nearly zero emphasis on MBA diploma (everyone who works hard is directly promoted or may lateral as an associate hire in case of solid experience and knowledge).
If you want some knowledge, get your CPA, ACA, CFA charter while working full time. Its by no means a "passage right" nowadays, but at least it says something positive about your ability to handle work and serious studies simultaneously, implying commitment and dedication.
If you want to be an equities quant in the hedge fund and are exceptionally bright, get math PhD at a good place (contrary to an MBA, it does require HUGE intellectual power).
If, however, you want two years off and USD180k of debt, go ahead with an IVy league MBA. 10 or 15% of really great students will make it from there, but the rest will trail, often severely, as in the current economy, you must deliver NOW (and, sadly, HBS diploma doesn't help here when compared to 5 additional closed deals at a hard working analyst's disposal).
All the above comes from someone who's been a VP at a top tier global IB (not in US), and who's seen a lot. In this country, 180k USD MBA debt is a huge waste in every respect (unless, perhaps, your aspirations are to become a partner in a TPG-level firm one day, but come on, less than 1% will ever be In a position to do so, chances are too slim to make such a bet)
Oh, quite a lot of those whom I personally know could do. Ironically, NONE wants to waste money and 2 years of work experience/track record/salary/bonus.
Maybe you are unaware, but there are IBs, consultancies etc outside the US. With higher after-tax pay (due to lower taxes and comparable gross pay) and nearly zero emphasis on MBA diploma (everyone who works hard is directly promoted or may lateral as an associate hire in case of solid experience and knowledge).
If you want some knowledge, get your CPA, ACA, CFA charter while working full time. Its by no means a "passage right" nowadays, but at least it says something positive about your ability to handle work and serious studies simultaneously, implying commitment and dedication.
If you want to be an equities quant in the hedge fund and are exceptionally bright, get math PhD at a good place (contrary to an MBA, it does require HUGE intellectual power).
If, however, you want two years off and USD180k of debt, go ahead with an IVy league MBA. 10 or 15% of really great students will make it from there, but the rest will trail, often severely, as in the current economy, you must deliver NOW (and, sadly, HBS diploma doesn't help here when compared to 5 additional closed deals at a hard working analyst's disposal).
All the above comes from someone who's been a VP at a top tier global IB (not in US), and who's seen a lot. In this country, 180k USD MBA debt is a huge waste in every respect (unless, perhaps, your aspirations are to become a partner in a TPG-level firm one day, but come on, less than 1% will ever be In a position to do so, chances are too slim to make such a bet)
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