Shall I take USD 160k loan to attend Wharton?

yf0223's picture
yf0223 - Certified Professional
Rank: Monkey | banana points 58

Hi, I am an international student who just get admitted into Wharton Full time MBA (2019 intake / Class of 2021) without any fellowship. To pay for the MBA, I need to take a loan of around 160k USD which is pretty hefty to me, especially considering the high interests rate in the states ("as low as 9%"). Before the offer arrives, i am fully convinced that an Wharton MBA will be worth it, but I am a bit shaky now after i realized all my other MBA friends are either self-financed or have received 100k+ fellowships.

I am currently 30 and earning around 80k USD after-tax in the Risk-Management function of a bb, and hoped to eventually move to a Chinese-tech focused PE / VC such as Sequoia / IDG / Hillhouse based in Mainland China / Hongkong / Singapore, but I am open to other career paths in other locations as well if opportunities present itself.

Any suggestions that if i should proceed with the loan? If I am able to secure a 160k job offer in the US after graduation, i will have 120k+ after tax and save around 50k+ per year. At that speed, i need around 3 or more years to repay the loan, and i will be 36+ when I fully clear the debt. The repayment timeline will be similar if i work in Hongkong / Singapore as the pay will be less but so will be the tax. By the time I have saved enough for the house down payment / marriage, i will be 40+, which sounds pretty scary.

Any suggestions ? if i shall take the offer and go for the MBA? or any career advise?

I have thought about making the IBD TMT --> PE path in the US, but I also understand that I will be a bit old for IBD by the time of graduation (i will be 33 by then) , while US PE firms prefer to recruit young IBD analyst at around 25 yo. The PE / VC circle is also fairly closed to Asians, not to mention international students. In Asia, a Wharton MBA "might" be able to help me leap into the PE industry directly without going through the IBD stage (that's a big "might", i know), but my odds of landing in the PE/VC industry still look higher in Asia than in the US.

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Comments (54)

Most Helpful
Jan 3, 2019

I'm in the same boat as an international student going to a H/S/W MBA and will be taking on considerable debt. I think if you already went through the process of applying, you see the value of a MBA not just in the ROI but the life-long benefits from a brand like Wharton. The average student graduates from H/S/W with about $80K in debt after paying off a considerable portion from signing bonuses, summer jobs, second-year fellowships. I believe Wharton also provides a number of on-campus, paid positions for MBAs that can help offset some of those costs.

As well, I think a significant number of post-mba professionals have manager to get married, get a mortgage, while still slowly paying off their student loans.

Don't shut yourself out from other industries yet either, when you get to Wharton you will find a litany of other opportunities. I read a statistic that only 30% of mba grads end up doing what they expected to do pre-mba.

As for loans - see if you can borrow from family or friends ahead of a bank. I know it's not glamorous asking your parents for money at 30, but this truly is an investment in your future, and with Wharton you will be seeing dividends.

Best of luck!

    • 7
Jan 4, 2019

Thanks! I also saw the average indebtness of 80k and didn't realize that the number was after some repayment. I used to think my 160k debt will put me 3 standard deviation higher than the school average which stressed me out.

Great to know there are other people in my shoes =)

Jan 3, 2019

It's a no-brainer from your salary level and with any high level finance aspiration. Consulting now pays $200k+ post MBA and expect IB/finance roles to adjust upwards from $250K+ to $300k+ to compete. Honestly the loans are a drop in the bucket compared to the long term earnings adjust. It will mean a few years of focusing on your loans after school at a better standard of living than as before; once they're paid off, your life will change dramatically.

IB at 33 is fine from Wharton. You won't hit any obstacles. 90%+ of people will land a role. Even if you totally bomb in recruiting and end up in corp fin or something, the long term doors the degree opens are worth it. I was in a similar position and also self financed; while the debt hurts now, it is steadily decreasing.

    • 1
Jan 4, 2019

These are really encouraging numbers! If 200k is a realistic salary expectation, all my concerns will be cleared right away!

Do you happen to know about the hiring of international students in bb? My Booth friend told me that it is difficult for an international student to secure an MBB (consulting) offer in the US unless he/she has a US undergraduate degree. I was thinking if finance jobs require the same.

Jan 4, 2019

Will be great if you can share how hard it will for internationals to land a BB IB gig from a Top 15-20 school. Thanks.

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Jan 4, 2019

I think you should go for it. From where I stand, your only downside prospect is that you want to work in China, a nation happens to be very unfriendly to MBA degree holders, even for Wharton-educated MBA. But if you are open to opportunities in US, HK or SG, the debt you are about to carry is really nothing compared with your bright future.

Jan 4, 2019

Is this true? I've heard the opposite - that the minimum to get any decent job in China these days require at least a masters degree, and that international MBAs are expected for reputable PE/VC roles. But would be interested to hear more about this.

Jan 6, 2019

Master degree yes, but not MBA. If you are looking for a role at the China branch of international PE/VC, MBA is the right way to go. On the other hand, if you want to work in local firm, then you probably won't need MBA. Chinese firms ask for advanced degree, not the right degree. Some local firms even prefer PhD over MBA or other masters for purely business roles.

Jan 7, 2019

Hi HoggieT, thanks for your help! I am targeting PE firms with international genes like Sequoia (Headed by Yale SOM MBA Neil Shen) and Hillhouse Capital (Headed by another Yale SOM MBA Zhang Lei). But I don't know if they want MBA graduates without prior IBD / PE experiences. Do you know anything on this aspect?

Thanks!

    • 1
Jan 7, 2019

i know somebody who worked at hillhouse and had no prior finance background (project manager in a corporate role prior to MBA)

Jan 8, 2019

Ah that's good to know. Do you happen to know the pay there?

Jan 8, 2019

I think Sequoia and Hillhouse generally recruit from PE and BB banks, but they do have a lot of intakes from industry. Both of them accept MBA, so I guess you should be good to go with a Wharton MBA. Out of curiosity, China is expected to undergo a great amount of turmoil in the near future, and the government has been aggressively killing financial holding groups (Large private-owned PE mainly), why do you put the China market on your first choice? Aren't you concerned about what is happening here?

Jan 8, 2019

Hi Hoggie T, thanks for the reminder on the macro condition. I had thought about it actually during my school application.

There are two kinds of PE in China, one is the PE we used to know in the west, while the other kind is more like hedge funds with legal subtleties desgined to exploit regulatory loopholes. Both of them are named PEs but they are quite different things. I think the recent crush-down is targeting the hedge-fund-in-disguise, but I may be wrong.

Currently China and US are the two leading PE / VC markets especially for Techs. China has already taken off US in terms of VC deal volumes in recent quarters. On the US side, i have talked to a Booth alumnus who worked for Blackrock upon graduation. According to him, there were only 2 Asians in the entire office including him, and the other one was in tech support. Unable to envision a future for himself, he quit the job after a year and joined Sequoia in Hong Kong. He told me that the PE / VC deal sourcing / closure requires very strong social bonding skills, and if I am not a true fan of US popular cultures (e.g. know all the crazy moves of each NBA stars; watch all the famous talk shows and movies and understand all the culture references), I can't blend in as an East Asian and I will suffer in the industry. If that's true, China is the only place left for me.

If China is going to do badly in the near future, all of Asia (and probably the rest of the world) will take a big hit. Hong Kong is all about China businesses and will take a full blow. Singapore is about currency trading which I am not interested in. IBD deal volumes in Singapore is quite small compared to HK, and the clients are often tied to China in one way or another. If there is no way for me to hedge the China risk, i rather embrace it and exploit the opportunities.

If I can stay in the US that will be a different story, but again there are uncertainties about H1B, glass ceiling in IBD / PE for east Asians.

    • 3
Jan 9, 2019

Actually, according to a handbook published by the PBoC in 2016, the second kind is officially translated as hedge fund by the officials now, but I see what you mean. So far, the crack down of PE is actually targeting the first kind because the government is becoming less willing to let private sector to control substantial stakes in key industries. For example, Fosun, a leading and the largest PE firm in China, is undergoing a lot of nonsense investigations and has been required by the government to dump a lot of assets. HNA, on the other hand, lost their CEO to a mysterious accident last year and has been forced to sell everything but its airline business. Sequoia and Hillhouse are probably OK, as they barely invest in national security related industries.

But I guess you're right, if you can't hedge the risk then just make the most out of it. I work in alternative credit investment so I'm probably not in a place to give you career advice, but I strongly suggest you to take a position at an international PE house with headquarter outside of China, so that you would have a way out if the market is really going towards to worst scenario. Warburg Pincus, for example, has a great amount of deal flow in China. I'd take a job there over Hillhouse.

Jan 9, 2019

Thanks! You know great deal about the China market (much better than i do). I have never thought about political risks previously and i think i should start thinking about it now. Warburg Pincus was not a familiar name to me, but i will start doing my research on them and see if i can get an internship there in the future. =)

Thanks again for your valuable insights!

Jan 9, 2019

Warburg Pincus seems like an incredibly competitive place to get a job at; is it realistic at all?

Curious as I'm in a similar position as OP. (Incoming international student at M7 with Big 4 Corporate Finance background but no PE experience.)

Jan 9, 2019

No problem man. I'm also in the middle of business school application, but I plan to settle in North America or Europe post MBA. You can always PM me if there's anything useful I could tell you about the China market.

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Jan 4, 2019

I say you go for it man, I'm too young for these considerations so maybe it's just naivety, but damn doesn't that just sound so rewarding and exciting? Like you astutely pointed out, it's gonna take you a few years to pay them down but your life will be different from there on out.

Jan 7, 2019

While I agree with others that going to W is the right move, I would caution some of the overly optimistic points. Let's break these down:

  1. Salary: Consulting does not pay $200+ in salary, but rather that includes bonuses. Cut that in half after tax, and then depending on the COL of your home office, you aren't actually left with a lot.
  2. Visa: As an international student, do not rely on you getting a job in the US post-MBA for your financial calculations. You might very well lose the H1B lottery and end up having to go abroad or back to your home country. It sounds like you have already thought about that, but US pay is very different from international pay, even in developed markets.

I agree with the asking friends and family for a loan. Anything you can do to reduce or eliminate that 9% interest (lol) is worthwhile. It's not like you are asking for money to finance some random venture or shady business, this is Wharton after all.

    • 2
Jan 7, 2019

Thanks for the advice. I will definitely think though the points you have highlighted.

My current career plan still centres around Asia. While I dreamed to become a value-added investor in a Chinese-tech focused PE/VC firm (as the tech industry is very happening in China), I have very little knowledge about the job opportunities there or their compensation. My back up plans are either consulting or HK IBD .

HK IBD, I heard, pays a base salary at around 100k USD (with 10% effective tax rate) but the working hours are much worse than NYC. I have a few friends who got transferred to the HK office from NYC after they failed the H1B lottery , and they all quitted their jobs within 2 years.

Another friend told me that MBB pays the same after-tax amount to MBAs in all their global offices (around 140k USD after tax). Last year Wharton sent 7 MBA to McKinsey China, the most among all business schools. Considering there are only ~40 mandarin speakers in a batch in Wharton, it appears that I may have a decent chance to get a consulting job in China. I am open to consulting jobs in HK and SG as well. These are my plans for now. hopefully I can make more informed decisions in my year 2.

    • 2
Jan 9, 2019

The consulting salary expectations may be slightly off. From what I've seen, the managementconsulted website has the most accurate figures (based on what my MBA colleagues got offered at MBBs). Still, even with bonuses, it would be difficult to get a $140k after tax annual amount. US is about $140k-150k (+bonuses), London about GBP80k-90k, Western Europe EUR80k-95k and Dubai $120k-130k. After taxes, those amounts are quite different per country, from less than $5,000 per month in some European countries to more than $10,000 in Dubai. Some of those difference could narrow once you factor in living costs. Still, you'd have a decent lifestyle anywhere on an MBB salary.

Nonetheless, I wouldn't base your MBA decision on how quickly you can pay back the loan. I found the network, career opportunities and life friends I made during my MBA as much more valuable than the cost of the programme and the lost earnings.

Jan 9, 2019

Thanks for the correction! I also recently found out that global pay does not work that way.

According to the very detailed employment report of INSEAD (which i use as a salary guide because Wharton does not break down its stats by country), management consultants in China / HK / Singapore all earns around 135k USD including bonus before tax, and the signing bonus is around 20 - 25k USD. In Singapore, 160k USD annual pay is subject to 10% effective tax rate, while in HK thats around 12%. China charges around 30%.

Financial Services in APAC pays around 170k USD before tax according to INSEAD, but they didnt break down this number into countries or more granular sector.

In that sense, 140k USD before tax in the 1st year is probably an "ok" expectation, but I am not sure about the 2nd year. I will check managementconsulted as you suggested.

    • 1
Jan 10, 2019

Are you looking at PPP adjusted figures?

Jan 10, 2019

I don't think INSEAD reports PPP numbers. If exists, PPP adjustment will make Chinese salary double. From what i gathered from the internet , 1M Chinese Yuan (before tax) is a commonly quoted package for an MBA graduates in MBB, which is consistent with the 135k USD (not counting signing bonus but including bonus) I found on the INSEAD employment report. Thus i think the numbers I quoted earlier are nominal dollar values.

    • 1
Jan 8, 2019

Thanks for sharing this-certainly useful. Any thoughts on whether attending a 15-20 ranked MBA is worth it for an international? I am targeting IB post MBA

Jan 9, 2019

I would say this all depends on the individual circumstances:

  1. Are you going to be taking on any debt? If you can go at a significant discount, I see little downside apart from lost earnings for the two years.
  2. Do you actually want to work IB in the US afterwards? T15-20 may not be much help internationally vs. M7 back in your home country.
  3. What level are you currently at? If you are Associate on track for VP, then I would say not worth it. H/W/S, maybe.
    • 1
Jan 9, 2019
  1. Yes, I will be taking 160k debt out of 200k. 40k is what i got as scholarship.
  2. Yes, I want to work in the US in IB.
  3. I am not in IB but want to break into it. Why are there so few internationals in IB? Any insights and tips you can share?
Jan 7, 2019

Curious - at what preMBA income level would you all say it no longer makes sense to go? $100k? $150k? $200k?

Jan 7, 2019

idk i was making ~$250k and got no scholarship and am going to most likely be transitioning to a significantly lower paying job post bschool (~150k)...

i didn't think of it as a pure $$ equation, figure the intangibles and benefits down the road would make it worth it. maybe im an idiot and will regret it though lol

Jan 8, 2019

Helpful, thanks. Sounds like you're transitioning industries then? What if you want to stay in your current industry?

Jan 8, 2019

Yeah transitioning to either tech or med devices tbd. There's a lot of information on comp out there for VP level post-MBA, I know at my prior funds those guys pulled north of $300k (one fund was $400k and only hired MBAs other didn't take MBAs and was somewhere $300k+) and also got carry.

If you're going back into finance I don't think $$ will ever be a concern unless you have a really high standard of living, more of my concern would be around finding a seat at a place you like in a geography you want to live in. If I wanted to stay in PE, I would've probably still gone to business school because I didn't really like the strategy of my prior fund (not a fan of distressed) but if you're in a spot where you can get promo straight to VP without it and really like your fund/the people/strategy, I would consider foregoing it. I think finding the right seat is incredibly difficult, but finding a seat itself is not too hard.

    • 2
Jan 8, 2019

Hi plskystks, do you know if funds take MBA graduates without prior IBD or fund experiences?

Jan 8, 2019

I can only speak anecdotally, I know someone at Wharton who worked in AM doing long-only investing that transitioned to a small family office doing pe deals after spending the summer in PE. I think it's incredibly difficult and don't really have many data points, I've avoided the PE students and orgs at my school as I don't have any interest in pursuing that path so probably a better question to ask Wharton PE club.

    • 1
Jan 7, 2019

What would happen if you went back to China and just didnt make the payments?

Jan 8, 2019

Well, I won't consider that as an option. There will be consequences to you personally, and an extremely negative impact on future applicants who share your background. You will become famous in the most powerful alumni / career network in the world in an undesirable way. Rejecting the admission offer is probably a wiser choice than trying to run away from student loans.

Jan 8, 2019

My guess is that it will take your around 8 years to break even with the assumptions you provided.

Assumptions:
* Current Salary $80K, Expected $160K, 3% Growth
* $160K in Loans for tuition ($80K per Year), 7 year duration, 9% rate?
* Two Years Opportunity Cost
* Cost of living increase since you'll likely now live in a major city

You're probably right about buying a house ~38-40, but still Wharton has plenty of upside.

    • 2
Jan 8, 2019

Honestly this is the wrong way to think about it - but more because it's just foolish to model salary projections over 10 years out. There are too many intangibles/variables to consider that have a huge effect on the #'s.

Jan 9, 2019

Breaking - I don't disagree after 10 years it's a crap shoot. Though I would think the 5 - 8 year window show conservative assumptions on what you would expect. Even more so if you were to go the corporate route.

Jan 8, 2019

Thanks for the very detailed calculation. I was hoping my salary growth rate could be much higher than 3%, especially in the first few years after MBA graduation. Maybe I can reach 300k before i hit the bottleneck? or it can be just my wishful thinking....

Jan 9, 2019

I took a very conservative take. Don't just wish it, make it happen!

Jan 9, 2019

OP's 160k concern might be a bit overstated as well since I believe it is possible to get 2nd year money from Wharton even if you didn't enter with a fellowship.

Jan 9, 2019

Oh i didn't know about that. Do you have any details on the 2nd year funding? I know there are associate opportunities for 2nd year students. The school pays 5000 a month for those aasociates but i don't know the competition behind the scene. Are you talking about these opportunities? Or probably merit based scholarships?

Jan 8, 2019

Congrats on Wharton - take it!

Jan 8, 2019

First, congrats on getting into Wharton. It's a good school and most people get rejected. So good on you.

But have you applied to any other schools and received any type of aid or reduced tuition to compare this to? Even if Wharton doesn't offer you a loan or scholarship, it's likely that another school might, especially if you tested well and are talking about a T2/T3 or lower.

If your decision is "Wharton or bust" (this seems silly), that leads to one set of mental calculus. But there are plenty of other MBA programs out there that might help you reach your goals for a little less dime. If it were me, I would probably start there since $160k seems pretty hefty.

    • 1
Jan 8, 2019

I applied for a few top 7 and only got an offer from Wharton. Back then when i was preparing my application, I didn't want to go to a school ranked lower than my undergraduate school, and was using the Singapore INSEAD 1Y program as a kind o benchmark. While it might not be the right prospective to think about business school (e.g. US companies may not care about "global" rankings, or any rankings per se), it led to where i am now.

Jan 9, 2019

That's a bit of a pickle. What people are saying above is likely true - you should be able to pay back 160k in a few years assuming you get a good banking or consulting job (or another job that pays +$200k USD) and live meagerly. But that is dependent on you getting one of those jobs post graduation, which is not a guarantee. The AVERAGE compensation for MBAs (even from Wharton) is something around ~$160k, which means some people are higher and some are lower. Of course, this depends on job function, but to further state the obvious - the lower you go, the longer it takes you to pay back your loan.

I guess it just depends on how comfortable you feel living with debt for 3-5 years at this point in your life.

If it were me personally, I wouldn't be able to justify spending $160k (post tax) on a particular school when there are a couple dozen other schools that have employment outcomes that I consider to be within range, and that I felt would give me more of a cost break.

But as you say, that ship has sort of sailed already for you right now and so I would make the decision that you think you will regret least in 50 years.

    • 2
Jan 9, 2019

Congrats on getting into one of the H/S/W schools! Definitely should be proud.

All the others are posted great advice and only you can make the decision, but one question I would have for you is:

Have you thought about posting a job review of your location so you can get a free IBD report from WSO which shows Comp, Advancement, Growth, etc?

That would likely be able to calm your fears, would cost you nothing, and you would be able to see a realistic post-mba Associate 1 salary.

Also, 32/33 is not too old for IB associates. From what I've read on plenty of threads, getting into mid 30's and up is kind of when someone should be thinking another career path.

Cheers!

Jan 9, 2019

Thanks for the advice ! I am happy to contribute to the community and will look for the job review section in the forum. On the other hand, is the IBD salary report based on US numbers (because i don't know if i can win the H1B lottery and stay in US) ? I saw the associate salary of 217k, but i think i can find out more after posting a review.

Jan 10, 2019

From what I have seen in glimpses, it looks to be in USD. However, I would think they would have other firms other than just the US on since Banking is such an international type of work.

Best chance to give a review and give it a shot.

Best of luck!

Jan 9, 2019

Hi yf0223,

I'm literally in the exact same position as you as, albeit with a different M7 school. Like you, I wasn't offered any fellowships and for me the dynamics have definitely changed. I have always been excited about the IDEA of pursuing an MBA. Now that I actually have to DO it and take out a hefty loan, I have mixed feelings and doubts.

Here are some of my thoughts:

  1. I think it doesn't make much sense to view the MBA from a ROI perspective. There are way too many intangibles and uncertainties for any valid calculation. Assuming it had a negative NPV but you'd find a meaningful career, would you still do it? I decided I would.
  2. Anectodically, every single person I talked to told me the debt is not an issue and should be gone within 5ish years. (They were NOT all finance guys.) Make of it what you will as there might be choice-supporting biases at work.
  3. Thus, I'm trying to see this from a risk perspective, both regarding liquidity during the program and post-MBA trajectory (e.g. what if I don't get a visa or the job I want). I'm comparatively relaxed regarding the latter, even though as an international student, it really is a 3-5 year post-MBA commitment to staying in the US or UK as I would simply not get a competitive salary in my home country. Keep that in mind. I'm personally much more concerned about short-term liquidity as I don't have a hell lot of savings and I'm paranoid about being broke during the program (or broke enough to not be able to participate in travels or parties).
  4. Despite the doubts of point (3), while you may not have any fellowships right now, you might be able to offset some of the cost later in the program. Many programs (not sure about Wharton) offer merit-based fellowships for second years, you may get a teaching fellowship (or something similar) and after all, there will also be your internship salary. Try to get more information on your opportunities during the admit weekend!

I know that doesn't help you much, other than knowing that you're not alone in this! I personally decided I'll still go for it anyway. I also just turned 30 and thus view it as a once in a lifetime opportunity; climbing the ladder at my current job (Big 4 Corporate Finance) seems rather dull to me and I doubt the exit opportunities will be even close to the MBA's. Your situation may be different, but this is mine.

Jan 10, 2019

Thanks for sharing! I think that summer internship / signing bonus / associate opportunities may reduce the 160k to 100k, but provided you don't have other costly expenditures.

I am personally very concerned about the H1B lottery so I probably have to commit to a lot of Asian career Trek which may cost 10-20k USD? I don't know exactly at this moment. Do you have any backup plan in case H1B does not happen? or you are prepared for all-in?

Jan 10, 2019
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Jan 16, 2019