Should I borrow $80K to finance my business school education?

June 13, 2007 5:51 PM

Right now, I plan to start business school in the fall. It's a top five program, and in all likelihood, my salary after school will be about twice what I make now. That said, I'll be borrowing about $80K to cover the costs in the short-term. Is this a good idea? I'm excited about b-school in general but perhaps not to the extent that I'm willing to incur a debt that will burden me for decades to come.
posted by kakes to work & money (23 comments total)

Education isn't "bad" debt. It is an investment.
posted by k8t at 5:51 PM on June 13, 2007

Education isn't "bad" debt. It is an investment

Seconded.
posted by chrisamiller at 5:58 PM on June 13, 2007

my salary after school will be about twice what I make now

without knowing what "make now" equals and how many years you intend to continue working after business school this is a pretty difficult question .... could you provide some more information ?
posted by southof40 at 5:59 PM on June 13, 2007

second k8t. creditors will always look at school debt more leniently than other types of debt. not to mention, interest rates for education loans are usually a lot better as well.
posted by violetk at 6:00 PM on June 13, 2007

Make now = ~50K. I plan on working about 20-25 years after school.
posted by kakes at 6:10 PM on June 13, 2007

On the other hand, that kind of debt can limit your choices. It can be a problem if you want to get out and join an early stage startup or create your own. It's probably fine if you plan on working steady jobs until whenever it is that you've paid it off.
posted by Good Brain at 6:11 PM on June 13, 2007

You should expect to make towards 200k if you go to a top firm after graduation. My friend was assisting with a b-school event at a top 3 school (he was undergrad doing lackey work) and more competitive firms in consulting and finance were getting into bidding wars for top students. He said the average graduating salary was around 180k. Assuming you're anywhere near this, 80k in good debt is probably the same some spend on a new car on their way out.
posted by geoff. at 6:15 PM on June 13, 2007

Congrats on getting in to a top program. Unless you're very different than most graduates of top five b-schools, it is extremely likely you'll have that debt paid back well before its due. Nothing is certain, of course -- the economy could tank, you could be run over by a bus, etc. But if you've chosen to go back to school for the right reasons, a business school debt is relatively easily to repay. Go for it.
posted by blue mustard at 6:18 PM on June 13, 2007

That said, I'll be borrowing about $80K to cover the costs in the short-term. Is this a good idea?

Dude, this is what most people do when they go to a top B-school. If there wasn't a good ROI, people wouldn't be doing it year after year. Go.
posted by mkultra at 6:25 PM on June 13, 2007

Dont forget the opportunity cost of not working for two year. guess thats why you are going to b-school. Top schools (if your school is really top five, its fine) are considered to be worth the money over the long term. Below, say, top 15 and it is consumption/positional good. I might be able to dig up the reference if you are interested.
posted by shothotbot at 6:26 PM on June 13, 2007

As I recall, student loans typically have a term of 10 years, although shorter and longer terms are available. An $80k loan at 5% interest over 10 years will result in a monthly payment of about $850. If you're making $100k with relatively standard tax circumstances and retirement contributions, you'll take home around $60k, which is about $5k/month. So you'll net around $4,150/month right from the start, and that will only go up as you advance in salary and pay down debt (whether in 10 years or sooner if you can make accelerated payments).

Sounds pretty good to me, although if you decided to return to your old job things could be a little tight.
posted by brain_drain at 6:27 PM on June 13, 2007

If you have to spend 80K to double your salary for 20-25 years, you're making a good investment. Just nod and smile. It's worth it.
posted by debit at 6:36 PM on June 13, 2007

Dude, if you have to ask Metafilter, the top-five business school made a mistake letting you in.

As geoff. said, you'll be making much more than $100k.

But even at $100k, and even at 5% interest, and even losing two years of savings from $50k income, and even assuming no summer job paying $2000/week or more, this pays for itself in three to five years. You're planning on working 20-25? Sounds like a slam-dunk, even with all of those pessimistic assumptions.

This assumes, as shothotbot said, that it's really a top-five school. Schools outside the top tier don't have that sort of income bounce.
posted by commander_cool at 6:46 PM on June 13, 2007 [4 favorites]

Dude, if you have to ask Metafilter, the top-five business school made a mistake letting you in.

second that.
posted by violetk at 6:50 PM on June 13, 2007

It can be a problem if you want to get out and join an early stage startup or create your own.

With an MBA, you should be looking towards the more established end of the financial spectrum. IB, PE, or maybe a VC firm. Any startup that is willing to hire an MBA while it is still early stage has its priorities badly confused.
posted by b1tr0t at 7:11 PM on June 13, 2007

He said the average graduating salary was around 180k

Expect to make a salary between $100k and $160K, with a bonus anywhere from 25% to 200% of your salary. People going into industry (not working in finance or for a consultancy) will make a little less. You should google your school's "placement report" or "salary survey".

As shothotbot notes, some calculations ignore the salary you would earn during school, were you working full time. This matters (as you'll learn in business school) but the economics of a top program still dictate that going to school is a wonderful investment, so long as you are willing to work your face off after you graduate.

Also, the nonfinancial benefits of a top business school are truly fantastic. They will be 20 of the greatest months of your life.

PS- Nearly everyone who says "top 5" is affiliated with Chicago, MIT, or Columbia-- each of which thinks it's better than the other two.
posted by Kwantsar at 7:57 PM on June 13, 2007

PS- Nearly everyone who says "top 5" is affiliated with Chicago, MIT, or Columbia-- each of which thinks it's better than the other two.

…but not harvard, wharton, stanford, or kellogg?
posted by violetk at 8:26 PM on June 13, 2007

Should I borrow $80K to finance my business school education?

Your question implies that you have other options for paying for school. If you don't need to borrow it, don't. But if that's the only way to pay for it, do it now!
posted by blue_beetle at 8:43 PM on June 13, 2007

You're not the only person doing it. A friend of mine just took out 100k for her b-school tuition and living expenses for the entire program. Her program is at georgetown, so she'll be starting at about 100k as well after graduation...since she wants to work in NYC.

Good luck, and don't worry about the debt. Just study hard and try to get your moneys worth of education. It's an investment on yourself.
posted by icollectpurses at 8:44 PM on June 13, 2007

…but not harvard, wharton, stanford, or kellogg?

No. They all claim to be affiliated with "the best business school in the country." When the other three say "top five," they include themselves with the first four.

It's like how no one claims to be in the top quarter of his class when he was in the top fifth, y'know?
posted by Kwantsar at 8:48 PM on June 13, 2007

Thanks everyone. My mind is made up.
posted by kakes at 11:13 PM on June 13, 2007

The big question is: will you like the job your debt will force you to take and keep for at least 3-4 years after b-school? Most of my graduating class from law school ended up with over 100K in debt, forcing them to work at giant firms for at least 3 years. I believe many of them are miserable.
posted by footnote at 5:57 AM on June 14, 2007

You should expect to make towards 200k if you go to a top firm after graduation

Uh, no. Granted, I graduated from #6 (at the time) and it was a few years ago when the job market wasn't that good, but the average salary coming out was about $85-90. Yes, consulting/i-banks pay more, I think consulting salaries were $75-$130ish. Again, shitty job market at the time, but I can't imagine salaries have gone up THAT much in the past couple of years. If they have, I need to start looking for a new job.

Anyway...what everyone else said. Your debt is an investment. I sometimes regret my debt b/c I'm not able to live the lifestyle you would think someone with my salary would be living, and I probably would be making just as much if I hadn't gone back to school, but b-school was a great experience, I loved it, and most of the time I think it was worth the $800ish a month that go to Sallie Mae.

Just keep in mind that your monthly payments are probably going to be higher than you think they are. Esp if interest rates keep going up.
posted by echo0720 at 12:44 PM on June 14, 2007