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A Harvard MBA's radical quest to erase his debt
Fortune ^ | 05/17/2012 | John A. Byrne

Posted on 05/17/2012 6:31:39 AM PDT by SeekAndFind

B-school grad Joe Mihalic went on an extreme financial diet to pay down over $90,000 in debt in just seven months and charted his story through an anonymous blogging project.

When he graduated from the Harvard Business School three years ago this month, the economy was a wreck. Nearly one in four of his classmates didn't have a job at graduation in May 2009. Yet, Joe Mihalic, then 26, was able to land a job with Dell (DELL) in Austin, Texas, at twice as much as the $52,000 a year he made before earning his MBA. But there was some overhang from his experience in Boston: roughly $101,000 in loans that he had to borrow to get the degree, even after Harvard gave him $54,000 in fellowship support.

Mihalic, of course, is hardly alone. The average debt of a Harvard MBA last year was $77,880, up from $73,110 a year earlier. Wharton MBAs, however, racked up average debt loads estimated to be an unprecedented $114,000, and the median financial burden for an MBA from a top-10 business school from the Class of 2011 is about $88,500. Despite Mihalic's six-figure burden in the midst of the economic downturn, he gleefully jumped into a free-spending lifestyle that had defined his MBA experience. He bought a 2004 BMW M3 in the same month he graduated from Harvard. From Thursday to Saturday nights, he did the town with pricey dinners and drinks. For his 28th birthday, he barhopped with friends in a black stretch Hummer. Though Mihalic had budgeted $850 a month for entertainment, he was commonly spending $1,300 monthly. But there was one place where he didn't slough off. For 21 months straight, he dutifully made the monthly $1,057 payments on his student debt.

(Excerpt) Read more at management.fortune.cnn.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: debt; harvard; mba
HERE's THE KICKER:

It wasn't until last summer, when he checked his balance, was he thrown into shock. After paying out more than $22,000, he still owed $90,717, a sum that exceeded his after-tax salary for a year.

1 posted on 05/17/2012 6:31:51 AM PDT by SeekAndFind
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To: SeekAndFind

All this article does is prove that a Harvard MBA isn’t worth the paper it’s printed on.


2 posted on 05/17/2012 6:36:46 AM PDT by Lurker (Violence is rarely the answer. But when it is it is the only answer.)
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To: SeekAndFind

interest rates are a rip off. pay cash


3 posted on 05/17/2012 6:41:57 AM PDT by yldstrk ( My heroes have always been cowboys)
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To: SeekAndFind
He concedes now that a shift in his lifestyle occurred during his two years in the MBA program at Harvard. "At HBS, $100 dinners for one person in downtown Boston are a standard affair," he says. "Nobody thinks twice about taking an international vacation -- they just go. I remember a friend told me she was going with a group of students to Oktoberfest for the weekend. I asked her what bar she was heading to. She laughed at me and told me the bars in Germany -- she was going to the actual Oktoberfest -- for the weekend!"

IF they forgive one cent of student loan debt on the backs of taxpayers, CW2 should be commenced immediately.

4 posted on 05/17/2012 6:43:13 AM PDT by ScottinSacto
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To: SeekAndFind

A Harvard MBA could not figure out what the amoritization schedule of his student loan was. (Blank) Unbelievable.


5 posted on 05/17/2012 6:49:06 AM PDT by C19fan
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To: Lurker

“Though Mihalic had budgeted $850 a month for entertainment, he was commonly spending $1,300 monthly.”

Well, there ya go. Mr. Hah=vad MBA here did not have the discipline nor concept of an expense.


6 posted on 05/17/2012 6:52:31 AM PDT by max americana
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To: SeekAndFind
This is easily solved. Sell the car and buy a clunker. Move in with roommates. Stop the fancy dinners.

When I graduated from college I did not own a car, took public transportation and lived with 4 roommates in a rented apartment. I paid off my loans in 3 years.

This guy is living like a fool.

7 posted on 05/17/2012 6:53:58 AM PDT by outpostinmass2
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To: SeekAndFind
It wasn't until last summer, when he checked his balance, was he thrown into shock. After paying out more than $22,000, he still owed $90,717, a sum that exceeded his after-tax salary for a year.


8 posted on 05/17/2012 6:53:58 AM PDT by dfwgator
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To: max americana

No wonder Harvard MBAs have destroyed many a company.


9 posted on 05/17/2012 6:54:44 AM PDT by dfwgator
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To: ScottinSacto

I live in Boston and don’t eat $100 dinners nor do I take international vacations. In fact I don’t know anyone who does.


10 posted on 05/17/2012 6:57:11 AM PDT by outpostinmass2
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To: outpostinmass2

He did do all that. And more.


11 posted on 05/17/2012 6:59:07 AM PDT by FoxInSocks ("Hope is not a course of action." -- M. O'Neal, USMC)
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To: SeekAndFind

I’m probably in the minority here, but I am not judging this guy on what he figured out and when. It reminds me of obese doctors and nurses that finally realize that they are fat.

I also think there may be some positives:

1. He might get a few friends raised in debt culture to think twice about what they are doing.

2. He shows that you can still breathe even if you do all of the things he did (and a lot of people probably only need to do 2 or 3).

3. His behavior changed his attitude towards money/things and might change his voting habits to be more conservative.


12 posted on 05/17/2012 7:00:13 AM PDT by PrincessB (Drill Baby Drill.)
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To: Lurker

It seems it just taught him to spend like a big shot before he actually was a big shot. It went against everything he had learned in life before he got to that school.
I knew people like this in Law School.

God bless this guy, that he was able to get back to reality. And it really is a blessing that he knew what reality looked like, because he came from a functional, modest, church-going family. I wonder how many people at Harvard Business School have that advantage.


13 posted on 05/17/2012 7:01:15 AM PDT by married21 (As for me and my house, we will serve the Lord.)
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To: dfwgator

Yup. Many years ago when my Mom was at Stanford for her MBA, she had a classmate who was a Harvard grad and my Mom asked her why she didn’t attend the same school for her MBA. The other lady replied “because all they do is lecture you that being successful financially is evil.”


14 posted on 05/17/2012 7:01:15 AM PDT by max americana
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To: SeekAndFind

I’m glad to see he put that MBA of his to work to help overcome his debt situation.

A self-imposed austerity program worked!

Now if we could only get our city, state, and federal governments to do the same!


15 posted on 05/17/2012 7:06:55 AM PDT by Jack Hydrazine (It's the end of the world as we know it and I feel fine!)
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To: C19fan

I took one 3 hour (and it was quarter hours, not semester hours) class on Engineering Economy way back in engineering school, and doing interest rate calculations and amortizations of that sort has been trivial for me ever since. I most recently did a mortgage re-fi analysis spreadsheet from scratch in Excel in the last year or so (no dice, it doesn’t pay for me - I have too little interest left to pay, almost all principal in my payments now, which end pretty soon, and which is my only debt).

No wonder American business is having a tough time, if they’re hiring numbnuts like this to lead things. At least he finally woke up on his debt and lifestyle issues.


16 posted on 05/17/2012 7:10:09 AM PDT by FreedomPoster (Islam delenda est)
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To: ScottinSacto

student loans should be forgivable in bankruptcy. This would mean that worthless degrees would be financially unsustainable. Also, losses on such loans should fall back on the university. Give a worthless degree to students, the university is on the hook for the loss.


17 posted on 05/17/2012 7:10:30 AM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: SeekAndFind

At least he paid off his debt. However, I am not sure how smart he is. Not contributing to his 401K at a place like DELL is really dumb. If needs be, max it out and then borrow it back.
I sure hope he has nothing to do with Dell’s financial ops or strategy.


18 posted on 05/17/2012 7:11:03 AM PDT by bjc (Check the data!!)
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To: SeekAndFind

Had to come to Texas to pay his Yankee debt.


19 posted on 05/17/2012 7:27:54 AM PDT by fella ("As it was before Noah, so shall it be again.")
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To: longtermmemmory

no way should student loan debt be wiped ever.

Every college student in America would just simply get any degree at any college they wished at any college at any price, then immediately declare bankruptcy.

They got the product... (the education) which can not be taken away from them... thus the debt shouldn’t be able to be erased.


20 posted on 05/17/2012 7:41:03 AM PDT by TexasFreeper2009 (Obama lied .. and the economy died.)
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To: TexasFreeper2009

I would never hire anybody that I knew had their student debt forgiven....I don’t hire thieves.


21 posted on 05/17/2012 7:42:17 AM PDT by dfwgator
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To: SeekAndFind

I like this stories ending - after some soul searching and hard work, he is now advancing wealth rather than debt paying.

But, now he can focus on some new issues. Might I suggest he now drill-down into his paycheck. Specifically, social security. He may THINK he is advancing his wealth, but is he really? He is young. He is smart. He will NEVER see one thin dime (in real dollars, inflated, deflated, or even hyperinflated) of his 6.2% contribution (or his real 12.4% contribution, since he might be making 6.2% more if his employer didn’t have to pay it too).

Hopefully, this gent (and all his buddies and net followers) will vote with things like this in mind. In other words, vote as a conservative.


22 posted on 05/17/2012 7:50:13 AM PDT by C210N ("ask not what the candidate can do for you, ask what you can do for the candidate" (Breitbart, 2012))
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To: Lurker

-—All this article does is prove that a Harvard MBA isn’t worth the paper it’s printed on——

Extend that to 90% of college degrees. How many people really need a college degree to do their job?

I’m all for education, but schooling and learning are hardly synonymous, and are often antithetical.

Granted, many jobs require a piece of paper, but in comparison to the return on a college degree, it’s worth exerting much time and energy to land a low-level, entry-level job, just to break into a career field, or to start a small business.

I hope that we can someday thank Obama for destroying the college mystique, and saving generations from propagandization.


23 posted on 05/17/2012 7:53:23 AM PDT by St_Thomas_Aquinas (hViva Christo Rey!)
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To: Lurker; All
FTA: To start, he liquidated his IRA account for $8,000, sold stock worth $14,000, and used about $3,000 of available cash to wipe out one loan.

Overall what he did was great, but that was dumb and shows he never learned the value of compounded earnings over a long term. At age 28 he has about 37 more earning years before he will need to start using either an IRA or a 401(k) for retirement income. He had a total of $25,000 that was either already invested in an IRA or could be invested in a Roth IRA. Assuming that $25,000 would double every eight years with proper management, it would have doubled 4.62 times by the time he reached age 65. IOW that $25,000 would have become about $1,296,000 if he'd just left it alone.

It's really a shock that Harvard doesn't teach its MBA candidates the value of long term compounded earnings and the vital importance of saving while young to take advantage of that compounding. Any one of them who intends to become a financial advisor had better learn that lesson damn quick.

24 posted on 05/17/2012 8:13:09 AM PDT by libstripper
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To: SeekAndFind

Pretty interesting.....


25 posted on 05/17/2012 12:39:36 PM PDT by CORedneck
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To: TexasFreeper2009

So instead you believe that it is ok for 18 year old kids who get roped in the scam that is 90% of college programs out there become debt slaves for life.

Obama spent 1 Trillion dollars on what? Stimulus? On the backs of the taxpayers (actually their children) so Solyndra and entrenched interests could wallow around at the govt feeding trough?

Cash for Clunkers? Yep on the backs of tax payers.

I could go on for a thousand different programs...

I all for a new system that would reinvent our college system, how it gets funded and who is allowed or chosen to go. I’d like to see hundreds of different jobs in the real world get off the college degree path, maybe onto a 2 year program or even an on the job mentoring vocational type thing. As part of this retooling I would recommend that every single dollar of student loan debt the govt holds be forgiven during a bankruptcy.


26 posted on 05/18/2012 8:37:20 AM PDT by RC51
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