A Harvard MBA's radical quest to erase his debt

Fortune ^ | 05/17/2012 | John A. Byrne

[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.

[dfwgator]

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

[C210N]

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.

[St_Thomas_Aquinas]

-—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.

[libstripper]

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.

[CORedneck]

Pretty interesting.....

[RC51]

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.