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Changing mind about going this fall due to debt [#permalink]
18 Jul 2007, 14:33
I am thinking about bailing. The school is close to me so it's not as if I had to sign a new lease. I was going to be able to stay put in my current apartment. What is freaking me out is the loans. I know my loans would not be much compared to a private school, but the public school I would be going to, a top 50, is relatively expensive for a state institution. With capitalization, I would probably come out around 50k in the hole. What also scares me is placement statistics..average earnings coming out is around 68 k..but some people earn 40..and some earn 110. I was definitely scared when I saw people going to places like Chicago and Haas... and coming out and making 25k..I am not sure how that happened..a hair stylist makes 25k
If I wasn't an older student, I may not be so apprehensive about the loan debt..but unfortunately due to illnesses with both of my parents I had to put off going back for about 3 years (I will be 31 if I go and graduate this dfall( I don't want to be paying off huge loans right when I am trying to get married, and have a family, buy a house etc... Unfortunately I just met my girlfriend last fall..and she is not going to be a huge earner..she is an elementary teacher. Her parents are religious so no chance of us moving in together while I am in school..and the one bad thing is unlike other loans...there are no do overs with student loans..they follow you to the day you die.
I am very sad about not going, but I don't want to be in school thinking about debt 24/7..I am not a person that handles anxiety well
Well, debt is certainly a major consideration. You should also include opportunity costs of the two years that you spend out of the work force. As we have discussed before, ultra-elites are no brainers, and elites are more or less no brainers for most people. Beyond that, people should have a clear idea of what they want to accomplish and how an MBA will help. Not surprisingly, a form of this question is common to most MBA applications.
Regarding the people from Chicago and Haas making 25k, I didn't see where you got that data from but I would be that those people chose to take positions with non-profits or in countries where the pay scale is much different. By and large, even those that have trouble securing the top jobs from those schools will have many opportunities in the $50-100k range.
Those low paying jobs are taken out of desire to do the work and not the pay. I read of someone getting a job working on the X-prize and their salary was negligble to what they would make doing anything else but it was a dream of theirs to be involved with getting a privately launched manned craft into space.
A piece of advice, if you can't handle the stress of a school loan dont buy a house. I know personally my house payment is far more than any student loan will ever be. Plus your school loan isn't going to suddenly need a new roof, boiler, or an updated kitchen. A student loan is an investment in yourself and your future. If you like your job, dont feel that you want a change or need an MBA to advance, the pay is high enough for you...then dont bother with an MBA.
As for your GF, if you guys want to move in together don't let family keep you from doing it. You are adults and unless she is against it without being married go for it. We bought our house together before we were even engaged...If she wont out of fear of her folks good luck with those in-laws.
Oh...and 50K is a nice car its not even something to flinch at when it comes to getting an MBA. If you are making 80K I dont think you will be taking a pay cut after you get an MBA. If you are making 45K you stand a good chance of doubling your salary if you attend a good program. There are enough calculators out there to give you an idea about the return you will get from your MBA in comparison to lost wages and debt.
Thanks for your responses. I am just very unsure about the whole loan thing.
I would really like to move into finance, but in all seriousness, the financial end of B-school..the loans..scare me..Maybe I am just a little paranoid since I have seen first hand the ruthlessness and the inhumanity that can happen when people are not able to pay their student loans..for reasons that are beyond their control. A good female friend of mine went to grad school and had a bunch of loans, but she was also making decent money. Unfortunately, she developed a serious disease/illness.. She got the loans deferred for as long as she could but the interest was still accruing and then they temporarily went into default...she had medical documentation and faxed it to the loan companies but they didn't care..they said there was nothing they could do Lets jut say the debt ballooned to a hellish amount with interest and fees..here is a girl about as responsible as she can be..was valedictortian in our high school..high honors thoughout college and grad school..volunteeed.. but fell into bad times She is doing better now and is starting back to work, but she will never be able to pay back these loans without living like a pauper for the next 30 years of her life and can't even save for her retirement. Now she has developed serious depression and is not sure what to do. She feels her life is over. I told her to leave the country..I know that is probably unethical to tell her to do that, but she was/is willing to pay back the original loan amount..but there is no way she will ever be able to pay this amount down after interest and fees have accrued, not without it zapping supposedly the best years of her life.
She is basically in a debtors prison. The system is really out of control when it comes to student loans. The loans can grow to outrageous amounts yet never can be discharged unless you are on you die or permanently disabled i.e. can never do ANY job ever again. If you were a lawyer at one time yet due to an illness had to work as a greeter at walmart, you are out of luck..no discharge.. Either they should allow discharges via bankruptcy or cap interest/fees to a certain amount that way if people do get themselves into trouble they can get themselves back on track they can actually pay back the loans without it ruining their lives. I know of no other debt that can grow in perpetuity yet never be discharged.
And in regards to buying a house, I am not concerned about that. The worst that can happen is the bank takes possession..unless you trashed the house, the bank usually gets the amount of the loan back and then some..because of the equity you had in the house...and even if it doesn't, that can be discharged.
Its called long term disability insurance. If you ever are married with kids you better have it unless you have a huge amount of savings and aren't worried about it. I don’t see how missing a years payments or whatever would totally ruin you for life. Sure it would screw your credit score pretty hard but still its not like its going to triple the amount you owe in a year.
I know people don't buy houses thinking they will lose their statement but your comment strikes me as the typical American response of well if I cant afford it what’s the worst thats going to happen...I declare bankruptcy and all is forgiven. That seems to fly totally in the face of your fears of student loans.
In my neck of the woods, foreclosed mortgages rarely cover the lender's investment and costs. Just an FYI.
More importantly, any big decision -- going to grad school, getting married, buying a home, having kids -- comes with risk. There is no right or wrong answer, and you need to weigh out the pros and cons for YOUR situation. But it does seem that your worries may be somewhat out of perspective. While I know nothing about your current job, your targeted program, and your career goals, I can say that $50k is relatively little.
(I came out of undergrad with nearly $30k and have paid off most of it in 6 years -- while making practically nothing: $9k, $17k, $19k, $24, $25, and $30. Nonprofit is grand! And we've managed to buy a home during all this.)
Your friend's story is one I've heard before, and it really is a horrible situation. However, it's certainly not the norm. Again, you need to make decisions based on you and your goals.
Debt is certainly an issue. My friend and I joke about taking a $10k vacation before we start bschool. Hell what's another $10k on top of $200k?
I agree with Pelihu about the ultra elites/elites. If you try hard enough at those schools, there's no reason you shouldn't be able to land an 85k+bonus job. But if you're at a lower cluster school, it may be tougher.
Bschool is not for everyone, because some people can't cut it and because some people don't need it. There's no shame in not going.
But, I sense there might be some other issue with you, so I will finish by posting this little gem by Alex Chu (I read this every now and then to inspire myself):
The biggest hurdle facing many joe averages is having the balls to commit to something wholeheartedly. Most people simply are too chicken to emotionally invest fully in something they care about (and no, this doesn't mean quitting your job; it's deeper than that; it's about doing whatever it is you enjoy doing with your heart on the line). They're so afraid of hurt and disappointment that they'd commit half-heartedly, or not at all (because even if it's half-heartedly, you only feel half the disappointment if things don't' turn out well). Some of this starts from early childhood -- they let their parents dictate their choices even through their adult life; they constantly let peer pressure determine how to think, do, and choose; they let their environment or circumstance dictate their choices; the imagination, enthusiasm and curiosity they had as little kids is virtually non-existent by the time they're adults (but the jaded adults will always say that adults aren't supposed to be imaginative or curious because they have to live in the "real world"). They've let everything else dictate who they are that they can't be their own person (or they don't even know the person that they are and are afraid to find that out). They live according to what is *practical* as opposed to what is *possible* -- a HUGE difference between those who can fly and those who stick to their knitting. And to cope with having all their choices being dictated to them, they develop great fear and indifference -- it's a security blanket that allows them to reaffirm the fact that while they haven't been bad citizens at all, they haven't taken enough risks to accomplish great things either. They live in their honeycomb, and look to upgrade to a bigger honeycomb (i.e. a grad degree, a bigger house, a higher paying job), but are afraid to go anywhere that doesn't look like a honeycomb (they are always more worried about "looking bad" or keeping up appearances and seeking reaffirmation from others than following their own path).
So It's this overwhelming fear and indifference that prevents most people from accomplishing great things (you'll notice it in many office environments -- there's always that guy who bitches and moans, and is always planning on leaving but never does right? Or the guy who always responds with "that's just the way it is. It is what it is."). Nothing big accomplished comes without great sacrifice or heartache or a trail of disappointments along the way. It's like loving someone -- the person you love the most is also the very person who can hurt you the most.
So if you think about anyone who overachieves - whether it's athletic, artistic, social/political, entrepreneurial, etc. they poured their heart and soul into it. They weren't casual about their process, no matter how flip or nonchalant they seem to be about it not being a big deal. It is a big deal - few people are in the mood to talk about and relive all the crap they've gone through to get to where they are. You need the courage to endure suffering and heartbreak in order to have your shot at glory (whatever that may be).
Another thing. You are who you associate with. If you want to be inspired to do great things, you need to be around others who have done such things already -- what they have done can help feed, galvanize and inspire you. I'll stop now as it's becoming too Dale Carnegie...
I really hope I'm just touching on the obvious here - nothing I'm saying here is new. But you want to know the difference between an overachiever and someone who's not -- the masses overestimate natural talent, and underestimate the heart and guts necessary to turn that talent into something special.
I just signed and returned a promissary notice to Sallie Mae for almost that same amount, and that's just for the first year at a tier two school. Figure in a (soon to be) unemployed wife and barely enough in savings to scrape by a meager existence until mid '08 - when I say meager, I mean packed tuna sandwiches and bicycle commuting - yet somehow I have a hard time being convinced that a reputable American graduate business education (arguably the world's best) won't have a positive influence on my career during an anticipated period of sustained global economic growth with record low unemployment rates. And that's taking the WCS in which I will have to start over from scratch after completing an MBA.
As hackneyed as it sounds, nothing worth having in this world is free. An AACSB accredited MBA, even if it's from a trans elite school, opens doors, period. An elite or ultra elite MBA knocks the doors clean off their hinges with the force of a battering ram.
Another certainty is that the door almost never magically opens on it's own.
Anybody can claim financial hardship and request a one year forebearance (with interest accruing), however, inevitably at some point in time the same individual is going to have to face monthly repayments of ~$700 on a $90K loan for a long, long time. What it comes down to is how much is a shot at a significantly life changing opportunity worth to you? How much faith do you have in yourself? Are you just flirting with the idea of an MBA because it seems like the fashionable thing to do or do you you have somewhat of a plan as to where you want to be in 2, 5, 10+ years, allowing for possible contingencies?
If as you say you are 31 now, then you should have roughly 25~30 good working years ahead of you post-MBA. Calculate your salary now with realistic annual pay raises and compare that figure to the bottom 80% of what your school's reported first year starting annual income. Add in conservative wage increases and expand the first figure over 22 years and the second over 20 years. Don't even consider bonuses. If the latter figure is not at least 15% higher than the former, and you place no intrinsic value on knowledge, the advanced degree itself, and potentially a new marketable skill with an exponentially increased professional network, then perhaps an MBA is not for you.
I am guessing the MBA is not for me then.
It is something I would do if the risks were not so high. I am not totally risk adverse, but I am rather frugal. Putting it this way, if the cost for this program was what it was 7-8 years ago, I would not have an issue with going back right now. I would really like to go into finance, but not bad enough to put myself under that kind of pressure to succeed during and after the program. Tuition is going to go up another 8% this fall, and probably another 8% next fall. I am not someone that deals with anxiety well. Plus I have some concerns about my mother's health..if something goes wrong during school, I don't want to have to leave or be faced with helping her out and trying to go to school. It wouldn't be worth it
I did get a full tuition scholarship and an assistantship for another state school in the midwest, but I don't think I can leave right now.
The more the risk generally the greater the return though. I think that people who get MBA's only for the money will more often than not be dissappointed. Yes it most likely will be a finacial gain but the people doing it only for the money are the ones that generally having images of millions in their heads and if 10 years out they are "only" making 200K a year they wont be happy. If you like what you do, can get by comfortably, and are terrified of the debt then dont subject yourself to all the stress.
And honestly, if you are risk adverse and get anxious over money then you shouldn't get an MBA and go into finance. Imagine what losing other people's money would do to you. Imagine a downturn in the markets where you lose millions in a day. In business you will deal with figures factors higher than 50K and you would need to be comfortable with that or you would put yourself into an early grave.
Well now it may be changing again...it looks like student loan reform is going to pass..and worst case scenario, I won't have to sacrifice more than 15% of my disposable income for student loans and if the balance is not paid in 20 years, the debt is forgiven.. If this goes through, the same thing that happened to my friend could not happen to me..sure if loans are deferred for any length of time interest will balloon, but any time you are not making income it would still count towards the 20 years..so basically I won't have to worry about these loans following me to my grave regardless..
I am primarily concerned about my employability coming out..if this was a top 10-20 school, I don't think it would be as much of an issue. Its borderline top 50..its a good regional school and is ranked in some areas..Salary stats are ok..average salary for finance is 71k a year..but some come out of there making 40-45 (those with no experience in finance..such as myself)
Maybe I should reinvigorate myself and try for a better school next fall:?
Maybe I won't be so apprehensive?
I think you're being smart. 2 years of your life and $75-150k are huge commitments, and it's wise to give it some careful consideration. If you're not comfortable with the situation at hand, then giving it another go this year and trying for a better school seems to make sense.
I think I will pick up my student ID..that will allow me to ride public transportation for free for three years..and my free copies of Vista Ultimate and Office 07..before I formally withdrawl from the program..that is the last I can do considering the deposit for the program was 1 k:)
If you don't mind sharing, which school are you having second thoughts about? If you hold out for another year, are you absolutely sure that you can/will want to put yourself through the entire admissions application process again? How much confidence do you have in your ability to gain admissions to a significantly better program?
The school is Pittsburgh (Katz). I went to undergrad there and the program is local for me. I had some major family issues (father battled prostate cancer..and my mother became ill as well) over the last two years, and I did not feel comfortable applying to a school too far from home in case I had to help out. I was planning on going back sooner, but couldn't due to those issues..didn't want to be distracted..If I was a few years younger, I am not sure I would be so concerned about debt as I wouldn't mind living like a pauper for a few years to pay it down...
I received a 12k scholarship from them, and only 1/3 receives any type of scholarship... Stats are 690 GMAT and 3.8 QPA I know I can break the 700 mark..I actually bombed the verbal section in comparison to what I usually get..I got a 41 and on every single practice test I got 44-45, and in one instance a 46. Unfortunately they do not offer assistantships..I wouldn't have cared if I was sweeping the dean's floor every night.
I am not overly concerned about the quality of a program as long as its AASCB accredited..I mean it would have to be top 50, but I would like a program where I can obtain an assistantship..and take on minimal debt.
I am not looking to move into IB or consulting..I would be content just to move into finance in a non-sales capacity at a decent salary ($65+).
You might be well served to delay your MBA for a year. Start studying ofr the GMAT again and bump your GMAT up 30-40 points and apply to CMU. They seem to really like higher GMATs (probably to help the rankings like many in the mid to high teens). Your GPA is solid, your GMAT is good, and with good work experience you have a good shot if you put it together right. Your personal struggles definitely are something to use for essays, the whole overcoming adversity is always a good story.
If your school will let you differ you could attempt an application to CMU and if you get in great if not then you got yourself an extra year to reevaluate b-school instead of rushing to a decision. If you get into CMU that will give you access to much better jobs and higher pay. It would be worth paying all expenses out of your pocket to attend it instead of accepting the scholarship to the lesser school.
Would your company pay if you went part time? Seems like that could be the right compromise for your situation. I don't think your stats (read: numbers) are keeping you out of higher ranked schools, plenty people with your #'s at ultras and elites, but rather other stuff in your profile or maybe how your application essays come across. There are areas of finance like operations and risk management where you would get to experience the markets, wouldn't have to go against your risk appetite (actually you'd be charged with keeping the traders in line lol), and have a decent work/life balance. I dunno who hires in Pittsburgh but if you moved to NYC, Boston, Chicago, San Fran, etc. you'd probably be looking at $75K or more. You only live once, if the job of your dreams is attainable with an MBA then screw the debt and go for it. If you want to stay where you are then don't bother.
You have very good stats @ 690 and 3.8. If I were in your shoes i'd defer another year. Apply to some other programs next year including FT or PT @CMU. I think they (CMU) have a pretty good flexmode program. In the meantime nail the interview with the job that gives tuition re-imbursement.
I thought my employer had tuition reimbursement when I started, but they don't pay for MBA's..doesn't make sense..class has to be related to current job..which is kind of dumb
On another note, I have an interview with a Pittsburgh division of ML next Tuesday..they have tuition reimbursement:)