US MBA Loan and Re-Payment->Worth It? A Discussion

[iday]

Originally Posted by kgkid

or it might be pretty darn close to you in Michigan. Whatever be the case, you would definitely hear some noise.

Enjoy your time at TNDC and definitely budget for the Random Walk.

Then all the PGites can meet in US. If all of us have an offer at the end of internship then we can visit Rahul in Paris. wat say

TNDC - i'm out of it I dont booze
Random walk is definitely on...

[imjimmy]

In short, you would be suprised that many great Indian candidates ditch top 10 not because of money but the 10 years after MBA that they would have to live in US or a developed nation to pay back

Huh...why would it take 10 years to pay back the loan? With the kind of salaries the Top 10 schools passouts get - 10 yrs..really.?

[itsrahul]

Originally Posted by imjimmy

Huh...why would it take 10 years to pay back the loan? With the kind of salaries the Top 10 schools passouts get - 10 yrs..really.?

It might. The avg salary figures can be quite misleading at times.
Let us do some rough calculations:
U go to one of the top 10 schools and take a loan of around 90K USD @ 5%.
After first 2 yrs, calculating on SI, you would owe the bank 99K. After that the interest will be compounded.
Lets say you get a decent job that fetches you around 90K USD/annum.
Post tax, you would get around 65-70K in hand. Out of this, you will be spending around 35-40K per year on your living expenses. That means you can save around 25-30K per year. Now if you want to repay your loan ASAP, you will be repaying around 20KUSD per year. At this rate, you will take around 5 more years to repay your entire loan.

Now important practical points to note here:
1. Not many people will get jobs fetching 90K USD after MBA.
2. Even if you do, you will have to spend around 7-8 yrs working abroad to repay your loans. If you return to India, repayment time would only increase.
3. After your MBA, you would want to settle down in life. Your expenses would increase, which means it might not be possible to save 30-40% of your salary.

Businessweek has a very interesting ranking of Bschools on the basis of ROI. You would be surprised to find that the top 10 schools offer the lowest ROI. Have a look:
The High Price of Admission

[imjimmy]

Originally Posted by itsrahul

It might. The avg salary figures can be quite misleading at times.
Let us do some rough calculations:
U go to one of the top 10 schools and take a loan of around 90K USD @ 5%.
After first 2 yrs, calculating on SI, you would owe the bank 99K. After that the interest will be compounded.
Lets say you get a decent job that fetches you around 90K USD/annum.
Post tax, you would get around 65-70K in hand. Out of this, you will be spending around 35-40K per year on your living expenses. That means you can save around 25-30K per year. Now if you want to repay your loan ASAP, you will be repaying around 20KUSD per year. At this rate, you will take around 5 more years to repay your entire loan.

Now important practical points to note here:
1. Not many people will get jobs fetching 90K USD after MBA.
2. Even if you do, you will have to spend around 7-8 yrs working abroad to repay your loans. If you return to India, repayment time would only increase.
3. After your MBA, you would want to settle down in life. Your expenses would increase, which means it might not be possible to save 30-40% of your salary.

Businessweek has a very interesting ranking of Bschools on the basis of ROI. You would be surprised to find that the top 10 schools offer the lowest ROI. Have a look:
The High Price of Admission

Thanks for the post Rahul. It does put a lot of things in the correct perpective.
I guess for top schools 90K is just the tution. For a person with not much in terms of savings, the loan amount may be higher than 90K to account for living expenses.

[kgkid]

Originally Posted by itsrahul

It might. The avg salary figures can be quite misleading at times.
Let us do some rough calculations:
U go to one of the top 10 schools and take a loan of around 90K USD @ 5%.
After first 2 yrs, calculating on SI, you would owe the bank 99K. After that the interest will be compounded.
Lets say you get a decent job that fetches you around 90K USD/annum.
Post tax, you would get around 65-70K in hand. Out of this, you will be spending around 35-40K per year on your living expenses. That means you can save around 25-30K per year. Now if you want to repay your loan ASAP, you will be repaying around 20KUSD per year. At this rate, you will take around 5 more years to repay your entire loan.

Now important practical points to note here:
1. Not many people will get jobs fetching 90K USD after MBA.
2. Even if you do, you will have to spend around 7-8 yrs working abroad to repay your loans. If you return to India, repayment time would only increase.
3. After your MBA, you would want to settle down in life. Your expenses would increase, which means it might not be possible to save 30-40% of your salary.

Businessweek has a very interesting ranking of Bschools on the basis of ROI. You would be surprised to find that the top 10 schools offer the lowest ROI. Have a look:
The High Price of Admission

Rahul i would disagree with you on this. You can get 100K+ easily after an MBA from a top school. Infact, in IB and Consulting you can make upwards of 130K (including bonus, etc) at the drop of the hat. So whatever you are saying is not really what happens. And i am pretty darn sure about it. You would be surprised but in IM your average bonus can be equal to your annual salary (pretty common in the likes of Goldman Sachs and Lehmann Brothers).

Okay when i said 10 years it was more because of the lifestyle you would be leading. If you can stay in a 2 bedroom rented apartment with a Toyota Camry then you can prolly pay back the loan in 4 years max. But, i doubt one would lead that life after an MBA and certainly would want to have a 4 bedroom, 3000 sqft house + BMW etc due to peer pressure...

I hope you understand the perspective now.

I second my decision in saying that an MBA from a top 15 at US business school is absolutely worth it. The global reputation and money is uncomparable.

[kamakazie]

I totally agree with kgkid on this. The salaries at top-10 schools are much higher than $90k. I can vouch for that too

[itsrahul]

Originally Posted by kgkid

Rahul i would disagree with you on this. You can get 100K+ easily after an MBA from a top school. Infact, in IB and Consulting you can make upwards of 130K (including bonus, etc) at the drop of the hat. So whatever you are saying is not really what happens. And i am pretty darn sure about it. You would be surprised but in IM your average bonus can be equal to your annual salary (pretty common in the likes of Goldman Sachs and Lehmann Brothers).

I am slightly sceptical of the figures quoted by you. I think you're talking about the best case scenario. Agreed that I did not factor the bonus figures (btw, BusinessWeek recently reported that average bonus in GoldMan Sachs this year wil be around 6.2 Lakh USD.)
Even if we agree on the figures u've mentioned, one point still remains true. It will not be possible for a person to return to India atleast for 4-5 yrs after his/her MBA. This was the point I wanted to put across.
I completely agree that MBA from a top 10-15 institute is worth the time and money but I wanted to set this perspective that a person taking admission in top 10-15 school with a huge loan should consider the factor of working out of India for a longer duration to repay it.

[kgkid]

Originally Posted by itsrahul

I am slightly sceptical of the figures quoted by you. I think you're talking about the best case scenario. Agreed that I did not factor the bonus figures (btw, Economist recently reported that average bonus in GoldMan Sachs this year wil be around 6.2 Lakh USD.)
Even if we agree on the figures u've mentioned, one point still remains true. It will not be possible for a person to return to India atleast for 4-5 yrs after his/her MBA. This was the point I wanted to put across.
I completely agree that MBA from a top 10-15 institute is worth the time and money but I wanted to set this perspective that a person taking admission in top 10-15 school with a huge loan should consider the factor of working out of India for a longer duration to repay it.

+1.. it would take about 4 years by living pretty decent.

Moreover on your link on repayment, it is very biased. It is based on salary premium. Now, a Harvard grad already making 130K in a BB IB firm would have just a very low premium increase in salary. I mean seriously you have to analyze those numbers very carefully. Let me know if you want me to give my 2 cents on how those numbers are not to be interpreted as they are. If those numbers are so good then you would have maximum applications for Brigham Young and not Harvard. Isnt it my friend

One of the guys in our consulting wing is from Wharton. He got 4 times the joining bonus that he was offered from Bain. He also gets paid almost 30K more than what Bain offers. As per him, you can make average 150K in consulting including signing bonus, salary, tution reimburse. Moreover, i know those salary figures from many many guys i have known so far.
Now, one of my senior is finishing his MBA in 2007 from NYU. He dint start with any scholarship but he would prolly finish with 0 loans coz he did his summer internship at ML and is working part-time with them right now. On F1 you dont pay taxes. Even one year after MBA if you are on OPT you dont pay taxes.
It is as simple as "No pain no Gain". I want to be an enterpreneur and the way i look at it, if i cant manage this risk then i cant be an enterpreneur anyways.

cheers

[bizTechie]

Originally Posted by kgkid

Even one year after MBA if you are on OPT you dont pay taxes.

kgkid, could you clarify this part. I didn't follow the terminology

[inblue]

Couldn't add more than what Kgkid already has.

IB and Consulting pay 120 - 130 upwards ( all included ).

Top 10 do have their benefits in the long run. Again it all depends on what you want to do post MBA and how you want to settle your life.

If one can and wants to live in the US ( where he can pay off the loan faster ), top schools should be the only ones in the radar. They pay in the long run when you dont want to work !!:mg