Here’s a startling statistic for you: outstanding student loans in the U.S. have recently topped one trillion dollars! According to New York Times writer Annie Lowrey, it’s a drag on our future economic growth, because it is holding recent graduates back from buying homes, cars, and new clothes, among other items. This monetary “drag” is becoming clearer and clearer each day: Horror stories abound of anxiety-ridden students graduating with such high debt numbers that many are uncertain how they’ll ever pay them back in their lifetimes.
For business students in particular, loans play a big part in their education. A recent 2013 Alumni Perspectives Survey done by the Graduate Management Admissions Council found that 51 percent of prospective business students look to loans – over and above personal savings, scholarships, and grants – to pay for their educations. According to the report, loans are helping to put two thirds of full-time MBA students through school, along with 47 percent of part-time students and 50 percent of executive MBA students.
The main question is the same for all students: is there a way to pay back these outrageous loans quickly, while staying out of trouble? We are happy to present you with three stories of recent graduates who faced down their nightmarish situations, found creative solutions, and lived to tell their tales. Their successes should inspire you to rid yourself, once and for all, of those oppressive, stressful student loans!
Food Stamps, Ensure Shakes, and Secrets Of Cutting Expenses
Brian McBride took paying off his $20,500 student loan debt – plus $6,000 for a recent Honda Civic purchase – very, very seriously. How seriously? Well, how about skipping meals and going to sleep hungry? His meager sustenance consisted of Ensure shakes and protein bars. McBride kept his heating and cooling bills down by not using either one. Ever. We mean it. And he paid for groceries with food stamps during his time of skimping for the greater good.
Now, bear in mind that McBride was living in Green Bay at the time. That’s in the northern half of Wisconsin. If you’ve ever seen a Green Bay Packers home game, you know the winters there aren’t exactly balmy. McBride was one serious dude, we must say, when it came to paying off his debt.
Here is a formula for consistency in paying down an ungainly student debt. It’s called the 50/20/30 split method:
- 50 percent of your take-home pay goes toward essentials, like utilities, rent, groceries, and transportation costs.
- 20 percent goes to pay down your debt.
- 30 percent goes towards fun – vacation, living it up, or what have you.
The living-it-up part was particularly hard for McBride. In his efforts to cut costs, he got just a bit lax with expiration dates on food. OK, really lax. Well, way beyond lax. We’re talking about pushing the envelope so far past the sell-by dates that he entered the realm of pure faith in food’s ability to keep. Science has not yet trodden the paths he took. It was not an easy road he traveled – suffice it to say, he paid the price more than once for his convictions.
Later, after he moved to Atlanta and snagged a higher-paying job, McBride found he could cut even more: cable, phone, and gas were all shaved down to the bare minimum. He arranged his shopping life around grocery store deals. It all paid off, though. McBride worked out a way to pay for what he needed while still managing to pay down his loans. For an occasional splurge, McBride would head to his neighborhood McDonald’s, pay five bucks for hotcakes, sausage, and two – count them: two! – hash browns. This was a man willing to do whatever it took to be free of the shackles of debt!
$90,000? That’s All?
Forbes.com presents the story of Stephanie Hood, debtor and debt repayer extraordinaire! When she checked the Department of Education’s student loan site, she found a daunting number staring back at her: a whopping $90,000! At the rate she was then paying it off, it would have taken her almost 112 months – nine years – to pay it all back. After some initial calculations, she discovered that she was going to need a new plan. She ended up finding a way to pay down her loans faster, smarter, and with just a bit more creativity than most.
Alexa Von Tobel provides nine tips for students looking to get out of their student debt dilemmas. Tobel tells graduates the following: knock off private loans first. Then arrange the remaining loans in interest rate order, from higher to lower. Finally, pay them off in that order. That way, interest costs are minimized.
Stephanie took up the challenge but went through trials and tribulations. She moved to a lower-rent apartment and added a roommate. She cut costs on cable, gym, phone, and entertainment. When she traveled, she stayed in hostels and ate the cheapest food available. These measures were not enough, though. Even with the cuts, she still needed to bring in extra income. This is another of Tobel’s recommendations, by the way. So Stephanie turned to babysitting, mystery shopping, Craigslist ads, and more. Finally, she was able to tip the balance. Through her hard work and creative planning she was, at last report, expecting to make her final debt payment in February of 2013. Congratulations, Stephanie!
Even More Than $90,000 in Debt? Say It Ain’t So!
Joe Mihalic, a graduate of Harvard Business School, had a life a lot of people would sell a kidney for: two cars, one motorcycle, a beautiful home, and a six-figure annual paycheck. But he also had over $101,000 in student debt and was making structured payments of $1,057 per month. After a while, confident that he had been making solid progress on his ungodly debts, Mihalic went online to enjoy checking his “progress.” Imagine his shock upon finding that he still owed more than $90,000! And because of the staggering interest payments, it would take another 10 years to pay it off!
Joe was made of sterner stuff than most, however. Instead of crawling into a corner, turning off the lights, and hiding from the gods, Mihalic did something about his problem. In fact, he did several things. He, too, got creative. Now, did he resort to Ensure shakes for meals, use food stamps for his groceries, and live in the cold? Well, no. But he did temporarily stop contributing to his 401k, skip Christmas with his family, abstain from new clothing purchases, jury-rig his car with duct tape, and find roommates to lessen his monetary load. Mihalic ended up selling one of his cars (the one held together by duct tape? we were wondering that, too), as well as his motorcycle and a road bike, in order to recoup some of his previous losses. Finally, he started a weekend landscaping business with his friend, to bring in more money on the side.
214 days later, Mihalic made his last student loan payment and was debt free. For more on Mihalic’s experience – and a short film he created about it – check out his story at the Huffington Post!
There, you see? With a little elbow grease, some creativity, and healthy dose of commitment, and the will to overcome (or go around) all obstacles in the way, these three proved that debt is nothing but a number. It doesn’t have to rule your every waking thought. It is, in fact, something that, with an investment of time, can be vanquished. Imagine how it will feel to have that weight lifted off your shoulders – and it will be so. If these three can do it, so can you.
Does an MBA actually make sense for you at this point in your career? Have you shown strong leadership qualities in your work environment? How’s your work experience? How’s your GMAT score – is it high enough? Is your undergrad GPA good enough? Aim to make your second application different than your first. Show what’s changed in your life, how you have grown, and how you have shored up your weaknesses.
And get practical. Figure out what it takes to get accepted the second time around. Realize how your scores compare to that school’s averages. Remind your recommendation writers about your leadership skills and accomplishments, so they can give you really outstanding letters. If possible, get feedback from the rejecting school on their decision. Finally, be honest with yourself and admit your failings. Present yourself to the admissions officers as you are, warts and all. And never, ever – ever – do this!
Examples of the Potential Highs and Lows for the MBA Applicant
An anonymous MBA applicant, Just-Ship, writing at Poets & Quants, describes his experience of applying for top MBA programs across the country. Taking a rejection from MIT Sloan in stride, Just-Ship came up with a great come-back: it was one of his earlier applications, still suffering from certain basic flaws, and probably should have waited till he had worked out his best MBA applications strategy. In the end, Just-Ship chose not to attend business school, and now is focusing on starting a small business.
Entrepreneur Joseph Misiti was another would-be MBA student who didn’t get accepted to his dream school (or any others for that matter!). When he was rejected, he felt like the world had stopped turning. In the end, though, he realized it was for the best. He started his own business, began to focus more on what was important in his life, and found success. Misiti turned the rejection into an opportunity to grow, and transformed it into the fuel for his new path.
And What About You?
If you’re rejected by grad schools, now’s the time to re-think your financial costs and potential earnings down the road, and don’t forget your family and work responsibilities as you decide how to proceed. You may still have options. Online, part-time, and even executive MBA programs can be great ways to get an MBA while still having a life. The bottom line: there is always more than one path to success.
Additional Resources
In the end, what doesn’t kill us really does make us stronger. It may not seem like that at the point of rejection, but it is easier to see when you take time to reflect. For more information, Business Insider offers “9 Useful Tips for Getting into the Business School of Your Dreams.” A slightly older, but still outstanding, resource from BusinessWeek offers students solid advice on bouncing back. It all comes down to your resilience, your drive to earn your MBA no matter the cost, and your ability to forget about the naysayers once and for all. Don’t let a rejection letter stop you from achieving your dreams!