How did we come up with the estimate that Wharton’s Class of 2013 will rack up $112.4 million in debt and interest fees?

As conservatively as possible.

Here are the assumptions:

Roughly 75% of the Class of 2013 will graduate with debt (that’s the average percentage of borrowers among top business schools).

The average debt load for an MBA will be just shy of $124,000. The estimate is based on Wharton’s reported average debt per student in the Class of 2010: $109,836. It was adjusted to account for three years of increases in the cost of getting a degree. Those adjustments are equal to previous increases in the average debt numbers.

Many schools expect the average indebtedness of their students to increase due to the Great Recession. At Stanford Graduate School of Business, for example, the average debt of this year’s graduates jumped by 9.8% to $78,700 from $71,700 in 2010. “This was expected because these students started in the fall of 2009 right after the economic downturn in 2008,” says Jack Edwards, director of financial aid at Stanford. “I expect that my peer schools would also have been a similar increase.”

For each $124,000 borrowed, it was assumed that a graduate first maxed out a Stafford loan for $20,500 each year, or a total of $41,000 for two years, at an interest rate of 6.8% and a loan origination fee of 1%.

For the remaining $82,980 in loans, it was assumed that a graduate then borrowed at the same interest rate of 6.8% (it would more likely be higher, probably closer to 7.9%, according to loan experts), and a loan origination fee of 4%.

Using FinAid’s online loan calculator, a typical Wharton MBA borrowing the estimated average of nearly $124,000 would have monthly payments of $1,477 over ten years. The cumulative payments would come to $177,256, including nearly $53,000 in interest alone.

The total cumulative payments per graduate were then multiplied by 634 of the 845 enrolled students, roughly 75% of the class. Using a 10-year payback period, the total loan and interest payments for the class came to $112.4 million, including $33.5 million in interest.

This estimate is conservative based on the lower 6.8% interest rate chosen for the entire borrowed among as well as the fact that most students would likely pay back their loans over a period in excess of ten years.

Using a more likely 18-year payback period (the average for undergraduates who incur far less debt tends to be between 16 and 18 years), the total loan and interest payments for the class come to $140.7 million.

**MBA DEBT: A BEAST OF A BURDEN**

- PART I: MBA Debt: The Burden Grows Heavier & Gets Scarier
- PART II: A MBA Vows To Graduate Without A Dollar of Debt
- PART III: The Class The Loans Fell On — The First MBA Class With More Than $100 Million In Debt
- Caveat Emptor, Caveat Debtor: A Candid Interview About MBA Debt With GMAC’s David Wilson
- 25 B-Schools That Lead To The Most Student Debt