A Harvard MBA Pays Down $101K Of Debt

by John A. Byrne on

Joe Mihalic graduated from Harvard Business School in 2009 with $101,000 of student debt. The Dell manager went on a crash financial diet to pay it off.

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 of 2009. Yet, Joe Mihalic, then 26, was able to land a job with 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 ten 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 BWM 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 bar hopped with friends in a black stretch Hummer. Though Mihalic had budgeted $850 a month for entertainment, he was commonly spending $1,300 monthly.

AFTER MAKING $22,000 IN MONTHLY PAYMENTS, THE HARVARD MBA STILL OWED $90,717

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. It wasn’t until the summer of last year when he checked his balance and was thrown into shock. After paying out more than $22,000, he still owed $90,717, a sum that exceeded his after-tax salary for a year.

A back-of-the-envelope calculation showed that he would pay $42,000 in additional interest if the loans went to their natural 10- and 15-year terms. That is when he vowed to go on an extreme financial diet to get rid of the financial burden. “Student loans are a strange animal,” he reasoned. “Unlike a payment towards a car loan or a mortgage, a student loan payment doesn’t go towards something that is benefitting me in a direct way.”

Mihalic, now manager of strategic alliances and business development at Dell, vowed to do “everything in my power–short of lying, cheating, and stealing–to pay down this debt in the next ten months.” Except that in his case, he also decided to chronicle the journey on a blog called “No More Harvard Debt.” The idea to anonymously write about the sacrifices he was about to make occurred last August after knocking out a cover letter to apply for a weekend delivery job.

LOOKING FOR PART-TIME WEEKEND WORK WITH A HARVARD MBA AND A FORTUNE 50 JOB

Even to him, taking a part-time position to pay down more of his debt seemed like a peculiar thing to do as a Harvard MBA with a six-figure management job at a Fortune 50 company. “I took a step back and it wasn’t until I stopped laughing at myself that I realized others might enjoy laughing at me, too,” he recalls. “The blog started as a joke. I had every intention of following through on my challenge when I started it, but I wanted to let people be amused by it and get a laugh at it, too.”

Over the next seven and one-half months, through 88 separate posts, he vividly describes his novel experience. His blog is at times introspective, witty, and sincere, often inspirational. His finances are laid bare, open for all to see as if he were dissecting a frog in a high school lab class. From his $20 haircuts to his monthly car insurance of $171, he meticulously details every expense and just about every source of revenue in his life. Mihalic even shares an itemized credit card statement with a month’s typical charges in Austin’s 20-something bars and restaurants (among the charges were a $107.85 bill at Chez Nous, an $86.80 tab at La Condesa and a $68.13 purchase at Kona Grill). Always, he writes with humor and flair on what it is like to live a remarkably frugal life–at least for a Harvard MBA.

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  • David

    Rushing to pay off 3.13% interest loans? That is a bit extreme and probably would have been better used on his mortgage. Nice story though. 

  • Guest

    This guy made some counterproductive financial moves.  Even if the interest rate was 10%, you would still want to contribute the max for your 401k match before paying off debt.  Having 0 debt is emotionally satisfying and all, but he could use some additional tips on personal finance.

  • Graeme Harrison

    Great Story, well told, with lessons for all!
    Graeme Harrison (HBS MBA ’79)

  • Sonavm

    The best story I’ve ever read!!

  • buoy-slayer

    not the sharpest tool in the box if only making 100 clicks, I’d stay in bed lmfao!

  • Guest

    Keep in mind he matriculated B-school with roughly two years of work experience with a $52K pre-tax salary givining him minimal opportunity to save.

    Someone with 4-5 years exp making $65-$70K (the year before they matriculate) who has been somewhat responsible will have more personal resources to tap during B-school.

  • Dc111263

    I think he made a great decision to pay off all of that debt.  It would have taken him 10 years to pay it off if he just paid the minimum payments.  I believe it was the smartest move he’ll ever make in his life!

  • Shirleyaschen

    He really didn’t do much damage (not contributing to his 401k while he was paying off his debt).  It was only for 7 months.  Now he has even more money with which to invest because it is not going to student loan payments.

  • http://www.facebook.com/palmer.muntz Palmer Muntz

    “Student loans are a strange animal,” he reasoned. “Unlike a payment towards a car loan or a mortgage, a student loan payment doesn’t go towards something that is benefitting me in a direct way.”
     
    Huh?!  He doubled his salary by earning an MBA and yet his student loan didn’t benefit him in a direct way??  Seems like it should be easier than that for him to connect the dots. And lest anyone feel sorry for him, it appears a good chunk of the $101,000 in student loans he borrowed went toward expenses beyond just tuition and basic living expenses while he was in grad school. He likely could have gotten through his MBA with far less debt if he had been self-disciplined, then his extravagent lifestyle after graduation was just a continuation of those habits formed while at Harvard.  But perhaps he’s learned his lesson now. 
     

  • GGt2

    So, he had $10,000 in disposable income every month? And it took him two years to figure out he should direct more of it toward paying off massive debt instead of buying a second car, a huge 3-bedroom house, a motorcyle, and god knows what else? He clearly didn’t even need to launch those side-businesses; he was just taking away work opportunities from people who probably didn’t already have $100,000/year day jobs. Am I supposed to feel like I should be following his example?

  • Liz

    He calculated that he’d pay $42,000 extra in interest over the life of the loans.
    Where in the world did you get 3.13% interest?  There are many different kinds of student loans available and there are different kinds of loans offered at different schools and to different types of degrees.  He borrowed $25,000 with 3.13% interest, and I’m assuming that was the cap amount for that loan.  Lucky him, the best interest rate I could get in 2008 when I started grad school was with the Stafford, 6.8% interest.
    Almost $70,000 of his debt was thru Stafford, both subsidized and unsubsidized (I’m guessing he didn’t qualify for subsidized loans the first year?), which is 6.8%-7.9%. 

  • SM

    I thought that quote was strange as well. The only thing I can think of is this: when you pay off your mortgage you then own the house. Same when you pay off your car loan. But when you pay off your student loans there isn’t this sense of “owning your education” because you already have the education and the diploma in your hand. I hope that makes sense. Maybe someone should leave a comment on his blog asking for clarification.

  • Filippova T

    I could tell that having business education you need to be smarter then purchase everything after being graduated.
    Good example for many! 
    I could add: in countries where no credit cards exist people are really smart to live using cash only.Without Harvard education but without bright future also. ;-)

  • Jake

    I’m confused why he had to ask his roommates for the rent early. I read the month 7 progress report a few months back when he originally wrote it and he didn’t mention needing to do this. I’m guessing he probably spent too much on entertainment per usual and couldn’t make his rent payment for the following month.

  • Holly
  • Smi_josepha

    Well, he has gotten the attention he was looking for.  I would never hire a clown like this.  Went to Harvard and couldn’t do the math until 2 years later?

  • moc

    you all are running ur mouth as if u ur selfs dont
    have debt. I dont care about his financial history i give im major respect for
    doing something that most american dont even have the discipline to do. So to
    all of you haters talking as if you graduated from Harvard can go some were
    with ur debt infested lives

  • Barf

    so, you’re saying…despite having NO obstacles to overcome (other than his own privalege and over-spending habits), this young, straight, white, male, harvard-business-school-educated, guy made it??

    shocking!

  • Lol

    how does the single guy who makes 6 figures pay off his harvard grad school debt?!

    i’m sure he’s on the verge of homelessness and helplessness that so many of us are facing.

    I. NEED. TO. KNOW!!!

  • thekiyote

    It says he got the rent money early from his roommates so he could pay off his mortgage.  However he collected the rent, it most likely fell after the mortgage payment was due.  He probably went for broke to pay off his student debts, leaving him short for mortgage payments.

  • Mhyder1

     What you say is true but I think he was more concerned about the $42,000 than emotional satisfaction. An now he can contribute to his 401k as much as he likes. I think it was a good move.

  • yolo

    He did have an obstacle, his car got towed costing him ~$200.

  • http://twitter.com/lokeshjain2008 lokesh

    I think i have wasted my time reading his nonsense talk. 
    now, i have to think about reading,
    he is such an ass

  • Jimdetejas

    Great story and love the lessons of making sacrifices to accomplish a meaningful goal! Amazed and disappointed at haters and their negative comments… Jealousy is so ugly.

  • deez

    no youre wrong dude

  • The Jesus

    His examples of roughing it kill me… going to dinner at
    the Olive Garden, Red Lobster and other similarly price places… shopping at
    Kohls and his father only buying him 2 bikes and being an executive at an
    automotive company… that is not roughing it at all… My father had passed
    away when I was 5 and my family moved here from South America. I remember as a
    5 year old not asking my mother for a quarter for the machines outside of the
    supermarket cause I didn’t want to put her in a bad situation when it came to
    food or rent. I know this guy was trying
    to portray a meager background… but I would have loved living in his shoes…
    although he did make his father sound like a jerk… Also, he was purchasing a
    house and had a bunch of cars… If I was him, I would have paid off that loan much
    quicker and it probably would have been half that to begin with.

    Also, unless his 401K and IRA was invested in a dogs, he
    should have been making 3 to 7% or more… then to pull that money out, they
    charge you tax and a penalty in excess of 10%… I understand he wanted to
    satisfaction… but it came at a much larger opportunity cost… I give him respect
    for getting into Harvard… but I just don’t know what they saw in him.

    Also, just so all of you know, all MBA cost about $100K ±10K
    including living expenses. Those that
    say they are $60k aren’t including living expenses. So, if Harvard gave him a $50k and he still
    had 100k in debt, then spent 50k over necessary living expenses.

    I cannot give this dummy respect for getting himself in that
    much debt to begin with. Also, he doesn’t
    realize it but he does sound very privileged.
    At least he’s honest enough to let it show!

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