By John A. Byrne
(Poets&Quants) -- 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 2009. Yet, Joe Mihalic, then 26, was able to land a job with Dell (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-10 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 BMW 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 barhopped with friends in a black stretch Hummer. Though Mihalic had budgeted $850 a month for entertainment, he was commonly spending $1,300 monthly.
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 last summer, when he checked his balance, was he 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.
Going the extreme financial diet route
A back-of-the-envelope calculation showed that Mihalic 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 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."
He vowed to do "everything in my power -- short of lying, cheating, and stealing -- to pay down this debt in the next 10 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 to Mihalic last August after knocking out a cover letter to apply for a weekend delivery job. More
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