College and graduate degrees can certainly cost a pretty penny, and many a personal finance blog is devoted to amassing a mountain of debt and then chronicling its payoff.
I want to play too. Tuition and fees alone easily exceeded $65,000 at my MBA program in the early oughts, and I paid it off by…
…writing a check.
It took me at least two minutes because I had to write a total of 6 checks (we were on the quarter system).
You may say this doesn’t qualify as “debt”, but when those tuition invoices showed up, they sure felt like debt to me.
You may also say I’m being silly, but here’s a newsflash: any statement of “I paid off X debt in Y months” is a wee bit silly, because once you embrace it as indicative of financial authority, folks’ll keep increasing the stakes. (“You paid off $180K in debt in 6 months? Big deal. I paid off $380K of debt in 3 months, brah.”). You get extra points if you did it while under some handicap (“I paid off $3 million of debt in 1 month while
working minimum wage holding my breath juggling octopuses.”)
Had I been more strategic, I would have actually taken out the student loans and paid them off immediately. Then my personal finance credibility would be unmatched, just like Bart’s when he quit smoking (Simpsons #166):
Bart: I’ll take up smoking and give that up.
Homer: Good for you son. Giving up smoking is one of the hardest things you’ll ever have to do. Have a dollar.
Lisa: But he didn’t do anything!
Homer: Didn’t he Lisa? Didn’t he?
So there’s my entry into the Global Personal Finance Hyperbole Competition. It’s not a ton of debt, but man did I pay it off fast.
Before you immediately disqualify my entry, let’s consider what I did. Many folks get into grad school, take out massive student loans, and then save like crazy to pay off the debt. I saved like crazy, got into grad school, and just skipped the student loan bit. Was my way worse?
How I Saved for My MBA
My parents paid for Little Lord Fauntleroy’s college so I graduated that debt-free (though I did commit that I would pay for my kid’s college in return). My net worth at graduation was pretty close to $0.
I was on my own for any graduate school. Not only was I fine with that, I think it’s quite wise: if you subsidize graduate school, you might encourage it when it doesn’t make economic sense at all. (The same is true for an undergraduate, but my parents didn’t give me an option there.)
My grad school of choice had always been law school. I was 99.9% sure I wanted to be a lawyer, but I wanted to 1) confirm that law was as awesome as I dreamed, and 2) save some money to help with the cost.
I did both when I went to work for a small financial consultancy that worked with lawyers. I saved money like a madman and tried to keep the same lifestyle I’d have as a grad student, because I knew the pain of going down is way more than the pleasure of going up.
At that firm, I made two awesome life discoveries: I didn’t seem to like the practice of law so much, and most lawyers were downright miserable. So much for my best laid plans. I decided to abort, but what should I do now?
The one thing I didn’t do was abandon my grad-school-appropriate cost of living.
I was driving a totally boss Pontiac Sunfire (hello ladies!). I was living in a really cheap apartment (for those who know Dallas, yes it was the Village Apartments, and yes, it was one of the lowest-rent ones). My favorite pastimes were playing videogames and grilling out with a case of cheap beer and a couple of close friends. I did do some rich people stuff like travel and go to loud bars with expensive drinks, but I didn’t do it much.
I wasn’t killing it with my wages, but I was now steadily advancing at one of the Big Four (nice work on the Oscars last Sunday guys!) while keeping my cost of living locked super low.
My peers looked at me a bit askance when I never upgraded my apartment, kept driving the same sweet ride (note to self – power windows and locks are probably worth it next time), and continued my crazy saving. As my income rose, my expenses stayed frozen. Some folks thought I was desperately paying off undergrad student loans…
After working for 7 years, I had far more than I needed to pay the rack rate for an MBA plus living expenses.
Why I got my MBA is a topic for another day, but having it paid for did guide my decision. It was a long-term investment with potentially very high returns, but for someone still figuring out what to do with his life, it was an extreme luxury. If student loans were my only option to swing it, I probably wouldn’t have gone.
Je Ne Regrette Rien
Except for the super rich, super old, or company-sponsored, it seemed that everyone at my MBA program financed their degree; some finished with six figures of loans. I hadn’t significantly outearned anyone (unless they went straight from undergrad) – my pre-MBA wages were pretty modest and were dwarfed by bankers and other financial superstars. But I was one of the rare people who graduated debt-free.
You could argue I should have taken out a ton of student loans and kept my money in the market.
You could also argue that I should have taken all of the money I spent on candy and video games as a kid and put it into Berkshire Hathaway stock. It’s fun to play the “what if” game, but I don’t regret the opportunity cost of graduating debt-free.
My MBA was an enormous investment in Human Capital (truth be told, it was an enormous investment in a piece of paper, but the world seems to value it somehow…). I’ve earned a nice return on that investment, and hopefully it’ll keep paying dividends for the rest of my life.
I wanted to avoid student loans because I knew a mountain of debt would have changed my career. I would have chased a combination of high income and safety over doing something I enjoyed – that’s just how I’m wired.
Graduating without any debt left me free to take much bigger risks with my shiny new MBA. I joined a turnaround consultancy (for which folks told me I was woefully unqualified), and it ended up being quite lucrative in terms of pay and experience. It gave me entrepreneurial skills I’ll use for the rest of my life (troubled companies share many traits with startups), and it was a lot more fun than some of the safer offers I had.
Paying cash for my MBA also made it very real. Student loans can sometimes feel like Monopoly money (I’m told), and that’s how the troubles begin. Writing a check each quarter was a painful reminder of the true cost of my degree, and it focused me on maximizing the opportunity.
So until someone bests me, I declare myself the fastest student debt payoff in the history of the universe. Members of the press – feel free to run with this title 🙂
Picture courtesy of Cari Dobbins