Roth IRA/Grad School Loan Dilemma

**disneysteve** · 05-21-2012, 02:32 PM

Originally posted by hokies2688 View Post

If we'll need anywhere between $50-70k in loans for grad school, should we:

D)do something else.

How much do you currently earn? What is a reasonable estimate of what you will earn once you have your MBA? And how much will you be earning during the time you are getting your MBA?

I vote for D) do something else. Figure out a way to not "need" to borrow 70K to complete your education. Work an extra job. Go to a cheaper school. Take longer to get the degree.

**hokies2688** · 05-22-2012, 04:55 AM

I've decided to do the full time program in the normal amount of time. I'll probably work a side job to earn money for living expenses, but in the end, I'll probably have at least $30k but it could be a little higher in loans. What would you do in this scenario? It's worth it to me to go back full time to the school I want to.

**J.Apple902** · 05-22-2012, 07:51 AM

I think you should continue to max out your ROTH if you can afford it. The time is what you cannot get back. If you are considering getting your MBA in the near future I am assuming you are < 30 yrs old. I've run the numbers. Starting and maxing out your Roth just one extra year, say 35 vs 34, is a difference of hundreds of thousands of dollars upon retirement. Roth should be getting 8% return or so, your student loans will not be that high. Also, when you get out and return to the work force with an MBA you're going to be making plenty of money. If you live frugally for a couple years you can quickly pay down that $70k or whatever it is. Use No More Harvard Debt for guidance and inspiration. Joe Mihalic graduated from Harvard business school and paid down over $90k worth of debt in seven months.

A Harvard MBA's radical quest to erase his debt - Fortune Management

No More Harvard Debt | Follow one person's attempt to pay off $90k in student loans in ten months

**hokies2688** · 05-22-2012, 05:02 PM

That's what I was kind of thinking with the time that I'd never get back. I'm 24 now, make $65 with very limited expenses and already live frugally. Also looking to take on a part time job for extra money. I did read his whole blog in like two days last week; I was fascinated by it and that's what led me to this. I guess that means don't cash out my Roth and 401k like he did to pay off debts.

**Slug** · 05-23-2012, 05:05 AM

I think you're on the right track with your thinking. At $65k you're earning decent $, but depending on your chosen field, you should easily be making 6 figures coming out. My MBA loan rates are ridiculously low so I'm paying them down slowly. I would keep funding the Roth. You can use your signing bonus to knock a chunk out of the loans on day 1.

Also, don't plan on working part time during the program. If you have time to do that, the program isn't pushing you hard enough. And, don't bother applying to non-top 20 programs. I see your screen name references the Hokies. If you're still living in VA, then Darden would be a great fit. Remember that when buying an MBA, you're buying lifelong branding and a network of alums. Finally make sure the schools you are considering are being recruited by the companies you want to work for. If they're not, you don't want to go there.

Good luck.

**J.Apple902** · 05-23-2012, 08:24 AM

I don't have much experience with MBA programs, I choose the technical master's route myself. I sort of wish I had done undergraduate engineering --> MBA rather than into MS Engineering. Maybe i'll get my MBA too if i can afford it and the cards fall correctly.

Regardless of my experience with MBAs, I do agree with Slug. Don't cash out your Roth or other assest like Joe M did. He had an incredibly ambitious goal to pay down nearly $100k of debt in under a year which required him to resort to extreme measures. May he regret cashing out assets? Probably not because he met is goals and also become famous along the way (always a bonus).

**Jon991** · 05-23-2012, 09:33 AM

Originally posted by disneysteve View Post

How much do you currently earn? What is a reasonable estimate of what you will earn once you have your MBA? And how much will you be earning during the time you are getting your MBA?

I vote for D) do something else. Figure out a way to not "need" to borrow 70K to complete your education. Work an extra job. Go to a cheaper school. Take longer to get the degree.

I 100% agree with steve on the above. How certain are you that your income will increase after you take on this mountain of debt? Is there a path set out for you by your employer that says you will be making X times more if you hold an MBA? I would analyze the pay difference very closely. We've all heard the stories, especially lately, about people going back to grad school for an advanced degree only to find themselves making the same money....or going back to grad school to make themselves more marketable but still no job. I am not saying getting your MBA is not worth it, but you need to be careful since you are taking out a large sum of money to make it happen.

If I were you, I would seriously consider going part time and pay as you go without taking on the debt. You are making a good income right now, especially for a 24 year old). This has got me thinking, does the company you work for not offer any kind of program to help pay for your advanced degree?

**hokies2688** · 05-23-2012, 01:07 PM

My company does give us around $5500 per year for tuition reimbursement and even though we have good schools around here (GW, Georgetown, George Mason), I've been here all my life and want to get out of Virginia. I want to expand my horizons and it's worth it to me to go back to school fulltime even if that means a bit more in loans. I don't plan on going back to my company after school as it might not even be in existence in a few years even though it's Fortune 20. I'd like to do something completely different in a new city and it is worth the risk for me to do this.

Roth IRA/Grad School Loan Dilemma