Wednesday, July 4, 2007

How I Got Through Graduate School Debt-Free

I graduated from college with a BS in Business at the tender age of 20 years old. I'd taken advanced courses in highschool and that allowed me to lop a year off of the end of my undergrad experience. It wasn't an easy decision- I gave up on another year of fun living away from home with a bunch of friends (including my future wife), but I had a longer-term view in mind.

I remember my first year on my first job. It was a pretty big adjustment, and I was the youngest person in the office. I wasn't even old enough to legally drink at my first company Christmas party. However, I was also one of the most interested in what I did, interested in improving how I did my work, and my salary went from $33,000 to $50,000 in about a year and a half.

Did I buy a flashy car? Did I buy fancy clothes and go out drinking every night? No. I socked most of this money away. I had my fun every now and then, but I ate peanut butter and jelly sandwiches almost every day.

I really wanted to do more than my entry level job, so as soon as I got settled, I started planning for my MBA. I got as much information as I could on starting salaries, tuition and board costs, GMAT scores needed, attributes the admissions folks looked for, school rankings etc...

My commute home from work was about an hour, and I remember entire train rides spent looking at my savings balances, forecasting when I would have enough cash to be able to support myself through school, and determining how much I would need to save out of each paycheck to make it happen. I filled legal pads with plans and ideas.

I got really lucky in a few ways. My job was pretty well suited to my abilities, and it was something I was interested in, so I stood out as one of the better performers. I was able to live in my parents house, paying low rent. Most of my friends were still away in college for that first year, so I didn't have as many offers to go away for the weekend, or do other things like that. In short, I was able to focus, probably more than I ever have in my life.

My savings grew little by little. I discovered high-yielding online banks. I remember my first CD had a 7% yield. I opened a small "play money" Ameritrade account (it was Datek back then). I learned all I could about business and finance. I read books, I got to work early, I volunteered to do extra projects, and before I knew it, I had a pretty healthy amount in my savings account.

Then the company I worked for folded. It was a very difficult time for me in many respects but after some time, I regained my focus and I was still ahead of the game. I used my extra free time to study for the GMAT. I put a sign above my desk that said "1290690 or burst." I scored exactly 1290 690 on the exam. I wrote my admissions essays, I got recommendations from former professors and coworkers, and I sent in my applications. I took a paycut, but found a new job where I worked for six months, at the end of which I found out I was accepted into graduate school. I had about $40,000 in my bank account at that point.

I went to a state school, I worked as a graduate assistant to earn some extra cash, as well as a reduced tuition rate. I lived in a modest apartment. I brought peanut butter and jelly sandwiches for lunch. I worked a paid internship during the summer between my first and second years of school. When I graduated, my savings account had just about $1,000 left in it. However, I had an MBA, and the starting salary at my next job was much higher than it was at my previous job. I think I came out ahead.

That was how I did it.

It seems like many people have resigned themselves to the mountains of debt they think they need to incur to go to graduate school. If you plan ahead and discipline yourself to do it, you can save enough money to either avoid debt alltogether, or at least keep it to a minimum.

I was inspired to write this after reading a Think Like the Rich post about about another strategy for avoiding debt in graduate school. A graduate degree is starting to seem like a prerequisite for getting some of the more interesting, higher-paying jobs out there right now. There are many approaches to getting one without going into a ton of debt.


movingeast said...

Not sure that I understand a mark of 1290 in the GMAT. The maximum score possible is 800 ??

think like the rich said...

its amazing how much debt can be accumulated in undergraduate/graduate school. however, i think college is a buyers market. schools wont work with you on price, but some will with the 'financing.' its definitely worth investigating.

MoneyMan said...

Movingeast, thanks for your correction. My target (and final score) was 690! I believe I was thinking of the SAT when I put down 1290.

And as to think like the rich's comment, in some cases borrowing is well worth it (for example, after getting a Harvard MBA or law degree, there is a chance you'll be making enough to pay off even a huge debt load within a few short years. However, I'll wager most of us don't fall into that category.)

Thanks for the feedback.

Dennis said...

Congrats on your determination! that is truly inspiring.

MoneyMan said...

Dennis, I thank you for your kind words.

SavingDiva said...

Wow! That's a great story! I was never that committed to get to work. I also had the option of graduating a year early, but I chose to stay. I'm glad I did. I was able to write a dissertation and a acquire a few more publications. However, it is nice to see the other side of the coin.

Anonymous said...

how can you forget what your GMAT score was? Either you are really old (60+) or this blog was a bit of a lie thus this blog loses its credibility.
I have no idea how someone can forget what their GMAT score was.... makes no sense.