<p>financing an MBA
My husband and I are trying to figure out what makes the most sense for financing his MBA. </p>
<p>We both work. He started grad school full time in Fall 2010 and dropped down to working part time. His income + my income was enough to cover all our living expenses as well as max our ROTH-IRA plans. I am contributing up to the match limit through my work's 401(k) as well. </p>
<p>We borrowed $20k for tuition (private school, he got the other $20k of tuition through a merit scholarship) last year as well as $10k for living expenses. </p>
<p>We have not touched the $10k (we put it into a S&P 500 fund that is up 8% so far) and received $14k as a tax rebate. We have an additional $15k in savings in a mutual fund and $10k in miscelleneous stocks/savings accounts/whatever. </p>
<p>We are now doing our financial aid for 2011-2012. We plan to borrow the second $20k (bringing the total borrowed to $50k) and are trying to figure out if we need to borrow any additional $ for living expenses. Here's the rub: my husband is going to quit his job entirely, leaving only my income. We will be running a deficit of $1300 a month from Sept 2011-May 2012 (assuming no lifestyle changes. We own our house, so we can't change the mortgage...we could scrimp and get the deficit down to $800 if we had to). </p>
<p>So...thoughts? Do we just run on our savings/loan from last year? And hope nothing happens that would make it run out? I should add that he's got a full time internship over the summer that will gross us $20k between June and August 2011. </p>
<p>We are in our mid/late 20s, no kids, own our cars etc. I expect a large salary raise in 2011, though we are not planning on that when running the numbers.</p>
<p>Tell him to keep working part time. If the school he is attending is a T10-15 school, just take out loans and don’t worry. If he is quiting his job to get an MBA from Kentucky, smack him in the face and say no.</p>
<p>Thanks for the reply. Unfortunately, your thoughts aren’t that helpful…</p>
<p>A couple of points:
- He’s already in school. Regardless of where it is, “smack him in the face and say no” is not an option, unless it makes sense to quit halfway through the program. That being said, he’s in a top 20 program, but going for less than half price (merit $). He chose this program because it allowed us to stay in the area, where I have a good job. He did get into another school (top 10 or top 15, depends where you look), but it was full price, and we’d have to move (and I’d have to leave my job for two years and live in the boonies).</p>
<ul>
<li>He can’t continue to work part time [at the current job]. If he could, the financial situation wouldn’t be in question. He plans to look for a part-time internship in the fall, but we aren’t comfortable counting on that for financial projections.</li>
</ul>
<p>As it stands, if we don’t take out any additional loans, he’ll graduate with $50k in debt and we’ll have ~$20k in the bank in liquid/semiliquid assets (none of that counts retirement $, or a $10k emergency fund that we are not factoring into our planning…). Alternatively, he’ll graduate with $60-70k in debt and ~$40k in the bank. If that were the case, as soon as he got a job offer we’d start to aggressively pay down the loans.</p>
<p>Given that info, any insight?</p>
<p>Take out the loans. Keep the cash in the bank for liquidity sake. Top 20 program will pay off. </p>
<p>Having excess cash flow and a reserve is key. If you don’t need the money when he graduates and he gets a great job right away, simply take the money in the bank and pay down the loan in one big lump sum. </p>
<p>Right now your biggest issues are liquid cash and an unknown employment situation. Have low loans, but no cash in the bank will really hurt you if something goes wrong.</p>
<p>You can always pay down the loans, you can’t always take them out.</p>