The Debt Monster

Remember that episode of the American version of The Office when Michael buys a condo? He's about to sign the 30-year mortgage and, choking on the obligation, has to go out in the backyard to get his breath. Hovering by his side is Dwight K. Schrute (my favorite character) who points out that given Michael's age, he's pretty much buying a coffin. "And if I were buying my coffin," Dwight says, "I'd get one with thicker walls."

The scene came back to me today when I took a hard (and probably overdue) look at the loans necessary to pay for SOM and, using the calculators at Access Group, figured I'd pay about $1040 a month for the next 20 years (though after the first, oh, decade, when the Stafford loan is paid off, that number drops to a cool $622. The scenario is based on borrowing about 90% of the total 2-year budget of $122K, drawing on both the max Federal Stafford loan and then on the new Graduate Plus loan. To choose the latter is to gamble that the interest rate on a private loan will rise about the fixed 7.2% rate on the Plus (I've included the discount offered by at least on Plus lender).

It's not so much the $1040 as it is the 20 years. I can see why Michael had trouble breathing. The internal Yale-admit boards are alive with the same kind of worry. And mutual reassurance.

One route is Yale's unbeatable loan repayment program. Given that non-profit work has been the central and consuming theme of my short professional existence, that program is a comforting option. It's a life raft stored on the deck of a towering freighter of debt.

The other choice, of course, is to harness the MBA's vast earning power - that's right, earning power - and simply earn enough to manage the loans. I'm skeptical there is a private sector job out there that a) I'd want and b) pays enough, though expect the next two years will open my eyes (and the doors) to all sorts of possibilities I'm not even considering. The worst and most dreaded outcome is to be forced into this route not because I love the job but because I need the money.

Last Sunday's New York Times reports that the average first-year salary of an HBS graduate is $100K and goes on to debate, inconclusively, whether the tuition and attendant costs are worth it. Probably not coincidently, the same day's Magazine devotes itself to debt, with an entire article on student debt.

The cover is a red ink drawing of some kind of debt monster waving its many frightening arms.