It is possible to get your MBA and avoid student loans. The recent discussions on student loan forgiveness and free college has made me reflect how lucky I am to be debt free. Even if college is free, it’s unlikely advanced degrees will also be free. Below I go into detail how I personally avoided student loans in grad school. It required a multi-pronged approach to accomplish this. It’s possible to get your MBA without loans but it takes extra effort and some creativity.

Disclosure

Before I discuss how I avoided student loans and graduated with my MBA though, it’s important to recognize both my privilege and my hard work when I was in undergrad. Since this post got very long, I wrote a separate post on my undergrad experience. I also graduated with no credit card debt. When I graduated, I had a mortgage but at this point turned it into a rental property. At the time of graduation, the rental property had a positive cash flow and the value had appreciated since original purchase.

Grad School Background

I decided to attend a top 10 business school part time so that I still had a paycheck. This limited my options to University of Chicago and Northwestern. Both were expensive but the ROI of these degrees was higher than lower ranked schools. The cost was $120K+ compared to $40K+ for part time programs in Boston.

When applying, I had no idea how I was going to avoid student loans. But, I knew the timing was right so I didn’t let this deter me. I knew my company would reimburse $40,000, so I consciously made the decision then that I would pay money out of pocket for my degree. Since tuition rises faster than inflation the bill would only get higher if I waited until I made more money. Lesson learned: do not wait until you have everything figured out! Set a goal, and continue to make progress towards that goal.

I got into both schools. Northwestern was my first choice because 5 classes I took in undergrad were going to transfer. This would save me ~$30K. When I applied though, it was clear the best school for me was University of Chicago. My parents didn’t want me to have to make a decision based on finances. They offered to pay the difference between the two schools because of the scholarships I was awarded in undergrad. I acknowledge I am very fortunate to have this support. If I didn’t have this option, I may have attended Northwestern. With that support, it was my responsibility to figure out how to shore up $103,000 to spend over the next 3 years to cover tuition, fees, books and the U-Haul to move to Chicago.

Summary of Avoiding Student Loans

Below I’ll go into detail on every category. Here is the summary at a high level:

Avoid Student Loans by Making Money

Working Full Time While Going to School Part Time

The #1 reason why I graduated with my MBA with no debt was that I worked through school. To start, this allowed me to avoid taking out loans for living expenses. It also removed the opportunity cost of forgoing a salary while attending school full time. This decision came with tradeoffs as I had less time to network and fully appreciate everything the school had to offer. Financially though, I ended up much better off. After paying my bills, I worked through a plan on how to pay tuition on my salary. Even though I had savings I could have fallen back on, I tried really hard to pay for my MBA with my paycheck.

Working At A Company With A Generous Tuition Reimbursement Benefit

The second main benefit of working while going to school is tuition reimbursement. I thought I would only receive $40,000 in tuition reimbursement. Then, my company threw a curveball after reimbursing me $16,000 saying that they were ending the old program of $10,000 a year and moving to $50,000 lifetime. I couldn’t believe my ears when it happened, and I had a much stronger loyalty to my company and my team when this happened – one of the biggest reasons 3 years after graduating I’m still working there!

Was I lucky? Yes. Had this not happened I had a backup plan of starting a new job at a new company though. I didn’t want to switch companies but I wasn’t going to be able to cut costs to finance this degree. It was clear I had to make more money. I had an offer in hand from a different company with a significant pay raise when our tuition reimbursement policy changed. Because of this change, I stayed with my current company.

Don’t think it’s easy to graduate debt free when your employer is paying a significant amount. Working full time while going to school part time was the most grueling thing I have ever done. Many weeks I worked more than 40 hours while traveling occasionally for work. I would get home at 9:30pm and immediately get on the phone with our team in Asia. There were a lot of sacrifices I made for 3 years with my friends and family. This is a choice I made and I don’t regret it. Anyone can make this choice.

If your employer doesn’t offer tuition reimbursement consider switching companies. This is a huge benefit and makes a big difference. The easiest way to get your foot in the door at a new company is through an employee referral.

Getting Promoted While In School

After my second tuition bill it was apparent that paying my way through grad school was not going to work with my current salary. For the first time in my life I was barely scraping by paycheck to paycheck. A job opened up internally and I got it! This job was both a promotion and a pay raise. It was intended to be for someone more senior than me, but a coworker went to bat for me behind the scenes. I proved myself in that role and with that same manager I got the second promotion less than 2 years later. In the end, I was promoted twice while in grad school.

Taking Advantage of Additional Company Perks

I maxed out my ESPP plan the period leading up to grad school and during grad school. I contributed $37,100 to ESPP over 3 years. This helped me earn an extra $3,700 over 3 years. Yes, I had to pay higher taxes selling these shares the next day; however, it was a guaranteed return. Essentially, I used ESPP as if it were a high yield savings account.

There wasn’t much money left over after bills and tuition. But, it was important for me to continue to increase my net worth. My main savings vehicle during this time period was through continuing 401(k) contributions and the 401(k) company match.

I continued to receive healthcare through my employer which kept these costs manageable. Our plan also had additional perks like contributing towards a gym membership.

Lastly, I was able to continue to accrue airline, hotel and car rental miles through company travel which helped reduce my personal travel costs.

Avoid Student Loans By Being Smart with Taxes

There were four areas I was smart with taxes: contributing to a 529 plan, contributing to a 401(k) plan, tuition bills and housing. I did go to school prior to the recent tax reform. Some of these benefits may no longer be available and there may be new benefits I don’t discuss.

Tax Deductions on 529 Plan Contributions

I leveraged a 529 plan for my MBA primarily for the tax benefits. I contributed $10,000 / year for 3 calendar years. These contributions were then tax deductions on my state taxes. Due to withdrawal limitations I only contributed for 3 years. This plan also served as a savings account for tuition and I withdrew the full amount to put towards my tuition bills. The benefit from the state tax deduction alone was $1,125 across three years.

Tax Deductions on 401(k) Contributions

401(k) contributions are pre-tax contributions. I continued to contribute enough to my 401(k) to get my company match which also resulted in tax benefits. I go into detail here on tax benefits by income level.

Tax Deductions On Education Expenses

My employer tuition reimbursement was not taxed due to certain criteria I met. This same criteria meant certain education expenses paid out of pocket could be considered an unreimbursed business expense. You can learn more about work related education expenses and how to know if you qualify for this tax deduction on the IRS website.

Tax Deductions on Housing

I bought my condo when I moved to Chicago so I was able to take all of the standard deductions of buying a property, mortgage deductions and SALT tax deductions.

Net Tax Savings are unclear; however, I received $6,500 in tax refunds while in grad school. Usually I owe taxes, so it can be assumed the net benefit exceeded $6,500.

Avoid Student Loans Through Spending Cuts

Prior to grad school, I already lived below my means, saving 40%+ of my salary after taxes. Now, I had to try to cut my spending even further. The total amount I saved over almost 3 years to help finance my degree was about $10,000.

Gave Up My Car and Used Public Transportation

When I moved to Chicago, I made the decision to no longer have a car. I no longer needed a car to commute to work and didn’t have family in the suburbs to visit. I didn’t have a car loan and was spending $3,500 on gas, insurance, tolls and maintenance, not including depreciation a year. If I had brought my car, it would have cost $200 / month for parking plus the cost to ship it to Chicago.

With this decision, I was able to drop my transportation costs to only $1,000 a year. This included all public transportation, cabs and Ubers. Now living in a city instead of commuting 35 miles each way I was able to walk to the office (~2 miles each way or take the bus). This is the biggest savings decision I made.
Net Savings = $2,500 / year / $7,500 while in grad school

Stopped Dying My Hair

I had been getting highlights since I was a teenager. Stopping this was a BIG DEAL for me. I was pretty frugal here before so it didn’t save a ton of money. Now that I properly maintain my hair I would save a lot more money if I stopped getting highlights. While in school, I sucked it up and became a brunette for 3 years with a lot of split ends. I celebrated the end of this by cutting off 10 inches and donating it to Pantene Beautiful Lengths.
Net saved $150 a year / $750 while in grad school

Travel Costs

I reduced my travel for the first year by $1,000 before returning to previous spending levels. This included the increased cost of now having to fly home to see my friends and family instead of being able to drive to see everyone. The good news is when you’re working full time and going to school part time you have no time to travel. The bad news is it really wears on you mentally. My office, school and home were all within 2 miles. It was great for transportation savings but I also felt trapped. This was not sustainable and I increased my travel/ fun budget back to what it had previously been: $2,200 a year.
Net saved $1,000 total while in grad school

Food and Drink Costs

My grocery / eating out / bars spending stayed relatively flat. The mix changed, but overall it stayed flat. Who knew groceries are more expensive in Chicago than they are in the Boston suburbs? I also moved where I knew no one and it was important to go out and meet new people. Even limiting myself to only one drink when I went out it was still an expense.

Could I have reduced this further? Yes, but I literally would have been a hermit and missed networking with my classmates. I was already limited to only one night out (either bars or dinner) per week with my schedule. One of the biggest reasons why you go to grad school is for the network. It was important that I grabbed a quick drink with them after class to network and enjoy one night off a week. I was able to keep this flat by taking advantage of school and work sponsored events.

Clothing Costs

I tried to reduce the amount I spent on clothing – the first year spending only $840! Sneakers are at least $100 / year (I walked a lot in the city) and I lost weight and went down a size. A much colder climate also required heavier coats and sweaters. The second year I spent $1,500 which I feel like is still pretty low – doesn’t even cover a nice designer purse! Overall, this category is one each individual can look at and determine how much they can cut here.
Net Saved $700 total while in grad school

Housing Costs

I’d be remiss to not mention housing. No, I didn’t live at home for free. This was definitely my largest expense and it actually INCREASED! I went from living with 4 other roommates in a HCOL city to living by myself in a condo in Chicago. Financially it made more sense to buy verse rent. But, the first few months were tough after spending money on a down payment and moving. I pretty much had no furniture. But, I was building equity and able to deduct my mortgage so net I think of this as pretty much even.

Continued My 401(k) Contributions But Froze The Increases

I had a company match of 6% / up to $3K a year. Ideally I would have like to increase the % I contributed but it wasn’t feasible while in school. I held my contributions steady. No matter how hard, I knew I had to at least continue to contribute enough to my 401(k) to get the company match.

Avoid Student Loans Through Credit Card Hacking

Since I moved away my travel cost to see friends and family increased. I used credit card points to fly to my friends weddings and fly home.

At the time, I was able to put tuition on my credit card with no penalty from the school. My tuition reimbursement was also that: reimbursement. That meant I had to pay the bill first and get reimbursed. I researched credit cards and switched to a travel credit card. Receiving 103,000 points to spend on travel from tuition alone- not bad!! Additionally, with my credit card switch I received 50,000 sign up points. Turns out it’s very easy to hit a minimum spend in 3 months when you pay tuition. This also helped paying the bills as I would charge tuition the day it was due and then pay off my credit card bill in full the day it was due. An extra 20-30 days interest free helps immensely when you’re barely squeezing by. This was also key as my ESPP payout occurred in this month window every time.

Post MBA Graduation Reflection

I successfully managed to avoid student loans and graduate with my MBA. When my classmates received their first student loan bill I was busy investing in the stock market. Now that I’ve been out of school for a few years I realize I learned a lot outside of the classroom. It is possible to reduce spending to meager amounts, but it’s not sustainable and mentally very tough. You cannot focus on cutting costs alone, you must focus on how you can increase your income. It was few really tough years between the stress of school, work and finances.

I’m very grateful to have gone through this as tough as it was as it makes me appreciate what I have even more. It was the first time in my life I had to worry about cash flow, and how to stretch $300 / month after I paid my mortgage for literally all expenses.

I also learned a lot about time management! I have continued to climb the corporate ladder which has put me at 60-80 hour weeks. With strengthening my time management skills during school I have been able to work these hours, relax way more than I did and work out every day I’m not traveling. I’ve even had the opportunity to start my next few things on the side: this blog, and researching how to start investing in startups.