Joe Mihalic is a changed man. In 2011, he led the typical the Harvard-MBA lifestyle, with a lucrative job at a big tech company, a house in the suburbs, two cars and a motorcycle, and frequent travel—but he felt trapped. “I wasn’t working at a company I loved or in a job I loved. I wasn’t living a life I loved,” Joe says. So he changed his life drastically, becoming a minimalist. And that decision led him to pay off $90,000 in student loan debt in just seven months.
Joe, who lives in Austin, Texas, chronicled his journey to payoff success in his blog No More Harvard Debt. His posts resonated with many young grads, and his blog went viral in 2012. Now debt-free and an operations manager at a company he loves, Joe says he’s found inner peace. But he hasn’t let go of his frugal lifestyle— his work shoes attest to that. While paying down his loans, he wore the same shoes, even as holes appeared in them. Today, he won’t buy a new pair of shoes until the soles wear out.
Joe didn’t take every possible road to pay off his student loans—for example, he didn’t refinance, or take advantage of a student loan forgiveness program. But his “all in” approach offers many takeaways for MBA grads facing mortgage-sized loan debt.
What made you decide to tackle your student loan debt, and what had to be cut from your life to do it?
I was spending thousands of dollars a month on debt payments and things I didn’t need. That’s really what led to my epiphany. So I got rid of my second car and sold my motorcycle, even though I loved it. I stopped buying clothes, didn’t go to dinner or movies with friends, and I even brought my own flask to bars! It changed me 100%. I became a total minimalist, saving every penny. I also got roommates. Initially, I hated it but figured I could deal short term. Eventually, we became friends.
Cutting back in such extreme ways had to be difficult.
It wasn’t easy. I was still super materialistic at the time. My self-esteem was fueled by money, by the lifestyle. MBA grads are ‘Type A” individuals; we surround ourselves with each other. With freshly minted degrees, we think we have to look and act a certain way, and our expenses accumulate. A lot of MBAs also quickly spend their sign-on bonus, relocation bonus, and first big paycheck, and before they know it, they have all this additional debt. That’s where I was.
Initially, I looked for an easy way to earn more. I tried pedicabbing, which only lasted two weekends; I didn’t make a lot because of competition from other drivers in downtown Austin. I also started a weekend landscaping business. But working seven days a week—including 8 a.m. to 6 p.m. at my day job—was tough. So I had to cut back on spending in order to pay down my student loan debt.
Related: Facing a Post-MBA Career Crossroads – How to Pull a Successful Career Pivot
You had $90K in student debt when you started this mission, and your private and federal loans carried interest rates between 3% and 7.9%. Do you regret not consolidating and refinancing?
I did look into that, but the interest rate offered by the lender wasn’t lower than the weighted average of all interest rates across my loans. I would tell people paying high-interest loans, that if they can find a lender that offers to refinance at a lower interest rate, it would be foolish not to take it. It can be a game-changer.
Looking back at your hard-core debt payoff, what advice do you have for others strategizing to do the same?
My advice is to cut spending deeply, but surgically. That means making smart decisions, which I didn’t always do, though I got away with it.
For instance, I stopped contributing to my 401(k), despite a 50% company match. I also cashed in an IRA to pay off one of my smaller loans. Never in my life had I paid off a loan before; it was a symbolic move that was a boost to my mission. But it wasn’t that smart. I was in my late 20s, with plenty of time to recover retirement funds. Dropping my 401(k) contributions meant I walked away from free money.
I also didn’t go home to Michigan for Christmas once. That’s family time you don’t get back. Life is short and support is important.
Can you provide some insight on how to cope emotionally with such big lifestyle changes?
Realize there are no quick fixes. It might take a year to come to grips with a new, frugal reality. But at the end of the day, hard work will get it done.
I also suggest staying away from social media. Facebook and Instagram are just terrible if you’re trying to cut back on your lifestyle. Spend time with people instead; deeper connections will keep you less focused on the superficial crap. It would have been a dark seven months for me if I hadn’t been with friends.
Given your experience, do you now think MBAs are worth the cost of tuition and resulting debt?
Some people say an MBA from anything but a top-20 school isn’t worth it. I think that’s a little harsh. It matters where you go to school and how seriously you take your education. The academic aspect makes the debt worth it—you learn all the critical aspects of running a business. And if your program promotes diversity, you’ll meet a variety of people and be exposed to different kinds of thinking. Those relationships will last, and your friends’ successes will be your inspiration.
What role do business school choices play in an MBA grad’s future debt and ability to pay it off?
When choosing a school, learn what area of business most graduates enter after graduating to ensure it aligns with your own goals. It’s also important to look at how much you’ll earn after the program, and ask about the school’s placement rates and alumni network.
Consider the opportunity costs of grad school, too. MBA programs can encourage consumption: formal parties, expensive trips, etc. It’s easy to get wrapped up with folks who come from family money or who have already earned a lot. Spending often trips people up—it can leave you with even more debt upon graduation. Plus, you might not get a paycheck or contribute to a 401(k) for two years while you’re paying tuition and living expenses, which means there will be catching up to do later.
Recommended: SoFi’s “No BS” 2017 MBA Rankings Analyze Salary Vs. Debt
Finally, how does it feel to be debt-free?
Paying off my student loans and living minimally have allowed me the financial freedom to find my passions and feel better emotionally. I now work for a company and in a role that’s better aligned with my life goals. I manage a team of very smart people with a lot of drive. I help run our distribution centers across the U.S. and achieve big things every day.
My choices have also led to financial boons. I’ve saved enough cash outside of my investment accounts to pay off my mortgage and be 100% debt-free, even while maxing out my 401k every year.
I don’t want to say I could die now and be happy, but I feel like I’ve made a dent. It’s an incredibly good feeling.
SoFi members who have refinanced their MBA loans have saved a lifetime average of $20,215. Refinance your MBA debt, with fixed rates starting at 3.375% APR and variable rates starting as low as 2.355% APR (with AutoPay). Find your rate in two minutes.
Consolidation, Refinancing, and Forgiveness Considerations
Not quite sure you can crush your debt Joe-style—in a year or less? There are other less drastic, but still efficient paths to becoming debt-free:
Refinance. Low fixed and variable rates, significant savings on interest, and the simplicity of making just one payment each month are key reasons to consider student loan consolidation and refinancing. The option is especially suited for career-climbing MBA grads with high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans. If you choose to refi with SoFi, you also get unemployment protection, career support, wealth management advice, and more.
Research student loan forgiveness programs.
Through your school: Most top-tier business schools (and some other schools) offer graduates student loan debt assistance through loan forgiveness programs. The catch? Only those in the nonprofit or public service fields can apply, and then must further qualify based on income and assets (significant assets could disqualify an application). Even the best programs won’t eliminate a huge percentage of your debt, but every bit helps.
Through the government: The federal Public Service Loan Forgiveness Program forgives Direct Loan balances after 120 qualifying monthly payments have been made. You must work full-time for a qualifying employer, however. The Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) plans limit monthly student loan payments to 10% of discretionary income and forgive the remaining loan balance after 20 to 25 years (10 years if you work in public service).