How to Think about Business School Debt

I was recently catching up with a friend when he said “Wow so you’ve finally graduated. You must be in like 200k worth of debt by now correct?” While most top business school programs cost about $200,000.00, the median debt burden for a top ten school according to Poets & Quants is $88,500. This is because some students get generous scholarship awards, and others save substantial parts of their pre-MBA salaries to offset the cost of their graduate business education. While I didn’t get any scholarship money from Kellogg, I did have some meager pre-MBA savings. This meant that I definitely had to borrow “big”, but I didn’t have to borrow as much as $200,000. 🙂

Before attending business school, I spent a lot of time agonizing over business school debt, and I asked current students and alums lots of questions about it. The questions I asked, and the answers I will give today – with the benefit of hindsight – are as follows:

1. How Easy/Difficult is it to Pay Back the Loan?: I think this was the main source of my agony. What if I did this MBA and the debt burden made me financially worse off than I was before my MBA? A lot of people told me that this was not a very likely scenario, and that I’d be fine, but I wasn’t ready to take their word for it. Instead of asking you to do the same – take my word for it, I’ll provide you with a loan repayment tool. What I tried to do here was make some estimates that helps one see how much she might have to pay after business school, and how easy the payments might be to make. In using this tool, you’ll have to make some estimates about:

  • how much you’ll be borrowing,
  • your interest rate,
  • your repayment duration,
  • your post MBA salary (please don’t be too optimistic here),
  • where you’ll live after business school (and the corresponding taxes of that location)

Notwithstanding the amount of “guesstimation” involved, and the fact that I use a fixed salary for the total duration of the loan, I still think this tool can provide some valuable insight into one’s financial situation after getting that flashy but expensive MBA. From my analysis, I think that it is in most cases possible to easily pay back your loan. For example, if you want to spend no more than 20% of your monthly after-tax salary on loan repayment, and you borrow $95,000 at an interest rate of 5.5%, the only scenario where you will fail to achieve your goal is with a post-MBA salary of $80,000, and a payback period of 10 years.

loan repayment

It is important to pay close attention to the variables mentioned above, since as they get more aggressive (payment duration gets shorter, or loan amount gets larger), payment becomes more difficult. Please feel free to play around with the tool, and let me know if anything seems off.

2. Is it worth it to take on this incredible amount of debt?: This is definitely a more nuanced question. How does one decide if an amount of debt was worth it? For me it came down to this question: has the business school experience delivered what I expected it to? While my answer so far has been yes, I know that this is not the case for all of my classmates. With that in mind, I’d say that there is an element of risk associated with funding an MBA through debt. In most cases, you will get what you want from the experience, but sometimes you may not; you have to be comfortable with both outcomes.

3. Should you borrow more to go to a higher ranked school?: Now that I’m out of the business school bubble, I can tell you for a fact that the people who care the most about rankings are the students deciding to go to business school, and the business schools themselves. Most employers are satisfied with knowing that you went to a ‘top’ school. How you decide to define ‘top’ is another matter, but I won’t touch that one. My point is that going to Wharton instead of Kellogg, or Booth instead of Ross will not significantly affect your career prospects. I work with people from a bunch of different business schools right now and we’re pretty much interchangeable. That said, I think there’s something to be said about the experience of a school. I decided to attend Kellogg even though it was the only school I got into that didn’t give me any money, and the reason for my decision was the people I met during my campus visit.

4 .Should you borrow more to get a richer business school experience?: Short answer: yes, I think it’s fine to borrow for certain parts of the bschool experience, but you have to be smart about it. If you’re like most students, you can’t afford to do everything, and you will have to pay back this money sometime in the future. I’ve started my own repayment process, and I can tell you that it’s not fun. 🙂 I’ll definitely love to be using that money for something else at this point. Therefore, my advice would be to optimize for things that have lasting value to you. For me that was participating in the tech trek to San Francisco and Seattle and doing my study abroad in Madrid.

This post is longer than I’d have liked it to be. However, I hope it’s helpful in some small way to someone somewhere, asking the same questions as I was in 2012.

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3 Things I Wish I did Differently At Business School

Now that I’m a few months into life after graduation, I’ve had some time to reflect on my bschool experience. I feel very grateful for the opportunity to have attended a school like Kellogg as it was a truly transformational experience. However, if I had to do it all over again, I would definitely do some things differently. Before mentioning what these things are, I think it’s important to state that some of these areas of improvement are definitely unique to me – an introverted and risk averse Nigerian guy. Now that the safe harbor statement has been shared, here goes:

1. I Wish I Developed Relationships With People Not Like Me: Most of my really good business school friends turned out to be people who recruited for tech-related careers, were part of my section, or were foreign students like me. This sort of makes sense considering that like attracts like right? The downside to it is that there were so many awesome people who didn’t fit into any of these buckets that I’d really have loved to develop a relationship with. I think I was just too caught up with academics, finding a job, and delivering on my other bschool responsibilities to find the time and resources for these other relationships. In other words, I was lazy and it cost me big time.

2. I Wish I Partied More: Parties aren’t my thing and they probably will never be. I prefer quiet casual conversations in quiet settings to loud parties where I can barely hear myself. In addition, there’s usually such a huge demand on your time at bschool that most people (including me) end up doing what’s tried and tested. For me that was avoiding parties and spending time with my friends in quiet, convenient settings. If this is true, why do I wish I partied more at Kellogg? Some of the cool people I wanted to meet actually liked to party (they’re not like me remember?). Also, a wise friend once said that the magic of life usually happens outside your comfort zone. I wish I had stepped out of my anti-party comfort zone more often; who knows what magic I may have found? 🙂

3. I Wish I Took on More Extra-Curricular Responsibilities: Now to be fair, I did take on a decent amount of stuff. I was president of the Africa Business Club, logistics chair for the Kellogg Technology Conference 2014, VP communications for Catholics @ Kellogg, and an admissions committee reader for my entire time at Kellogg. The reason why I feel I could’ve taken on more is that I could fit these responsibilities into my schedule without dropping major balls. In other words, I didn’t figure out my breaking point. Maybe if I did take on more, I may have reached my breaking point. I may also have been forced to learn new time management skills in order to cope. There’s no way to confirm this hypothesis now though because I didn’t experiment.

If there’s one piece of advice I’d give to current or aspiring business school students – given my own personal experience – it would be this: do what you need to do to be successful, but once in a while, try to find the magic that lives outside your comfort zone.

Final Quarter (Spring) Courses

Oh Spring quarter! The final lap of the bschool experience. When you realize it’s all coming to an abrupt end, you can do one of two things: have your final course binge in order to maximize the value of your tuition and/or complete the requirements of your desired major, or take things really easy with respect to academics so you can take the rest of the experience in. Guess what I did? I chilled!

I decided to take a few classes for two main reasons. The first was that I wanted to have time to connect with my classmates before we scattered to different parts of the globe, and to plan my wedding (yes I did do some of the planning 🙂 ). The second was that I wanted to have a lot of time to dive deep into my finance classes. As I mentioned in an earlier post, I didn’t enjoy Fin D because I didn’t have enough time to work through the cases in depth, and I didn’t want to feel that way with the final finance classes I was taking at Kellogg. With the benefit of hindsight, I’m glad I took 3 credits in my final quarter. The classes that I took are as follows:

1. Entrepreneurial Finance & Venture Capital: I really enjoyed this course. It focused on the venture capital industry, an industry that I continue to be fascinated by. Through this course I was able to understand key industry terminologies like pre-money, post-money, and the various types of investment vehicles available to early stage investors. I was also able to debate with my classmates about the future prospects and possible valuations of a wide variety of businesses from biotech to enterprise software. These conversations were the best part of the class. We also had a few visiting entrepreneurs and VC speakers which was cool.

2. Financial Modeling For Leveraged Buyout Transactions (LBOs): I took this 5-week class because of the professor. Chirag Saraiya is a professor at Kellogg and a partner at Training The Street, a training outfit that teaches financial modeling and Excel skills to some of the most reputable banks and consulting firms in the world. I encountered Chirag and his amazing teaching style during one of his weekend workshops at Kellogg focused on financial modeling, and decided to take his class, even though I knew I wouldn’t be doing any LBO transactions anytime soon. What I really liked about his class is that he uses a lot of real-world examples, and tells us how finance-related stuff (like calculating WACC) plays out in the real world. I’ll definitely recommend this class for anyone interested in real-world corporate finance, or kick-ass Excel modeling skills.

3. Healthcare Information Technology: I decided to take some ‘random’ classes during my final quarter at Kellogg. By random I mean classes that had nothing to do with my primary interests: marketing, finance and technology. This turned out to be one of those classes, and I can’t say it went very well. It was a 5-week class so it wasn’t too bad. While we were talking about healthcare IT which is a hot topic, we ended up spending too much time on healthcare and not enough time on technology. With the right balance of both, it could be a pretty cool class.

4. Healthcare Quality: This was the other random 5-week class I took, and I didn’t enjoy it at all. Maybe it was too far from my comfort zone. We talked a lot about how hospitals measure quality and other similar but overall it was just a bad fit for me. Wouldn’t recommend.

5. Entrepreneurship: Building Innovation, Teams and Cultures: This one was good; really good. Think entrepreneurship meets technology meets organizational behavior. The professor, Mark Achler is one of the coolest people I’ve ever met. He’s incredibly accomplished and yet so humble, and he has this vast network of entrepreneurs that he willingly shared with us. This was also a 5-week class, and every week the professor brought in a past or current CEO to chat with us about topics around corporate culture, bootstrapping a business, and other inspiring topics. The best speaker in my mind was the former CEO of Redbox. He had an incredible life story that left some of my classmates in tears. Definitely recommend!

Overall, a great quarter, and a good end to my academic experience at business school. Unless I have some sort of mid-life crisis (which is a distinct possibility), this is the end of formal classroom learning for me! 😀

The Best Part of Studying Abroad

I spent the first 3 months of this year at IE Business School in Madrid, Spain, and this was definitely one of the best parts of my Kellogg experience. Without counting the fact that I escaped the Chicago winter (which turned out to be much better than expected), I can think of three main reasons why studying abroad rocked:

 1. I Missed My Friends: I’ve made some really good friends at Kellogg; friends that I can depend on for counsel, and when I’m in trouble. Over the winter quarter, it was really difficult to make out time to connect with my Kellogg buddies as most of us were in different time zones in different parts of the world. To make things more interesting, we were also engaged in preparing first years for internship recruiting, which takes a lot of time. In the end, I didn’t speak much with my friends over a period of 3 months, and this was a good thing because unlike graduation (which is really close by!), studying abroad gives you the opportunity to miss your friends, and then reconnect with them when you return to school for your final quarter.

2. I Gorged Myself on the “Candy” of Europe: Any self respecting history buff knows that he/she needs to visit Europe at least once during his/her lifetime right? Before this year, I had only been to the UK a few times, but that was really it. My study abroad was my first real trip to Europe and it was aMAzIng! It’s really difficult to put into words what it felt like to experience historic sites like the Colosseum, St. Peter’s Basillica in Rome, or Checkpoint Charlie in Berlin. I really soaked in all the history and got challenged to learn even more about this complex and wonderful world that we live in.

3. I Did some Personal Development: My two years in business school have been a period of tremendous personal and professional growth. However, something I’ve always struggled with is the issue of volume. There’s so much good material and information coming at you all the time that it’s really difficult to digest anything. You just have to take the little you can quickly assimilate and move on to what’s next. The good thing about studying abroad was that I didn’t have this problem. I took very few classes, and I wasn’t involved in as many extracurricular activities as I usually am at Kellogg. This meant that I had the free time I needed to travel and to work on finance related topics that I felt I hadn’t fully digested at Kellogg. I’m really grateful that I got the chance to do this, and I’m already reaping the benefits in the finance classes that I’m taking this quarter.

I’d like to end this post with some thoughts around cost. When I told some friends (within and outside business school) that I was studying abroad, I usually got a lot of questions around how I could afford it. The truth of the matter is that I couldn’t. I will be graduating from Kellogg in a few weeks’ time with a decent amount of student loans, which will take me some time to fully pay off. Notwithstanding, I still think that it makes a lot of sense to incur certain expenses like traveling before one can actually afford them. My reasoning is this: if you graduate from a decent business school, it is certain that you’ll someday be able to afford these expenses. The challenge is that when you do get the funds you need, you may no longer have the time to embark on that trip or experience that you desire. Work commitments, family obligations, something usually ends up getting in the way. It took me a while to accept this, but this is how I managed to convince myself that it makes sense for broke old me to take time out and see the world. 🙂

Business School Electives: Go Hard or Soft?

Hard or soft

Last week I chose the classes that I’ll be taking for my last quarter at Kellogg. Business school is really coming to an end!

Something that I’ve struggled with over the past two years is how to choose my business school electives. There usually is a vast array of classes to choose from – in areas ranging from finance to supply chain management. However, I usually have insufficient time (and bid points) to take all the classes that I’m interested in, so I have to make choices, and therein lies my dilemma. Should I focus more on taking ‘hard’ classes that teach functional skills like marketing, finance or operations, or should i take ‘soft’ classes that teach behavioral and leadership skills like negotiations, personal leadership and power in organizations?

From conversations with classmates and alums, I’ve come to understand that there are two main schools of thought regarding how to choose business school electives. The first group strongly advocates for ‘soft’ classes that focus on leadership and organizational behavior, and their argument is that when you talk to alums that are now in senior leadership positions, they usually tell you that they wish they had paid more attention to their leadership classes. The second group argues for choosing ‘hard’ classes, and state that they’d rather spend their time in business school learning functional skills like marketing and finance which they won’t be willing or able to learn in-depth after they graduate. Who is right and who is wrong?

I think both arguments definitely have their merits. However, I think the argument for choosing soft courses based on the recommendation of alums might be a bit misleading. The fact that an alum who graduated 10 years ago now wishes that she had taken more leadership classes doesn’t necessarily mean that if she could do it all over again, she would take more leadership classes at the expense of developing functional skills. In my opinion, the mix of functional and leadership skills that are needed on the job varies throughout one’s career. In most post-MBA roles, a greater emphasis is placed on functional skills. By middle management, it becomes more of a balance between functional and leadership skills, and at senior leadership levels, leadership skills become more dominant as one would expect.

What does this mean for me and my choice of electives? In the end, I decided to choose a mix of leadership and functional classes, but to focus more on gaining the functional skills that I need to succeed in my next job. My thinking is that performing excellently in my next job is what will give me the opportunity to move towards the senior roles that will require more leadership skills. Furthermore, I’ve always been a student of leadership, so I know for a fact that my leadership education will continue for as long as I am alive. Unfortunately, I don’t share the same enthusiasm for learning finance and statistics, so I better get up to speed while I still can! 🙂

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Musings on MBA Internship Recruiting

A major reason people come to business school is to find that dream job that pays pretty well, and makes them jump out of bed every morning. As an internship offer is the first major step in finding that dream job, internship recruiting is a pretty important part of the MBA experience. If I could go back in time and give myself some advice on internship recruiting, I would mention five things:

1. Recruiting is Hard: After successfully getting into an ultra-competitive business school, expecting recruiters to fall at your feet and beg you to bring your awesome talents to their company doesn’t seem to be a particularly crazy idea. Furthermore, recruiters actually validate this mindset for a brief period of time by constantly emailing you, and inviting you to all sorts of company presentations, fancy dinners and coffee chats. However, when actual recruiting starts, you quickly realize the truth: internship recruiting is one of the most difficult things you’ve ever done. If there is one challenge that illustrates the difficulty of MBA internship recruiting, it is the challenge of bringing your “A-game” into yet another interview after having being rejected multiple times.

2. It Goes By Pretty Quickly: Another part of internship recruiting that makes it challenging is the speed of the whole process. After my first week of internship recruiting, I’d been through 8 interviews, and I’d already been rejected by two of the firms that I interviewed with. To make things more vivid, I was actually standing in front of my Amazon interview room when I got the phone call from Bain that told me that I’d been rejected. Was my case unique? Not at all. In fact, I think I had a pretty good run. The truth of the matter is that the process is a really…. really fast roller coaster ride.

3. Guard Your Heart Throughout The Process: I really believe that the most difficult parts of recruiting are actually emotional. If you look at the stories I mentioned earlier (being rejected multiple times, being rejected just before another interview), the challenge isn’t really about physical preparation, but about maintaining perspective, refusing to entertain doubt about your abilities, and sustaining the momentum needed to succeed during the interview. One practice that helped me stay focused during recruiting was refusing to emotionally commit to any firm until I’d actually gotten a job offer. I told myself that I would not build castles in the sky by dreaming about what it would be like to work at any particular firm. I’d just go in, do the interview, and see what happens. It’s definitely easier said than done, but I think this approach actually saved me a lot of heartache throughout my internship recruiting process.

4. Focus Consistently Trumps Diversification: I don’t think a whole lot needs to be said here. My only addition would be that if you are focused on changing your industry, job function and location at the same time, realize that this is a very risky strategy. My advice would be to try to change at most two of these three criteria. If you really want to pursue all three, clearly articulate what steps you would take in the very likely event that you don’t achieve your goal.

5. Miracles Do Happen!: After all the doom and gloom of this post, I’m happy to end on a rather positive note. Despite the fact that recruiting is really difficult, miracles do happen! A small group of people get a job offer from their very first interview. Others end the rigorous recruiting process with really cool jobs in their target industry. The happy faces you see on the marketing materials are true stories. For all you know, that lucky person might as well be you!

Any additional thoughts on how best to manage internship recruiting?

Fall Courses

As I mentioned in an earlier post, I planned to take only 3.5 courses in the Fall. My hope was that with this approach, I won’t be stretched too thin, and I’d have time for important parts of the business school experience like connecting with my classmates. I ended up taking 3 courses instead of 3.5, but I still felt overwhelmed! Why? Well, one of my classes (Financial Decisions) felt like 2 classes rolled up into one so I was back to taking 4 courses again. 😦 Furthermore, I still had to attend to my other responsibilities at Kellogg like leading the Africa Business Club, and driving logistics for the Kellogg Tech. Conference.

While I was – once again – unable to dive deep into my coursework, I really loved my second fall quarter at Kellogg as my extracurricular activities really helped me to better understand and develop my leadership abilities. This is a part of the business school experience that I initially underestimated, but have come to really really appreciate.

The classes that I took last Fall are as follows:

1. Strategy and Organization: This is the second strategy class I’ve taken at Kellogg; the first was my Business Strategy core class. The best part of this class was definitely the professor, Niko Matouschek. All you have to do is spend a few minutes with this guy and you can tell that he’s incredibly smart. How can you tell? I’m not really sure. Maybe it’s his high energy level, his insightful responses to questions, or the fact that he frequently wears white long sleeved shirts with the sleeves rolled up… 🙂
Something else I really liked about this course was the content. The course teaches simple but powerful frameworks for analyzing how compensation (monetary and otherwise) can be used to motivate workers, and how to think through the rationale for a merger or acquisition, and decide if it makes sense or not. I wasn’t sure if I would be needing any of this knowledge in the short term, but it’s surprising how often I’ve found myself using frameworks from this class to analyze everyday issues.

2. Financial Decisions: Financial Decisions, or Fin D, is meant to be some sort of Finance capstone class that allows you to utilize the financial concepts learnt in Finance I and Finance II. On average, we had to analyze two cases per week, and this usually included building a financial model and then writing a report on our analyses. The good part of the class was that I had an awesome team and we worked really well together. The not so good part was that I found the pace of the class to be too fast, and so I didn’t learn as much as would have if I’d taken the time to really dive deep into most of the cases.
If I had to do Fin D all over again, I’d go through this online training course before stepping into my first Fin D class. It’s a little pricey, and I’m not affiliated with Training the Street in any way, but I can tell you that the content is definitely worth it. I’m actually going through it right now and even after Fin D, I still find it to be very helpful.

3. International Finance: As always, I saved the best for last. International Finance was a lucky find for me. A friend of mine who graduated last year recommended the class to me and although the professor is a rockstar, I was able to get the class for 1 bid point! The International Finance course at Kellogg consists of two main parts: broccoli and dessert. (Stay with me okay? 🙂 ) Broccoli refers to international finance concepts such as hedging foreign transactions with forwards and options, and figuring out if a currency is overvalued or undervalued. Broccoli honestly wasn’t very exciting stuff. However, it did give me some tools and techniques for identifying and managing foreign exchange risk. Dessert on the other hand was simply awesome! It was about one of my favorite things in the world: economic history. (yes I’m nerdy that way 🙂 ) Professor Rebelo is really an expert on the world’s major economies, and he told such amazing stories that we really got sucked in, and learnt a lot about other parts of the world that we weren’t necessarily familiar with. While most classes were usually a mix of broccoli and dessert, my favorite classes were all dessert!

So what’s next? Studying abroad at IE Business School in Madrid, Spain! I guess I have to take some classes at IE Business School to maintain my student status, but my focus during my time in Madrid will definitely not be my business school courses. I want to chill, make new friends, and see Europe! 🙂