Wednesday, May 16, 2012

This is a story we've heard before...

In case you need to read yet another downer article about how college grads have racked up outrageous amounts of student loan debts, The New York Times delivers.  It's timely because graduation has just passed or is coming up shortly for most colleges. But the article fails to present any truly new or helpful information.  The first paragraph says it all:
Kelsey Griffith graduates on Sunday from Ohio Northern University. To start paying off her $120,000 in student debt, she is already working two restaurant jobs and will soon give up her apartment here to live with her parents. Her mother, who co-signed on the loans, is taking out a life insurance policy on her daughter.
The article covers the growth in student loan debt, some personal profiles, and plenty of political drama.  It also takes six pages (online) to cover the same story and issues as The New York Times has covered before.  It presents no advice or help to students who already have loans.  At best it's a cautionary tale or an alert. 

While it's a great overview for someone who's never read about the issue before and one long shout out to Ohio, for students or grads who already know the story and have debt their time would be better spent doing something other than reading this .... like getting a second or third job.

Tuesday, May 1, 2012

Frugal MBA Students

From what I write most of the time you'd think that all MBA students were reckless spendthrifts drowning in debt.  Many days it does feel that way, but after almost a full school year I've definitely met a few other frugal students.  Here are some of their tell tale signs:
  • Biking in to campus
  • Bringing a packed lunch or snacks
  • Making or packing tea/coffee in a thermos
  • No designer bags or clothes
  • Avoiding events with $50+ tickets
  • Living off campus for cheaper rent and having roommates
  • Staying home on the weekends - no international plane tickets
Though I paint MBA students with a broad brush, the emails I get and my own experience here clearly indicates there are exceptions and there is a range of spending levels.  I get emails asking which schools give the most aid or if it's worth it to turn down a top school for a second tier with a full ride.  Here I've met a student who worked in the public/non-profit sector in a low cost of living are before starting the MBA program. His kids are on food stamps while he's in school and he's living in a blue collar neighborhood far from campus for its quality schools and low rent in order to keep the MBA as affordable as possible. 

I just wanted to make sure that it's clear the I'm often making broad generalizations which might be true for MBA culture and community in general, it is far from true for every individual.  So if you're a frugal person or worried about debt coming in to an MBA program, yes, it will be hard.  However, you're not alone and won't be.  Like any community there are plenty of different people and you're bound to find someone who shares values similar to your own.

Monday, April 9, 2012

Why getting into Harvard is no longer an honor

That's the headline of a recent column by Jay Matthews at the Washington Post.  The argument that he and an anonymous student put together is that getting in to Harvard or any other highly selective school is less meaningful now that their selectivity is so high.  When you admit less than 10% of your applicants it's very likely that many of those on the edge of being admitted or denied are not all that different.  Matthews and his letter writer make this argument in a very generalized form, ending at the conclusion that being admitted to an Ivy or other top college is no longer a meaningful distinction.

Of course, investing five or six figures in a degree from a school like this is a pretty good indication that I wouldn't agree.  Perhaps being rejected from Harvard is no longer a sign of mediocrity. However, if we say that people being accepted and rejected are indistinguishably perfect and accomplished that means that the people being admitted are perfect and accomplished.  So for graduate schools, employers, scholarships and so on getting in to these schools still has enormous signalling power and makes the schools still worth pursuing in many cases.

On the employer side Matthews' argument might be more valid since there are potentially numerous people employers may overlook outside of their hiring processes focusing on top schools.  People at other schools may be equally (or even more) talented and qualified while also potentially being cheaper in recruiting and salary demands.  However, top schools still provide employers with the most expedient one-stop shop with an extensive quality check.  The ease of use and guarantee of rigorous standards means that many employers won't take the time to look elsewhere.

I personally believe that companies' outright rejection or avoidance of students from non-name brand schools is something that would find more benefit in Matthews and others' criticisms instead of haranguing about college admissions criteria.  Both schools and employers are tightly limited on the number of people they can take on in many cases.  Schools do their best to admit the best for themselves, but having companies blindly follow them creates a large opportunity gap for those who don't attend top schools for whatever reason and a uniform definition of what is "best".  Companies could potentially benefit from a wider labor pool with differentiated strengths and salary expectations.  However, there is still a problem in the limitations of budgets of time and money for recruiting.  If Matthews could solve that problem he wouldn't have to write a column for the Post.

What do you think?

Wednesday, April 4, 2012

Two links

I came across two interesting articles in Time via Google News (my favorite time waster). 

The first talks about the political debate around changing the interest rate on subsidized Stafford loans.  As you know you can't get these anymore. The program was discontinued last year in budget cuts.  But for those who got 'em while they were hot the current debate is on moving their interest rates from 3.4 to 6.8%.  Which Time rightly points out, is doubling their interest rate to ... a still below market rate.

The second talks about a fascinating niche - senior citizens with student loans.  Unfortunately Time couldn't seem to find one of this rare breed to interview and they don't do much more than throw around one or two facts and a heap of hypotheses and ancillary information, but I didn't even realize that this group existed.

Bonus: Time declares 200,000 the new 100,000.  And my 10 year old, 145,000 mile car is officially below average.

Wednesday, March 28, 2012

Looking forward to summer

While I'm still enjoying my classes and learning a lot,  I can't help but wish for summer to get here already.  I'm craving a little more autonomy and control of my schedule and feeling like an adult again.  Something about having a class schedule, homework and no vacation or personal days makes me feel like I'm back in high school.  Of course my internship won't give me real work benefits but it will be one step closer.

I'm feeling very satisfied with my summer internship.  As I mentioned before, it's in an area totally different from my background, uses a completely different skill set, in a city I've never lived in before.  So I'm excited for the opportunity to really get out and see something new and learn some really new skills.  I don't know if this is what I will want to do full time after graduation but there's only one way to find out.  I wanted to use business school as a tool to broaden my career options and understanding of the business world and this certainly fits the bill.

Friday, March 9, 2012

I'm dreading filling out my financial aid application

So it's almost spring now and that means it's time to write up the FAFSA or whatever other financial aid application that your school desires so they can pass judgement on your finances and decide how much help you'll get in the next year.  Last year this was a breeze for me.  At least as much as any process involving doing your tax returns, finding old tax returns and filling out even more paperwork can be.  I knew the rules, knew how to best arrange my finances in that light, and was pretty confident in my efforts to do so.  I came out of the process with an award that far exceeded my hopes and dreams (ok, even I don't dream about financial aid) of what I might be awarded.

But there's a problem.  Now I have to go through the process again and I'm nervous that it won't go as well.  This year the paperwork is going to be almost as complicated.  There will be fewer forms but my taxes are more complicated.  I'm still putting off whether or not I'll deduct my MBA - it's the only thing awaiting completion on my return.  Basically I'm worried because my finances are in really good shape, better than I was hoping in some ways.  No loans, investments have done well, extra 529 money, and spending that stayed low through out the last year.  That's worrisome because I fear I may be penalized because of my hard work and success and will receive less aid than last year. 

But there's nothing to do but to fill it out, turn it in, and see what comes back.  Cross your fingers for me!

Tuesday, February 28, 2012

MBAs can ID industry bubbles

MBAs have incredible predictive abilities and on aggregate clearly predicted the 2001 tech bubble pop and the 2008 one in finance.  Now you might this I've drunk the kool-aid of my own six-figure degree here, but I promise you I haven't.  At least not too much.

What I'm talking about instead is the fact that historic data from the recruiting offices of top-5 schools show big spikes in students accepting offers in these industries the year or two preceding the market drop.   Huge numbers of the graduating class of 2000 went west to join tech start ups, way more than in, say, 1998 or 2002 and you can see the same trend for the graduating class of 2007 and finance.

Unfortunately I don't have copies of this data to share with you, but there are a few things you can learn from it.

  1. MBAs are terrible at recognizing bubbles - This is on average and in aggregate, but clearly by taking these jobs the students have failed to recognize that these industries were due for a major market correction.
  2. MBAs are less useful the more there are together - A single business student can be quite rational but once you start pulling more of them into a group the more they tend to agree with each other.  This is particularly evident when something is "hot" or "exciting" because no one wants to miss out.  Fear of missing out is a hallmark of type A personalities and MBAs have it in spades.  The bigger the decision the bigger the effect, causing the group think that goes in to how students decide between job offers here.
So, is there current market information you can derive from my inside track on campus?  It doesn't seem like it this year.  Tech has seen a resurgence along with start ups, consulting and finance hiring is strong, and there's probably a lot more interest in healthcare than there was five years ago.  But nothing seems particularly hot or overheated.  So I think we're just slowly pulling out of the recession and finding some balance again.  But I would keep an eye on tech and healthcare over the next year or two as business schools publicize their careers data.

What do you think - are MBAs headed to an area in droves that seems prime for shorting?