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Ask Dave

Hold The Debt Snowball For An MBA?

Jordan is considering starting an MBA. He wants to take a break from the debt snowball to work on the MBA. Dave advises Jordan to make sure he's doing it for the right reasons.

QUESTION: Jordan is calling from Financial Peace Plaza after coming down from Chicago. He’s considering starting an MBA, and he and his wife have $60,000 in student loans with an $85,000 take-home pay. He wants to take a break from the debt snowball to work on the MBA. Dave advises Jordan to make sure he’s doing it for the right reasons.

ANSWER: I look at education, generally speaking, as the knowledge that it gives you to put tools in your belt to be able to function in the marketplace. That’s the primary reason for it. If you’re very happy with this company and your goal is to stay there, then it’s not unusual for them to have an MBA requirement to have you move up through the ranks. If you’re not going to be one of the 10–15% of the public who works for a company like that, which means you’re in the small minority, then the MBA for those purposes is not valuable. For the knowledge you would get, it is valuable. In other words, if you wanted to work for me, the fact that you had an MBA wouldn’t matter. The fact that you learned something while you were getting it might matter. But we’re a little company. There are only 300 of us. Small business guys think differently. I’m looking for effectiveness. I’m not looking for what decorates your wall. To my knowledge, we’ve never hired someone here because they had a degree or because they didn’t. We just look at the person, and we want to see that they’ve learned something. It’s certainly a plus to sit down and see that this person has some additional education.

MBAs are great strategic thinkers. Every MBA program teaches you strategic thought in a way that you don’t usually get in undergrad. It’s a valuable thing. I would go do it. Would I put my debt snowball on hold by paying minimum payments or paying nothing while your student loans are on hold because you’re back in school? I might. You’re delaying your whole Total Money Makeover plan, basically, for some education. I think there’s a case I would do that. You need to do some soul searching and make really sure that working at that company is what you’re going to want to do, because it’s the only thing that makes sense in the short term for the MBA. In the long term, the MBA makes sense just because it’s great knowledge, but that’ll take a little longer to monetize, and I might wait until I was out of debt to do it then.