Originally Posted by 00CivicSi,Sep 27 2006, 09:45 PM

I'd feel dumber asking that question as an MBA grad than I would asking it as a banker. Your classes should have easily prepared you to conduct a cost/benefit analysis. j/k As an MBA myself, I kid.


First, get all the facts... i.e. what are the exact terms of this loan. You need to know all the ins-and-outs of this loan in order to make an informed decision.
- You stated that each year they'll forgive 20%. Is that 20% of the remaining balance or $10k as you state (10% of the original loan amount)?
- If you were to leave prior to 5-years, you state the the loan is due if full. Is that the initial loan amount of $50k or the remaining balance, for which you might be able to take another loan ($40k after 1 year, $30k after 2, etc.)? The answer to this question could be the determining factor as to weather this is a no-brainer or not.
- As someone else highlighted, what are the terms if you get fired? layed off? etc?

Determine some possible outcomes... In determining these outcomes, consider what your intentions were for obtaining your MBA.
- Did you use your MBA as a qualification to obtain your current job with the intentions of moving up within the company, or do you intend to use it to obtain a new job? (I ask this because the average difference in salary before and after obtaining an MBA is usually much higher than $10k/year. )
- Consider life changes that could cause you to take a different job (starting a family, etc).

Build a model...
It shouldn't take more than a few minutes to build a comparison model in Excel. From there, you can compare the NPV (or what other comparison metric in which you're interested) of your current loan vs. the proposed loan. You can add other variables to the model to see how the various outcomes could impact the comparison.

Assign some probabilities. Base you decision on your personal goals. Do you plan on reducing your personal costs, or hedge against possible costly outcomes?

There is not necessarily one right answer, so no, it is not necessarily a "no brainer." But with a decent analysis the decision can become much easier. It's up to you to determine what other significant variables there are other than the term, loan amount, and interest rate.

Good luck!

Originally Posted by jasonw,Sep 28 2006, 08:18 AM

That's crazy, it works out to more than $10K/yr if it's not taxed! More like $14k/yr!