Paying Off Nearly Six Figures of Student Debt in Seven Months

How one Harvard graduate aggressively paid down his loans with creative cost-cutting measures.

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Joe Mihalic graduated from Harvard Business School with his MBA—and $95,000 in student loans—in 2009. After two years of loan payments, Mihalic resolved to pay them off in 10 months. He started a blog, No More Harvard Debt (, to chronicle his experiment in cutting costs and earning more money. In March, he paid the last of his loans several months ahead of schedule.

[See 10 Ways to Give Your Money a Makeover.]

U.S. News recently spoke with Mihalic about his creative cost-cutting strategies. Excerpts:

When and why did you decide to get more aggressive about paying off your student loans?

In August 2011, I logged into my student loan accounts and the total came up to somewhere just shy of $91,000. This was after almost two years of paying down the loan at $1,057 every month. I had put over $22,000 into these loans that started out at $101,000. The principle was still at $90,000 because most of the payment was going towards interest for the first couple of years. I looked at that total and it blew me away. I realized that I wasn't really happy with that trajectory of those loans. I felt like I was trapped. Emotionally, I felt it would just be better to be debt-free.

In a finance class that I took at Harvard, the professor said that debt was good. They're being held accountable to make a monthly payment to their debtors every fiscal quarter, so it keeps them focused and on track. I agree with that. The question is, "What's the right level of debt for an individual?" I thought that a mortgage was plenty of debt for an individual. This student loan debt was a little onerous for me. The pressure was too high.

Do you think it was worth taking on that much debt to get your MBA?

I do. I met a lot of really smart, talented, ambitious people who I probably wouldn't have met otherwise. I made great friends. The case method taught me to think in a whole new way. It made me a better decision-maker. Because of that, I was a more effective employee. I really don't think that it was that much debt when you consider that my salary doubled, as well as the fact that I was able to pay most of it down in seven months.

What steps did you take to cut expenses and boost your income?

I threw security and common investment wisdom to the wind and I used my life savings to kill a $25,000 loan to start my debt snowball. I stopped contributing to my 401(k), but I still have about $45,000 in my 401(k) that I didn't touch. I also had a $12,000 IRA from my old job. It started out as a 401(k), but I rolled it into an IRA and used it to pay down my loans. I took a hit on it, of course, when I did the early withdraw so it turned into $8,000.

[See How to Stop Feeling Broke.]

Certainly, if I had a qualified financial officer, they wouldn't say, "Withdrawing your IRA is the right thing to do," because you'll realize some loss. My situation does not apply to everyone, but it was my choice. Emotionally, I'm in a way better state now than I was this time last year.

I gave up my privacy and got two roommates on Craigslist. I also started a landscaping business, which was mildly successful. I also sold my motorcycle for $2,000, and I sold my bicycle for about $1,000. Then I sold some miscellaneous stuff on Craigslist: an iPod, motorcycle accessories, bicycle accessories, even an old pair of Burberry reading glasses that I had sitting around from grad school.

I saved 74 percent of my income. At the beginning of the challenge, I was making $103,000, which is really only $70,000 after taxes.

I didn't go home for Christmas or to friends' bachelor parties or weddings. I didn't go on any dinner dates or to the movies. I'd hike around the park. I'd get bagels and coffee, random things that didn't cost a lot of money.

How did people react in your life to this sudden lifestyle change?

It takes a certain type of girl to go on a hiking date instead of a dinner date, but that's kind of the girl I'm looking for. As far as my life, I still have a great time. I hang out with friends a lot but I bring a flask to bars, which some of them thought was a good idea.