Harvard B-School – Only Morons Need Apply

The article below substantiates my long-running theory that Ivy League schools pump out some of the dumbest jackasses the world has ever seen:


The fact that Dell hired this guy and is paying him six figures tells me I should short their stock.  Their decision-making abilities are obviously lacking.

The whole concept of trying to pay off $100k in debt in a year is just stupid.  The opportunity costs are exorbitant, and you’d screw yourself when it comes to taxes.  And that is exactly what this imbecile did.  This is so dumbfounding I’m having difficulty deciding where to start, so I guess I’ll start at the top.

In the last paragraph of the first section, he checked his loan balance and was “shocked” to see it was just shy of $91,000.  While he was busy getting his Harvard degree, I was learning about the compounding effects of interest, payment acceleration, and amortization schedules at my state school.  I wonder who got the better value.

Shortly thereafter, he says what has to be one of the dumbest quotes I’ve ever heard in my life.  I mean this quite literally, and cannot believe it came out of someone’s mouth who actually finished high school (in theory).  I have reposted it here for your jaw-dropping consumption:

“Unlike a payment towards a car loan or a mortgage, a student loan payment doesn’t go towards something that is benefitting me in a direct way.”

It states right in the article that he obtained a job paying $52,000 more than his previous job.  THAT is the direct benefit, you numb-skull.  You didn’t get a 100% raise because the company likes you, you got it because of your stupid piece of paper.  The car payment is going towards a depreciating asset, so your direct benefit of your depreciating BMW is not as good as it sounds.  Is that car generating an extra $52k a year in cash?  I didn’t think so.

As if that wasn’t foolish enough, the article then goes on to show his ingenious financial moves like stopping his 401k contributions.  Assuming the company has a match, you’re throwing away free tax-deferred money.  And when you’re making six figures, you should probably consider learning the basics of the U.S. tax system.  Or do they not teach that at Harvard?  But it’s okay, he sold his EXTRA car AND motorcycle, which clearly he needed in the first place.  He also sold his stock, which I can’t completely blame him for, if it’s used to reduce debt, but liquidating his IRA?  That’s almost as stupid as the 401k debacle!  There’s a limit on what you can put in, you get a tax break, and the earnings are tax-deferred.  Not to mention the fees, penalties, and taxes associated with early distributions.

There’s also one last thing that no one taught him at his highly-sought-after institution.  Student loan interest is tax deductible.    Oops.  So whether he realizes it or not, he’s keeping a LOT less of his “hard-earned” money than he thinks he is.  And he’s gloating about it at the same time.  It’s people like this that get jobs on Wall Street and accidentally lose their company $2 billion on one trade.

What he should have done?  Accelerate payments on his student interest by a couple hundred dollars a month.  If I assume he had a 101k loan @ 4.5% for 15 years he could have put $500/month towards it and had it paid off in less than 7 years.  An extra $1,000 per month would get it paid off in less than 5.  And since that’s only about 15% of his take-home pay, it’s not unreasonable.  He could then put at least 5% into his 401k, or whatever the company matches.  Sell ALL of his vehicles, and buy a cheap economy car like a Honda, Hyundai, or Toyota, put as much as he can into a Traditional IRA or Roth IRA (If he can keep his AGI low enough to qualify), and just ride out the loan for 5-7 years until it’s gone.  Instead he has nothing in his IRA, a pittance in his 401k, and a huge tax bill.  And more importantly, he has lost a great deal of time.  You don’t need an Ivy League degree to see the lack of value associated with one, or the stupidity of the business leaders they produce.

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