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Vishnu Chundi, co-Founder and CEO at AssetVault, shares his MBA journey and how with good planning and financial management, he was able to repay his student loan early.
I did my full-time MBA at London Business School during 2015-2017 and took out a Prodigy Finance loan for both years, covering tuition only. I repaid my entire student loan within 3 years of graduation, and started a fintech backed by Techstars during B-School. Find out what drove me to start-up a company while studying my MBA in this blog.
Strategies to pay off loans earlier
There are only four realistic ways of getting out of debt quickly:
- Increase income
- Cut costs
- Save more
- Invest early (optional)
There are two ways of looking at student loan repayment: through a mathematical and behavioural lens.
Mathematics is the easier bit. For folks who cracked GMAT, they can build a spreadsheet to figure out what their starting salary should be, and a savings rate to pay off the loan in the shortest amount of time. You can use this spreadsheet for a quick analysis of your situation.
The behavioural lens, on the other hand, is the harder part. This is about changing your habits and your lifestyle. My goal at the beginning of my MBA was to pay off my entire student loan within a 3-6 year period after graduating. I analysed a couple of scenarios to come up with the above period.
Here’s how I planned for my MBA and paid off my student loan in 3 years.
Pre-MBA steps: I began planning for my MBA in June 2013
- Saving: I started saving 20-30% of net income each month for B-School living cost from 2013 to 2015.
- Investment: I bought a small piece of land in India (home country) and some ETFs with the intention of selling in 2020 (post appreciation – assumption) to clear off the loan as a back-up plan. My savings bank interest rate in the UK is 0.1% p.a. and I was targeting medium-term asset classes that could offer 8-12% p.a within my risk tolerance. You can pick asset classes you are comfortable with. Real estate in an emerging market can sometimes be pretty good (lots of conditions apply).
- I took the redundancy option at work and obtained a decent severance package (3-month pay) that I used to pay part of my first-year tuition fees to reduce the amount borrowed via Prodigy Finance.
Steps taken during MBA: August 2015 to June 2017
The first two terms were intense with academics, and very little time to do anything else other than survive. I dipped into my savings to survive in London and adjust to the new phase of life.
Tip: Minimise living costs without compromising the quality of life. Try to find a place near campus, but not too expensive. You do not want to be commuting a lot as you may miss the various events on campus.
Create a budget (rent, groceries, eating out, travel) and stick to it religiously.
Rental example: I could have rented a room in a flat for anywhere between GBP 800 to GBP 1200 per month within my preferred radius from school. I always picked the lower end. This resulted in a saving of GBP 3000-4500 per annum which is nearly 15% of my first-year loan principal amount.
My co-founder, Farid, and I started AssetVault in the third term of the first year. We raised funding before the summer and I was able to get an internship stipend for my work. We even hired paid interns from my class and other early-career LBS programmes.
Note: You are allowed to work 20 hours per week on a UK student visa. This means you can work part-time internships to create an income during your FT MBA. If you are able to create a small but sustainable flow of income during the second year of MBA then you are well on your way to paying off your loans early. What you do in your second year makes a huge difference to how soon you pay off your loans.
I got plenty of free time as academic load reduced. I chose to do the 21-month version with the exchange programme (I did mine at Haas. It was awesome – Go Bears!) and a Global Business Experience in Peru (absolutely magical).
I used the second year to continue to work on my start-up and took electives wherever I could make AssetVault the group project. For instance, eg. Discovering Entrepreneurial Opportunities, New Venture Development, Financing the Entrepreneurial Business, Business Model Canvas (Haas) and others. This helped my project group members work on a ‘live product’ with customers. I was able to perform customer development with the help of some of the brightest minds from LBS and Haas. Plus I continued to get a stipend for the work I put in.
At this point, I was using all my non-study time on my start-up and making good progress.
AssetVault won several awards in 2017 and acquired new clients. Due to this traction, I managed to obtain the Tier 1 Exceptional Talent Visa and this gave me greater freedom to live and work in the UK. If you are an international student, it is definitely worth looking at.
Side hustles leveraging your newly-developed skills set:
I was asked to teach entrepreneurship as a guest lecturer on an executive education programme at LBS, to senior executives from large financial organisations. I got this opportunity as we were a fintech and part of the LBS incubator. Make sure you keep your professors informed about what you are up to so they can think of you for such collaborative opportunities
I taught GMAT quant classes over some weekends
Other ideas: Mentor people, join platforms like Lifeclass to make some money while sharing your expertise. Huge win-win!
Post-MBA: Loan repayment strategy
I kept up with the minimum monthly Prodigy Finance payments post the moratorium period.
Tip: If you can pay earlier, do not wait until the moratorium period ends. You save even more interest this way.
With each chunk of incoming income from my stipend and any side hustle, I started paying off the loan. I noticed the new monthly payments dropping and this was motivating (dopamine hits with each pay-off and the behavior getting reinforced). I paid off the first year loan within 18 months of graduating.
Using the Prodigy app (a wonderful tool that I checked many times a month to play with various payback scenarios), I could visualise the interest saved by paying off loans early. Psychologically, creating these mental wins and seeing the results was a huge morale boost.
Subsequently, I started attacking the bigger second-year loan by paying twice the minimum monthly payments.
In early 2020, COVID-19 happened and I decided to build an emergency savings pot for a few months. So, I went back to Prodigy Finance’s required monthly payment cycle for a couple of months. I wanted to make sure that there was some liquidity in case things got uglier due to COVID-19. As an entrepreneur, you do NOT have health insurance coverage like that of large corporates.
However, once I got comfortable with the size of my emergency savings pot, I began attacking the outstanding loan principal again. I am delighted that I hit my target of clearing off the student loan within 3 years.
By paying off the loans early, I saved a total interest amount of ~GBP 21,000.
Joy of becoming debt-free
I am grateful to Prodigy Finance for their non-collateral loan product. It was instrumental in helping me finish my MBA and explore entrepreneurship at the same time.
These last few years have given me valuable life experience, helped me inculcate good financial habits, and develop a growth mindset.
I have come to realise that our careers are marathons and not sprints. I’ve compressed all my lessons and insights from the MBA on various topics – such as starting-up during B-School, fundraising, incubators, art of networking and financing your career ‘marathon’ – into videos that you may find useful for your study abroad journey and career.
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Prodigy Finance Ltd is authorised and regulated by the Financial Conduct Authority.