# MBA Loan Repayment Plan: [Your name] > A workbook for repaying MBA loans after graduation: an inventory of every loan, amortisation schedules built with > `=PMT`, `=IPMT` and `=CUMIPMT`, the repayment plans available to new US federal borrowers from 1 July 2026 (dated > facts checked in October 2026), payoff strategies (avalanche and snowball) compared on total interest and time, > a refinancing break-even test, and affordability ratios against your post-MBA pay. It covers non-US loans in > general terms. Source basis: standard loan mathematics, US Federal Student Aid and ETS pages, and the consumer > debt literature. Replace every [bracketed] value and every row marked *Example*. This is a planning aid, not > financial, tax or legal advice: confirm every figure with your servicer or lender before you act. ## Document control | Field | Value | |---|---| | Document ID | [REPAY-001] | | Version | [0.1] | | Status | [Draft / In repayment / Paid off] | | Owner | [Your name] | | Reviewed by | [Partner, mentor or adviser] | | Last updated | YYYY-MM-DD | | Classification | Personal, confidential | | Graduation date | YYYY-MM | | First payment due | YYYY-MM-DD | | Currency of loans and of income | [USD; USD] | ## Contents 1. Purpose and principles 2. The repayment process 3. Loan inventory 4. Amortisation: the mathematics and the schedule 5. US federal repayment plans for new borrowers (dated facts) 6. Payoff strategies: avalanche and snowball 7. Refinancing and prepayment 8. Affordability and risk 9. Timeline 10. Quality checklist and common mistakes ## 1. Purpose and principles After graduation, MBA debt becomes a fixed monthly cost that competes with rent, savings and the rest of a new career. A written plan answers four questions: what do I owe and on what terms, what is the minimum I must pay, how fast do I want to be debt-free and at what cost, and what happens if my income falls? Principles: 1. **Know every loan.** Balance, rate, fixed or variable, servicer, term, plan, protections. You cannot optimise a list you have not written. 2. **Pay every minimum, always.** Missed payments cost fees, credit damage and sometimes the loss of protections. Set up automatic payments for all minimums. 3. **Direct extra money deliberately.** Extra payments to the highest-rate loan save the most interest; extra payments to the smallest balance free cash flow sooner. Choose one rule and write it down. 4. **Keep protections unless you are paid to give them up.** Income-driven plans, deferment and discharge rules are insurance. Refinancing federal loans into a private loan removes them. 5. **Protect the plan with a buffer.** An emergency fund prevents a car repair from turning into a missed payment. ## 2. The repayment process ```mermaid flowchart TD A["Confirm every loan with its servicer"] --> B["Build the loan inventory"] B --> C["Compute minimum payments and schedules"] C --> D["Compare federal plans: RAP and Tiered Standard"] D --> E["Set the monthly repayment budget"] E --> F{"Budget above the minimums?"} F -- "Yes" --> G["Choose avalanche or snowball for extra payments"] F -- "No" --> H["Income-driven plan, cut costs, contact servicers"] G --> I["Test refinancing offers"] H --> I I --> J["Automate payments"] J --> K["Yearly review: income, rates, plan, balances"] K --> C ``` The order matters. Plan choice comes before the extra-payment strategy because it sets the minimums, and refinancing comes last because it is only worth testing once you know what you are comparing against. ## 3. Loan inventory | ID | Lender or servicer | Type | Balance at repayment start | Rate (fixed or variable) | Term or plan | Minimum payment | Protections | |---|---|---|---|---|---|---|---| | LN-001 *(Example)* | Federal servicer | US Direct Unsubsidized | 47,617.40 | 8.07% fixed | Tiered Standard, 15 years | 456.98 | RAP, deferment and forbearance, discharge rules | | LN-002 *(Example)* | Private lender P1 | Private student loan | 79,260.00 | 9.00% fixed | 10 years | 1,004.03 | Per contract: [hardship options, cosigner release] | | [LN-003] | [ ] | [ ] | [ ] | [ ] | [ ] | [ ] | [ ] | | **Total** *(Example)* | | | **126,877.40** | | | **1,461.02** | | The balances come from the funding plan: USD 41,000 of federal loans plus USD 6,617.40 of interest accrued during the programme, and USD 69,000 of private loans plus USD 10,260.00 of accrued interest (mba/mba-funding-scholarship-plan, section 5.2). Federal rates for 2027-28 disbursements will be set separately; the example assumes 8.07% for both federal years. ## 4. Amortisation: the mathematics and the schedule ### 4.1 Formulas For a balance $P$, monthly rate $i = r/12$ and $n$ monthly payments, the level payment is $$ A = P \cdot \frac{i}{1-(1+i)^{-n}} $$ and in month $k$ the interest and the balance after payment are $$ I_k = i \cdot B_{k-1}, \qquad B_k = B_{k-1} + I_k - A $$ | Symbol | Meaning | Excel | |---|---|---| | $P$ | Balance when repayment starts | | | $r$ | Annual nominal rate | | | $i$ | Monthly rate $r/12$ | `=r/12` | | $n$ | Number of monthly payments | `=years*12` | | $A$ | Level monthly payment | `=PMT(r/12,n,-P)` | | $I_k$ | Interest in month $k$ | `=IPMT(r/12,k,n,-P)` | | $B_k$ | Balance after payment $k$ | `=-FV(r/12,k,-A,P)` | | | Interest paid in months $a$ to $b$ | `=-CUMIPMT(r/12,n,P,a,b,0)` | | | Months to repay with payment $A$ | `=NPER(r/12,-A,P)` | Assumptions and limits. These formulas assume a fixed rate and interest that accrues monthly on the outstanding balance. Many US federal and private loans accrue simple interest daily, so actual statements differ by small amounts; variable-rate loans need a new schedule each time the rate changes. `=PMT` returns a negative number when the balance is entered as positive; entering `-P` gives a positive payment. ### 4.2 Worked example A: Tomás's minimum schedule (fully solved) | Loan *(Example)* | Balance | Rate | Term | Monthly payment | Total repaid | Total interest | Excel | |---|---|---|---|---|---|---|---| | LN-001 federal, Tiered Standard | 47,617.40 | 8.07% | 15 years | 456.98 | 82,256.94 | 34,639.54 | `=PMT(8.07%/12,180,-47617.40)` | | LN-001 federal, if repaid in 10 years | 47,617.40 | 8.07% | 10 years | 579.49 | 69,539.19 | 21,921.79 | `=PMT(8.07%/12,120,-47617.40)` | | LN-002 private | 79,260.00 | 9.00% | 10 years | 1,004.03 | 120,483.86 | 41,223.86 | `=PMT(9%/12,120,-79260)` | First year of LN-001 on the 15-year term: | Month *(Example)* | Interest | Principal | Balance after payment | |---|---|---|---| | 1 | 320.23 | 136.76 | 47,480.64 | | 12 | 309.76 | 147.22 | 45,914.25 | | Months 1 to 12 | 3,780.64 | 1,703.15 | | Excel for the year: interest `=-CUMIPMT(8.07%/12,180,47617.40,1,12,0)` and principal `=-CUMPRINC(8.07%/12,180,47617.40,1,12,0)`. In the first year, 69% of what Tomás pays on the federal loan is interest. Paying the federal loan over ten years instead of fifteen costs USD 122.51 more a month and saves USD 12,717.76 of interest. ### 4.3 Worked example B: a third loan (half solved) A classmate has a USD 30,000 country-scheme loan at 6.5% fixed over 12 years. | Item | Value | |---|---| | Monthly payment `=PMT(6.5%/12,144,-30000)` | [ ] | | Interest in month 1 `=30000*6.5%/12` | [ ] | | Total interest over the term | [ ] | | Months to repay at USD 400 a month `=NPER(6.5%/12,-400,30000)` | [ ] | ## 5. US federal repayment plans for new borrowers (dated facts) As of October 2026 (checked 2026-10-28), borrowers with loans first disbursed on or after 1 July 2026 choose between two plans: **Tiered Standard Plan.** A fixed payment with no income adjustment and no forgiveness. The term depends on the total balance: | Total federal balance | Term | |---|---| | Under USD 25,000 | 10 years | | USD 25,000 to 49,999 | 15 years | | USD 50,000 to 99,999 | 20 years | | USD 100,000 or more | 25 years | The minimum payment is USD 50 a month or the full balance if lower. Tomás's federal balance of USD 47,617.40 puts him on a 15-year term. **Repayment Assistance Plan (RAP).** The income-driven plan for new borrowers. The yearly base payment is a percentage of adjusted gross income (AGI): USD 120 a year (USD 10 a month) for AGI up to USD 10,000, then 1% for AGI from USD 10,001 to 20,000, rising one percentage point for each further USD 10,000 band, up to 10% for AGI above USD 100,000. The percentage applies to the whole AGI, and the base payment is divided by 12. The monthly payment is reduced by USD 50 for each dependent, with a USD 10 minimum. If an on-time payment does not cover the month's interest, the unpaid interest is waived; if it reduces principal by less than USD 50, a matching principal reduction of up to USD 50 is applied. Any balance left after 360 qualifying monthly payments is forgiven. For married borrowers filing jointly, joint AGI is used, with an adjustment when the spouse also has federal student loans; married borrowers filing separately use their own AGI. | AGI *(Example)* | Rate | Monthly RAP payment | Compare: interest per month on USD 47,617.40 at 8.07% | |---|---|---|---| | 10,000 | minimum | 10.00 | 320.23 | | 35,000 | 3% | 87.50 | 320.23 | | 65,000 | 6% | 325.00 | 320.23 | | 150,000, one dependent | 10% | 1,200.00 | 320.23 | Excel for a single borrower with AGI in B1 and dependents in B2: `=MAX(10,IF(B1<=10000,10,MIN(10,ROUNDUP((B1-10000)/10000,0))/100*B1/12)-50*B2)`. At an AGI of USD 150,000 the RAP payment (USD 1,200) is far above the Tiered Standard payment (USD 456.98) and would repay the federal loan in about 46 months (`=NPER(8.07%/12,-1200,47617.40)`). RAP matters most as insurance: if income falls, the payment falls with it. Other points to check: the older plans (SAVE, PAYE, ICR) are being phased out for existing borrowers; borrowers covered by the legacy provision may have different options; Public Service Loan Forgiveness eligibility and qualifying payments depend on your employer and plan. Official sources: [studentaid.gov](https://studentaid.gov/), the federal servicer's [RAP information page](https://edfinancial.studentaid.gov/income-driven-repaymentinformation-center/rap), and the ETS summary [New Federal Student Loan Rules Took Effect](https://www.ets.org/grad-school-journey/student-loan-changes-2026.html) (updated 1 July 2026). Check before you rely on it. **Outside the US.** Many countries run income-contingent student loans where repayment is a share of income above a threshold and collected through payroll or tax; others have fixed schedules. Rules for borrowers who move abroad differ. Check your country's official scheme for the current threshold, rate, term and what happens if you live and work in another country, and model loans in the currency you will repay them in. ## 6. Payoff strategies: avalanche and snowball - **Avalanche.** Extra money goes to the loan with the highest interest rate. It minimises total interest. - **Snowball.** Extra money goes to the loan with the smallest balance. It closes accounts sooner, which some people find motivating; field evidence on consumer debt suggests that closing individual accounts helps people stick to repayment (Gal and McShane 2012). ### 6.1 Worked example A: USD 2,600 a month (fully solved) Tomás sets a repayment budget of USD 2,600 a month (28.9% of his estimated take-home pay at a 28% effective tax rate). The minimums are USD 1,461.02, leaving USD 1,138.98 of extra payment. | Strategy *(Example)* | First loan paid off | Debt-free after | Total interest | |---|---|---|---| | Minimum payments only (USD 1,461.02) | Private, month 120 | 180 months | 75,863.41 | | Avalanche, USD 2,600 (private first, 9.00%) | Private, month 44 | 61 months | 29,363.86 | | Snowball, USD 2,600 (federal first, smaller balance) | Federal, month 34 | 61 months | 30,737.84 | The higher budget, not the strategy, saves most of the interest: USD 46,499.55 against the minimums. Between the two strategies, avalanche saves USD 1,373.98, because the rate gap (8.07% against 9.00%) is small. Snowball closes the first loan ten months sooner. In a spreadsheet, build one column per loan with interest, minimum, extra and balance, and an `=IF` that sends the extra payment to the target loan until its balance reaches zero. ```vega-lite { "$schema": "https://vega.github.io/schema/vega-lite/v5.json", "description": "Total loan balance at each year end by repayment strategy, Example data", "width": 400, "height": 240, "data": {"values": [ {"year": 0, "strategy": "Minimums only", "balance": 126877}, {"year": 1, "strategy": "Minimums only", "balance": 120051}, {"year": 2, "strategy": "Minimums only", "balance": 112602}, {"year": 3, "strategy": "Minimums only", "balance": 104473}, {"year": 4, "strategy": "Minimums only", "balance": 95601}, {"year": 5, "strategy": "Minimums only", "balance": 85918}, {"year": 6, "strategy": "Minimums only", "balance": 75351}, {"year": 7, "strategy": "Minimums only", "balance": 63818}, {"year": 8, "strategy": "Minimums only", "balance": 51232}, {"year": 9, "strategy": "Minimums only", "balance": 37494}, {"year": 10, "strategy": "Minimums only", "balance": 22500}, {"year": 11, "strategy": "Minimums only", "balance": 18694}, {"year": 12, "strategy": "Minimums only", "balance": 14568}, {"year": 13, "strategy": "Minimums only", "balance": 10097}, {"year": 14, "strategy": "Minimums only", "balance": 5251}, {"year": 15, "strategy": "Minimums only", "balance": 0}, {"year": 0, "strategy": "Avalanche", "balance": 126877}, {"year": 1, "strategy": "Avalanche", "balance": 105805}, {"year": 2, "strategy": "Avalanche", "balance": 82774}, {"year": 3, "strategy": "Avalanche", "balance": 57600}, {"year": 4, "strategy": "Avalanche", "balance": 30099}, {"year": 5, "strategy": "Avalanche", "balance": 240}, {"year": 6, "strategy": "Avalanche", "balance": 0}, {"year": 0, "strategy": "Snowball", "balance": 126877}, {"year": 1, "strategy": "Snowball", "balance": 105867}, {"year": 2, "strategy": "Snowball", "balance": 83044}, {"year": 3, "strategy": "Snowball", "balance": 58252}, {"year": 4, "strategy": "Snowball", "balance": 31196}, {"year": 5, "strategy": "Snowball", "balance": 1603}, {"year": 6, "strategy": "Snowball", "balance": 0} ]}, "mark": {"type": "line", "point": true}, "encoding": { "x": {"field": "year", "type": "quantitative", "title": "Years from first payment"}, "y": {"field": "balance", "type": "quantitative", "title": "Total balance (USD)"}, "color": {"field": "strategy", "type": "nominal", "title": "Strategy"} } } ``` ### 6.2 Exercise C: your strategy (unsolved) | Item | Your value | |---|---| | Sum of minimum payments | [ ] | | Monthly repayment budget and share of take-home pay | [ ] | | Strategy chosen and why | [ ] | | Debt-free month and total interest under the chosen strategy | [ ] | | Rule for windfalls (bonus, tax refund) | [For example: 50% to the target loan, 50% to savings] | ## 7. Refinancing and prepayment ### 7.1 Refinancing break-even If a lender offers to refinance LN-002 at 7.25% fixed over the same ten years: | Measure *(Example)* | Value | Excel | |---|---|---| | New monthly payment | 930.52 | `=PMT(7.25%/12,120,-79260)` | | Monthly saving | 73.51 | `=1004.03-930.52` | | Total interest saved over ten years | 8,821.38 | `=(PMT(9%/12,120,-79260)-PMT(7.25%/12,120,-79260))*120` | | If a 1.5% fee is paid in cash | 1,188.90 | `=79260*1.5%` | | Break-even | 16.2 months | `=1188.90/73.51` | Questions before refinancing: is the new rate fixed or variable, and what is the cap? Does the term change (a longer term can lower the payment and raise the total)? Is there a fee or prepayment penalty? Does the cosigner stay liable? What hardship options does the new lender offer? For federal loans, the decisive question is what you lose: refinancing a federal loan into a private one ends access to RAP, federal deferment and forbearance, and federal discharge rules, and it cannot be reversed. ### 7.2 Prepayment Extra payments reduce principal and every future month's interest. Adding USD 200 a month to LN-002 repays it in 91.1 months instead of 120 (`=NPER(9%/12,-1204.03,79260)`, so 92 payments with a smaller last one) and saves USD 10,803.07 of interest. Before prepaying, ask the servicer to apply extra amounts to principal on the target loan rather than to future payments. Prepaying a loan earns a certain return equal to its after-tax interest rate. Whether that beats other uses of the money (an emergency fund, employer retirement matching, investing) depends on your risk, liquidity needs and tax position. The worksheet gives the questions; the answer is yours or your adviser's: | Question | Your answer | |---|---| | Is the emergency fund at its target? | [ ] | | Is any employer retirement match being left unused? | [ ] | | After-tax rate on each loan (check whether any interest is deductible where you live) | [ ] | | Expected return and risk of the alternative use | [ ] | | How would a job loss in the next 12 months affect each choice? | [ ] | ## 8. Affordability and risk | Ratio *(Example)* | Value | Excel | |---|---|---| | Minimum payments as a share of gross monthly income (USD 12,500) | 11.7% | `=1461.02/(150000/12)` | | Minimum payments as a share of take-home pay (USD 9,000) | 16.2% | `=1461.02/(150000/12*72%)` | | Repayment budget as a share of take-home pay | 28.9% | `=2600/(150000/12*72%)` | Lenders and planners use different thresholds for debt-to-income; use the ratios to compare scenarios rather than as a pass mark. Risk scenarios to write down: | Scenario | Effect on payments | Action you have prepared | |---|---|---| | Job loss for six months | [Minimums continue unless deferment applies] | [Emergency fund covers USD x; contact servicers] | | Income 30% lower | [Federal payment can move to RAP; private payment unchanged] | [ ] | | Variable rate rises 2 points | [ ] | [ ] | | Move to another country | [Currency of income changes; check loan terms] | [ ] | ## 9. Timeline | When (G = graduation) | Step | |---|---| | G-6 months | List every loan, log in to each servicer account, confirm balances and accrued interest | | G-3 months | Build schedules, compare federal plans, set the repayment budget against the offer salary | | G to G+1 month | Check when the grace period ends for each loan; set up automatic payments | | First payment | Confirm the payment was applied correctly and the plan is the one you chose | | Every month | Pay minimums automatically; send the extra payment to the target loan | | Every year | Review income, plan, rates and refinancing offers; recertify income if on RAP | | Each windfall | Apply your windfall rule | | Final payment | Get a paid-in-full letter from each lender; keep it | ## 10. Quality checklist and common mistakes Checklist: - [ ] Every loan is in the inventory with servicer figures. - [ ] Accrued interest is in the starting balance. - [ ] Minimum payments are automated. - [ ] Federal plan choice is recorded with the date the rules were checked. - [ ] The extra-payment rule is written and the servicer applies extra to principal. - [ ] Refinancing offers are compared on payment, total, fee, break-even and lost protections. - [ ] Affordability ratios are checked at a lower income. - [ ] Non-US loans are modelled in the currency you repay them in. Common mistakes: 1. **Missing the end of the grace period.** The first payment arrives sooner than many graduates expect. 2. **Ignoring accrued interest.** The example balance was USD 16,877.40 higher than the amount borrowed. 3. **Choosing the longest term for the lowest payment.** The 15-year federal term costs USD 12,717.76 more interest than ten years. 4. **Extra payments applied to future months.** Without instructions some servicers advance the due date instead of reducing principal. 5. **Refinancing federal loans without pricing the protections.** RAP and federal discharge rules are lost for good. 6. **Comparing refinancing on the monthly payment only.** Check the total, the fee and the break-even month. 7. **No emergency fund.** A single surprise can lead to missed payments and fees. 8. **Assuming the pre-2026 federal plans.** New borrowers choose between RAP and the Tiered Standard Plan; check current rules. 9. **Forgetting to recertify income on an income-driven plan.** Payments can jump when certification lapses. 10. **Ignoring currency.** A loan in one currency repaid from income in another carries exchange-rate risk. ## My notes and next steps | Next step | Owner | Due | |---|---|---| | [Confirm balances with each servicer] | [Your name] | YYYY-MM-DD | | [Set up automatic payments for all minimums] | [Your name] | YYYY-MM-DD | | [Request two refinancing quotes for the private loan] | [Your name] | YYYY-MM-DD | ## Sources and further reading Primary and evidence: - Fisher, I. (1930). *The Theory of Interest*. Macmillan. - Gal, D. and McShane, B. B. (2012). Can small victories help win the war? Evidence from consumer debt management. *Journal of Marketing Research*, 49(4), 487-501. Official and dated sources (checked 2026-10-28): ETS, New Federal Student Loan Rules Took Effect (updated 1 July 2026); Edfinancial (a Federal Student Aid servicer), Repayment Assistance Plan information page, edfinancial.studentaid.gov; Federal Student Aid, interest rates for Direct Loans first disbursed between 1 July 2026 and 30 June 2027 (fsapartners.ed.gov, June 2026); studentaid.gov. Further reading: Berk and DeMarzo, *Corporate Finance* (annuities and amortising loans); Brealey, Myers and Allen, *Principles of Corporate Finance*. Open resource: OpenStax, *Principles of Finance* (CC BY-NC-SA 4.0), chapters on the time value of money and loan amortisation. ## Answer key Worked example B: monthly payment USD 300.58; interest in month 1 USD 162.50; total interest USD 13,282.99; at USD 400 a month the loan is repaid in 96.5 months. ## Revision history | Version | Date | Author | Change | |---|---|---|---| | 0.1 | YYYY-MM-DD | [Your name] | First plan from template | | [0.2] | YYYY-MM-DD | [Your name] | [Plan chosen, payments automated] | ## Standard and licence note Based on standard loan amortisation mathematics and dated public facts from US Federal Student Aid, a federal loan servicer and ETS checked on 2026-10-28. The text, examples and numbers are original and fictional; they are not affiliated with or endorsed by any business school, lender, servicer or government body. Check the current official pages and your loan documents before you rely on any fact. Template licence: MIT.