Why I’m Not Paying off My $300k Student Loan Debt

Originally published/last updated on myearlyretiremenjourney.com on 22May2019. 

So when my student loan post first came out sometime last year (2018), I received a lot of attention and mixed feedback. To this day,  I still get the sporadic suggestion to aggressively pay off this debt or the ‘you’ll never retire early with that much debt.’ Thanks?

Pay off $300,000 of unsecured debt? Honestly, the thought hasn’t even crossed my mind.

Why?

Well, as I’m learning not to say in the work place…how does it benefit me? Since I’m blogging anonymously (although I know the Republic could find me in 10 seconds if they tried), I feel a little more free to explain what I mean.

1. I can’t afford it.

I paid the first monthly installment in 2016 sometime when I initially entered standard repayment and I literally had no money left. If you don’t believe me, here’s the net pay from my most recent paystub. We get paid twice a month.

My target monthly spending (incl the current $570/mon income-based student loan payment) is $2,167. And that’s buying only regular, recurring things.  Without income based repayment, my standard monthly payment would be more than $3,000/mon x 10 years. So where would that money even come from?

2. The Federal Government is okay with it.

If the government is okay with my only paying a fraction of what I owe, why would I argue? I have absolutely no qualms about it. Absolutely. None.

To see what I mean by fraction, let’s just do some quick math using the 2018 data in my original post as the loan balance hasn’t changed much, in fact I think it’s increased a bit (yes, you heard that right).

Current income based monthly payment:  $570/ mon x 12 mon/ yr x 25 years =  $171,000 repaid

Standard Repayment (2018 values): $3,642/ mon x 12 mon/yr x 10 years =  $437,040 repaid

Difference: $437,040 – $171,000 = $266,040

Why, yes I will take this bargain! As I said, Qualms = 0.

3. Have I ever mentioned how much I don’t enjoy working.

I would literally have to put retirement savings on hold for 10 years when my single most consistent goal of late is leaving the workforce…as early as possible.

Read more: About Me

Just last week, I actually printed off a resignation letter. In the past, it was just a thought. Then it was a draft in my journal at home. Then it was a draft in my Google Docs that I sometimes access at work. Then it was a draft in my email. Then that draft was deleted. Then half a year later, a second draft was well…drafted. Then Thursday afternoon of last week that draft was printed.

This was a feat because I just moved cubicles and had to add a new default printer. So did that, THEN printed my drafted resignation letter. Friday, I ripped it. I made $600 for two days’ work (a total of about 8 phone calls). I make no money staying home, eating, and watching TV. Ultimately, I stay for that reason. The privilege echoed in these last two paragraphs is sickening and I’m not even a white-man.  Eek! Let’s hurry up and be done talking about this!

4. But what if…

Sure I’ve heard a few people repeat the same thing… that one thing they heard that one time…but what if… blah, blah, blah, government, blah, blah. To date, no one has presented me any reliable data that loan forgiveness is not the best thing ever (Public Service Loan Forgiveness (PSLF) or the Income-Based Forgiveness)! But for some reason there is a pervasive thought that this is all some sort of fly by night scheme.

Just as an example, the Federal Perkins Loan program (ended in 2018) has been around since 1958, to name one, and that has offered teachers and public service workers loan forgiveness successfully without hysteria. I benefited from that. So this is not a new thing.

Just last night a friend who most certainly qualifies for PSLF told me they took out $18,000 from their investment account to pay down a student loan that can be forgiven just to hack at the principal a little. A little. This is six figure student loan debt and they’re on an income-based plan. According to her, they were advised by two professionals. What?! Someone advised you to do that and you believed them?! This is one of many friends who blindly follows the advice of a white man, when the numbers just don’t lie. If loan forgiveness is the goal and if you’re not paying the standard loan repayment amount, “extra money” thrown at the debt does nothing.

Twice we’ve talked about this, and this friend remains resolute that their decision is the best based on poor financial advice (hello, not everyone is good at their job) and some random article they read on NPR. Note they also don’t contribute the max to their 403b plans (same financial planner me thinks). Now that I think about it, this same friend told me abortion was illegal in like 3 states. Also not true. I digress. I think people just read the headlines and parrot the hysteria. I don’t understand the humans. The laws in America are mostly good. There are so many checks and balances. Even if a bad law makes it through, it doesn’t stick around for long.

Come to think of it, at least two other friends refuse to believe in student loan forgiveness (or FIRE for that matter). So my advice is this: read whatever click-bait article closely, understand the repayment process, run the numbers yourself and stop feeding into the hysterics.

As for me, my repayment contract says, I pay the amount my income dictates x 25 years. At the end, the remaining balance is forgiven (and taxed). If I retire early and my income is zero, then guess what: I pay nothing!  Where is bad?