I received some very insightful comments on my post about the wisdom of paying student loans off quickly.
I usually share these posts in several LinkedIn groups. One of the groups is made up of young professionals in Texas (where I live). That is where two of the comments came from that I would like to share with you.
They are sharing their experience and goals for the benefit of other young people in debt.
Here is the first comment from a young attorney.
“I made a goal to pay all my student loan debt off in 10 years… I know it hurts to pay that high student loan bill every month, but I took the approach of knocking out the highest interest rate loan first. I’m proud to say that next year it will be paid, and I will have an extra $450/month to throw at the rest of my loans and investments.
One last thought… If nothing else motivates you to be money savvy, when you pay your student loans off in 10 years, you save an insane amount of interest and free up a large amount of assets for investment and saving opportunities.”
The government’s new Pay As You Earn approach to repaying student loans encourages a borrower to pay over 20 years. She is pushing to get it paid off in 10 years. Of course, you could make a good case that 10 years is still a long time. But at least she is not falling for the unwise advice the government is handing out.
Here is another comment.
“I made the mistake of leaving the school that offered the best scholarship for one that left me with over $40K in student loan debt. That said, the past 7 years since graduating have been a nightmare; like you did, I’ve paid some, then not paid some, all depending on my financial situation at the time. I’m in my last year of graduate school (which I am paying out of pocket so as to not incur more debt) and am paying on my mom’s loan that she took out for my undergrad (it couldn’t be deferred b/c she is not the one in school).
Now, my new husband (who graduated loan-free thanks to a full athletic scholarship) and I are seriously considering our options to get my loans taken care of over the next year or two. We literally had that conversation this morning and are going to sit down and crunch numbers- I saw this article in my email and appreciate your insight. I keep thinking to myself, I know it’s not going to be easy but in the long run it’ll be worth it. Thanks for sharing!”
There are several important things we can all learn from her note to me.
The first is the financial aid offices and the government make student loans seem like they are like any other form of aid. But they are far from it. They try to entice you to say yes to a school even if it is not wise financially. Only later will you find out that debt is real… it has sharp teeth… and it bites!
The second message is she is getting focused on paying her student loans off quickly. That’s awesome. She and her husband are giving serious thought to sacrificing now in order to avoid having a big problem down the road.
That’s wise. Not easy, but wise.
What is Wise for You As An Individual
And the most interesting insight of all – paying the debt off quickly is the exact opposite of what the government’s new Pay As You Earn program encourages.
Hmmmmmmm. Maybe we have a rule of thumb here. If the government preaches the value (and necessity) of student loans and that they should be dragged out for 20+ years – maybe that is a good sign that it is unwise for you financially.
I am not anti-government. I just firmly believe that dragging around student loans is unwise financially. Sometimes it must be done. But it is not the goal you want if you are young and considering how best to deal with student loans as you come out of school.
Just a thought to consider!