Do you really want to pay your student loans off, or just pay less?


Everyone wants to pay off their student loans. I had loans for the 10 years after I graduated college, and I hated them every step of the way.

But people seem to handle their student loans in a confused and self-contradicting way sometimes. While the talk is often about paying the loans off, the actions often seem to involve paying as little as possible. And those are not the same things.

Have you encountered this with your own student loan journey?

Maths don’t lie

First, some difficult mathematical realities:

  • If you pay less on your student loans each month, your balance will not go down as fast.
  • Below a certain threshold of payment, your balance will actually rise each month.

Now, I know what you might say: “But my monthly student loan bill is so high! If I can pay less, I’m going to.

And right you are. But with that, you are focused on short term cash flow, not long term savings.

Which is fine, but it’s important to be honest about it. You are not focused on paying off your student loans, only making them easier to manage.

This can have long-term consequences. A $50,000 student loan at 6% interest, where you pay $500 a month, will take you a little under 12 years to pay off, and you’ll pay almost $70,000 total.

If you only pay $300 a month, you’ll save $200 extra dollars each month, which is a lot, but it’ll take you 30 years to pay it off, and you’ll end up spending over $100,000 when all is done.

Which is more important? $200 savings each month, or $50,000 extra?

Rate chasing

Another mathematical truth:

  • The only way to pay less each month and not have your payoff be affected is to get a lower rate.

Ahh, a lower rate, the holy grail of student loans.

Federal loan rates are fixed by Congress, so there’s not really much you can do about that. You can refinance to a private lender, which might get you a lower rate, but that can be problematic too, and you lose certain protections involved with your loans.

Loan chasing can be a problem too, in that it feels like you’re making progress, but all you’re doing is moving money around. Which is why I don’t care about interest rates when dealing with the debt snowball.

I mean, if you can get a greater than 1% interest rate reduction, then that might potentially be worth it, but the amount you gain from an interest rate change isn’t going to move your personal needle all that much.

And let’s not talk about the student loan forgiveness plans that are dangled in front of us. If you actively want to hold on to your loans for 20 years, paying as little as possible, only to potentially have them be wiped out, and then hit you with a giant tax bill for the privilege, I don’t think that’s a very good plan. A backup plan, maybe, but not a plan.

The hard truth

If you want to pay off your student loans, you need to pay more on them each month. For a long time. There is no other process that is more reliable than that.

Remember that hypothetical $50,000 loan? Let’s say you went wild and paid $1,000 a month instead of $500. You’d pay it off in less than 5 years, and pay only a total of $58,000.

Now, I’m not saying that everyone has an extra $500 in their budget. I believe you have more in your budget than you think (a written plan will help you figure that out), but it might not be that much.

I want you to believe

I guess I just want you to start believing that paying these loans off is possible.

If you believe it’s possible, then you will work harder and devote more energy to making it happen.

If you believe it’s possible, then you will see more progress quicker.

If you believe it’s possible, then you won’t want to pay less each month.

See, paying as little as possible on your student loans feels to me like an admission of resignment or of defeat. “I’ll always have these loans, so I might as well make them as comfortable for me now as possible.

And while I understand that $50,000 (or however much you have) is a huge amount, a crazy amount, a why-isn’t-anyone-doing-anything-about-this? amount, it is manageable. It is doable. And you don’t need to be wealthy to make it happen. It just requires focus, planning, patience, dedication, and belief.

So what will it be? Pay less each month? Or get rid of this thing once and for all?

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