Isn’t Canva a beautiful thing? I didn’t make this image. Canva did. I just put in the words.
You know the stats on student loan debt. The average college student graduates with about $30-$40k in student loan debt. I am no exception. I graduated college in May 2013 with about $40,000 in federal and private loans. It was my own fault and I take full responsibility. And even though this disturbing number has impacted my life in significant ways, I’m still not prioritizing it over other debts like car loans and credit cards.
The reasoning lies within the fine print.
1. Low Interest Rates
First and foremost, my student loans have the lowest interest rates out of all my other debts. They’re lower than the car loans and the credit cards. At those rates, it would be foolish to prioritize them over my smaller loans, simply because I don’t like them hanging over my head.
2. Tax Deductible
One of the biggest reasons I’m saving these for last is because the interest is tax-deductible. Now that Mike and I are making more money, as well as filing taxes jointly, we need more deductions so we don’t have to pay Uncle Sam a huge lump sum of cash. Because we have no children and aren’t in school, deducting the interest from my student loans is all we have. So why not let it ride?
I’m on the graduated repayment plan right now because that’s what worked best for me when my loans first went into repayment. The great thing about student loans – you can change your repayment plan at anytime. From income-driven to extended repayment terms, you can always find something that works on your salary. Plus, if you lose your job and can’t make payments, you can always apply for a deferment or forbearance. The government is much more flexible than private loan companies. I doubt your credit card companies and bank will be as forgiving.
4. Death Destroys It
Another reason I’m prioritizing our other debts first is because I am the only one with student loans. If I die, Mike has no legal obligation to pay the federal loans back. This is why we want to pay off our joint-debt first. If something happened to me, it would leave Mike in a tough position, so it’s better to just forget about the student loans right now and focus on more pressing debt.
Please don’t think that because I’m not prioritizing student loans in our debt pay-off plan that I don’t see them as important. I do not want to be paying on them for 25 years. I also don’t advocate slacking off to buy things you don’t need.
We have plans to pay them off in the coming years, but if other more important things come along, we will tackle those items first and put the loans on hold. I’m definitely not going to let the student loans get in our way of buying a home or bolstering up our emergency fund. Their end will come, but for now… I will continue to pay the minimums.
What are your thoughts on the subject? Do you think we should place a higher priority on my student loans?