Talk about a hot topic. Ever since my story of paying off my $40,000 of student loans on a teacher's salary blew up, I've been getting an email or two a week asking about and my decision to pay my loans off early instead of trying to seek loan forgiveness.
Generally, they look something like this:
“Obviously you didn't know about the PSLF program. I'm going to have my student loans forgiven, which is much smarter than what you did. Why would you spend that much money just to be able to say you were debt free?”
The PSLF program (or Public Service Loan Forgiveness Program) allows the remainder of your student loan debt to be forgiven if you serve in a public service career for 10 years. Because I was a teacher, I would have been able to participate in this program.
It was created back in October of 2007, and the first forgiveness of loan balances will be granted in October of 2017.
Why I chose to pay off my loans instead of seek forgiveness:
I'm going to use the word “chose” very purposely, because deciding to pay off debt faster than the loan term is a choice (a super difficult one BTW).
I was like a lot of people out there that knew about some of the various loan forgiveness programs, and wanted absolutely nothing to do with them. Instead of giving some blanket statement of wanting to be self-sufficient or whatever, I'll list the reasons:
1) The PSLF program takes 10 years (aka 120 payments) to complete
Make no mistake about it – many student loan forgiveness programs are designed to encourage people to stay in government jobs for a significant period of time. And before you think I am making that up, please read this statement made directly by the Department of Education:
“The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs.” – StudentAid.gov
I knew within about a year of being a teacher that I needed to have the ability to change my career. Because of the obvious financial burden, student loans can keep you locked into a career that you may not want to keep.
The reality is that you might not like your first job or career path.
2) 10 years is VERY long time
People tend to discredit how long a year actually is, much less a decade. What would happen if I decided on year four of the program that I was miserable being a teacher? Six more years of being unhappy to make some numbers balance out to zero?
Nope. Not for me. I have too much confidence in my abilities and intelligence to box myself into a situation like that. I want as much life liquidity as humanly freaking possible.
3) I don't want to rely on the government
This is not a politically charged site in any way, and I'm definitely not making some kind of jab at anyone's political views. I just know that change in the government is predicated on making voter bases happy, which means there are no guarantees that anything will stick around long term.
What if I had completed nine years of the PSLF program, and funding was slashed or cancelled altogether? That sounds like a nightmare to me. Paying off debt early gives you more freedom to create your own destiny.
Did I make the right choice?
I'm happier than I've ever been before, make twice as much money as I did teaching, and have a better quality of life and work-life balance than I could have ever imagined. I also found my passion in life for helping people with debt.
For me – it was very obviously the right choice, but it may not be for you.
There is no one-size-fits-all solution for debt. Stop looking for one.
For a lot of people, loan forgiveness is a great option that fits their life goals and plans really well. I stopped judging people for how they choose to attack their debt a long time ago. It only takes a few gut-wrenching emails from desperate readers about their debt to put you in your place.
If you want to go after one of the various loan forgiveness programs like PSLF, do it and don't give a crap what I or anyone else thinks about it. If you have a plan for becoming debt free, you're already winning more than anyone else you know.
Here's a great PDF by the Department of Education for more on the PSLF program.
Just remember – there are always a lot of exclusions in these programs and they don't work for everyone. There is also a TON of red tape/fine print to wade through. If forgiveness is part of your strategy, be a student of the game and research like crazy before you commit (please).
You can find the Department of Education's Federal Student Aid website here.
Live differently. Your bank accounts will thank me later. ~M$M
About Millennial Money Man
Bobby Hoyt is a former band director who paid off $40,000 of student loan debt in 18 months on his teaching salary and then left his job to run Millennial Money Man full-time. He helps other Millennials earn more through side hustles, save more through budgeting tools and apps, and pay off debt. He is a personal finance expert who has been seen on Forbes, Reuters, MarketWatch, CNBC, International Business Times, Business Insider, US News, Yahoo Finance, and many other personal finance and entrepreneurship media outlets.
Comments
The Green Swan
I think you went about it the right way, weighing all those considerations. I wouldn’t have wanted to feel trapped in a job for 10 years with the requirement to jump through a bunch of hoops just to get one over on the education system / government by way of a tax-payer bail-out basically. I would have done it the same way and I would like to think there are better ways for folks out there.
Millennial Money Man
Yeah it’s a tough call – I’ve gotten a bunch of emails from people that are in the program that feel like it’s the best way for them. No judging from me, but I definitely think there is a lot of value in paying them off early.
Mrs. Picky Pincher
Student loans are really tricky; the right path depends on how much you have and what type of loans you’ve taken out.
I have a family member who works heavily with government-related loans. They say the best bet is to just pay these suckers off ASAP.
The income-based repayment isn’t always a great idea, especially if you have a low income that makes it mathematically impossible to pay off the loans within the note period–and you get screwed on interest that way, too.
While loans are now forgiven after a period of time (I think the cutoff is 20 years, but I could be mistaken), even if they’re forgiven, they still count as income that year to the IRS. That means you could owe Uncle Sam a ridiculous amount of money in the future if you ignore student loans.
I hate student loans, so I’m getting rid of them ASAP! Starting in December, Mr. Picky Pincher and I will pay off both of our student loans in 18 months (hopefully less). Whoo!
Millennial Money Man
Nice, congrats on getting started! I’ve always maintained that the government has done a horrible job of getting good, non-confusing information out about student loans. It really leaves a lot of white space for scam companies to come in and trick people into wasting money on consolidation forms.
Ethan
True story. Under Public Safety Loan Forgiveness at the end of 10 years the money forgiven counts as income, that could be substantial.
Millennial Money Man
Yep – a lot of people don’t realize that at all!
Georgia Melas
It’s still probably less than what Their student loan debt is…. At least for me it is…
Millennial Money Man
Hey Georgia! Could you clarify? Not sure what you mean by it being less than student loan debt. Thanks!
Allesan Armstrong
PSLF is non-taxable. If you are on the track for forgiveness in 20-25 years, then the balance is taxable as income.
Financial Panther
I’ve always thought that paying them off quick is the right move to do as well. Of course, personal finance is personal! So it really depends on what you want. I recently took a new attorney job that makes me eligible for loan forgiveness. But like you pointed out, being forced to stick around for 10 years in order to get the loan forgiveness mean shackling yourself with golden handcuffs. I much prefer to have the flexibility to do what I want, rather than being forced to do a job because I need it.
Millennial Money Man
Haha I think that’s such a good point and love the line: “Personal finance is personal!”. Easy to forget that sometimes. For me I feel like I can give the best value to my readers if I give them information on both sides of the coin. Student loans suck – I don’t care too much how people attack them.
Kelan Kline
Hey,
-Awesome article and very relevant. My wife is a teacher and we are in the process of setting her up for a loan forgiveness plan. We live in NYS and it’s only 5 years instead of 10. Where do you live?
I love the statement of “one size does not fit all” it’s so true! Since you knew you needed to change careers you obviously made the right decision, your killing it! Since my wife loves teaching and the benefits/pension are great in NYS we plan on using the forgiveness program.
Again great article and congrats on the success! You are an inspiration. If you ever want to get involved with Ecommerce let me know! Having a successful blog with an ecommerce site would do wonders for your bank account.
Millennial Money Man
I live in Texas! I think that the loan forgiveness could be a very good option for people that are passionate about teaching. I just found out very quickly that working in a school (and wearing khakis and a button down) weren’t my thing. I’d much rather work from a coffee shop in flip flops and shorts like I am right now haha.
I’m sure I’ll get into Ecommerce down the road. My strategy for the next year is to just continue pushing my message and figure out affiliate income/build traffic. I appreciate the offer and will take you up someday! 🙂
Kate
Nice post! Good job explaining your reasoning in a non-judgmental way. My husband would have used the PSLF to finish off his loans IF ONLY he hadn’t previously consolidated them with a non federal company (making him ineligible) before the program existed. Trying to do the smart thing to cut down interest rates backfired for him. But we know plenty of people who have super-high loan balances, so they’ll still have tons remaining to pay off by the time their ten years are done. For them, I think it’s a good program, but of course, I hope the program is still in place when the time comes!
Millennial Money Man
Thanks Kate! That’s definitely one of the things to weigh when considering a refinance. Those federal benefits go away, but most people don’t realize that they probably don’t qualify for them anyways based on their income and profession.
That’s my concern – the program can disappear or be cut back (ahem Social Security), which would scare the crap out of me if I was in it.
On the non-judging – that’s definitely something that has changed a lot since I started this site. I look at some of my old posts and cringe a little bit. But, like I mentioned in the post it only takes 5-10 very heartbreaking situations from your readers to make you grow up and get over yourself.
Gail
Like you, I don’t want to rely on something I can’t be positive is going to be around in ten years (It really is a LONG time). I’m tackling my debt now and should have all of my loans paid off in less than 2 years! For me, loans feel like a black cloud following me around. I’d rather be rid of it than feel chained by it for a decade.
Millennial Money Man
Congrats on getting them knocked out! I think a lot of people discount that feeling debt freedom too much. That is a very real and visceral thing that in my opinion is worth the money. Quality of life has a price tag 🙂
Julia
Hello,
I am planning on using the program to pay off my loans. Our family has about 40k in student loans and then some on credit cards. I am a first year high school math teacher in an urban Houston district. The reason we chose to go the forgiveness route is because it fits into our plans. We have two young children and really want to buy a house in the next 5 years. If we tried to tackle student loans on top of credit card debt and a down payment, then I just don’t see us meeting the goal of buying a house.
With that said, we may need to readjust in the future. This year on an income-based plan my monthly payment is zero, but next year we will bring in quite a bit of money as a household. I love reading your posts. Have a great day.
Millennial Money Man
Sounds like you have a great plan! I would really suggest paying down the credit cards before buying a house if possible. Keep me posted on everything! 🙂
Rach
Thanks for the article! I think it definitely depends on your situation. Unfortunately we didn’t really look into the forgiveness program until my husband had been working for almost four years in the public sector, only to realize his didn’t qualify due to consolidation. He’s got over ten years on it left, but it still doesn’t make sense to us to try and move it to an approved loan (which you can do) when we could pay it off early and actually save more money in the long run. This is especially true if you don’t qualify for income based repayment plans and can afford to pay extra.
Millennial Money Man
No problem! There are so many different options that it’s hard to say there is only one way! As long as people are thinking about it and discussing the options I’m happy haha!
J-Fenn
My husband and I are newlyweds and earlier this month we paid off my car. It was the last thing to pay off and now we are 100% debt free! We both started to pay off debt before we even met each other 4 years ago. Between the two of us, we paid off over $120,000 in 6 years. We also paid for our entire wedding in cash this past summer while continuing to pay off debt.
This is my 6th year teaching music at an elementary school. Since it is a Title I school, I was able to qualify for $5,000 of loan forgiveness after my 5th year. At that point I had just under $3,000 to pay off from my student loans. I did some paperwork and turned it into the Feds. After several weeks of waiting I got an email saying the remainder of my loans would be forgiven. So to answer your questions, I did apply for a forgiveness program. I tried to pay off my student loans faster, but life happens (like shooting a rod through the engine block on my old Jeep) and the forgiveness program fell into my lap. I totally agree with you about the government programs. We don’t know what is going to happen with these programs in the next couple of years. It is better to be in control of your own money and not rely on others.
Millennial Money Man
Thanks for sharing that! Always interesting to see how another teacher handles that situation. Sounds like you guys are doing great!
The Educated Dreamer
I’ve been going back and forth on this for a while. I’m almost 3 years into PSLF and I owe more today than the day I graduated. I keep thinking I should just live off pb&j and knock these things out. I mean, I’m paying off a $20k car loan in less than 3 years, no reason why I couldn’t pay off $50k in student loan debt in less than 10. But now I just got engaged. My goal is to pay off my car and get married in the next year. From there my husband and I will start with Dave Ramsey’s snowball method. Student loan debt sucks and I wish people were more educated about it. Just a little plug, givling.com is doing great things for student loan debt of you ever want to feature them in an article. Use my invite code to sign up: JN330223. 🙂
Chelsea
My husband is also a teacher and we realized we’d have his loans payed off within ten years just making the minimum payments, so it was an easy decision to snowball it. We actually did the mortgage first though, because at the time of getting serious about paying off debt, we actually owed less on the house than student loans. Also because after 5 years of working in a low income district he did qualify for partial loan forgiveness, so we were sort of holding out for that, and a few months later we were solvent. Woo!!
Brian
We are waiting for PSLF. Started it while in residency and payments were low. Now our payments have reached the same amount of standard 10 yr repayment.
We attacked our mortgage as if it were student loans. House will be paid for in March, and we will be 64 payments into the PSLF. At least we have options if the thing falls apart and that was my goal. Don’t rely on the government, but if it was still in tact at he end of my 10 yrs then I’ll take it.