I was lucky enough to escape college unscathed without any student loan debt thanks to my parents taking the initiative to save when I was young. However, my boyfriend wasn’t so lucky.
We’ve been together for a while now, and he had to take out a few student loans to pay for his last few semesters of junior college. It’s nothing big — the total is less than $5,000 — but he doesn’t see the point of paying them all down.
He’s going back for his bachelor’s soon and thinks that because he’s going back, he should continue only paying the minimum, since he’s going to get more debt added onto his loan amount. I think he needs to work on paying off his balances in full so he doesn’t have that debt at all.
The worst part is, he could easily afford paying more than the minimum payment each month. How do I get him to see how important paying off student loans are?
Dear Debt-Free Evangelist,
He’s not messing up, but you think he could do better. You mean well, but conversations like the ones you’ve had can easily turn from offers of advice to never-ending, naggy guilt trips.
I understand his mindset. When I started graduate school, I was working full time and planning to take — and pay upfront for — one class each semester. It was a solid plan until I got laid off and found myself with little cash and a lot of free time.
“I have a great idea,” I explained breathlessly to my mother over the phone one day. “Why don’t I enjoy this time, do a little freelance work and go to school half time so I can get financial aid?” I would take out student loans to pay for school and defer my undergraduate loans.
Why she did not stop me right there and kick my butt back into reality, I do not know. But I had already convinced myself of this plan. By the time I graduated with a shiny new diploma, I’d have a shiny new job to take care of those pesky loans. Right?
Not right. You don’t waltz out of a liberal arts degree and into a six-figure job. It just does. Not. Happen.
($14,738.96 to go!)
Anyway, back to you two.
The tricky thing about paying the minimum or deferring your student loans is that interest continues to accrue.
It’s like lingering at a restaurant after you’ve paid the bill. But instead of dirty looks from the waitstaff, you get charged a dollar for each extra minute you stay at the table. You don’t have to gulp your drink down immediately and run out the door, but you do want to make a timely exit before those dollars add up too much.
It’s the same for student loans. Interest rate calculators make it easy to see the long-term impact of paying just the minimum.
I tested this out for you. Say your boyfriend has a $5,000 Direct Subsidized Loan with a 5% fixed interest rate. If he makes the minimum monthly payment over 10 years, he’ll really pay $6,364 for that loan. Add more loans on top of that in the coming years, and that’s more extra money he’ll have to pay back later.
I don’t know about you, but I don’t want to pay an extra $1,364 for anything.
So show him the math. But then it’s up to him. Would he rather have more cash in his pocket now and pay an extra few grand later for the convenience? Or is he willing to make sacrifices now for greater peace of mind later on?
He may also have money plans he’s not sharing with you, for the simple fact that it’s not easy to talk about money. For example, maybe he’s trying to save for an emergency fund (always a good idea).
Unexpected costs crop up all over the place during your college years, and credit card interest rates tend to be way higher than the interest he’ll pay on his student loans. If he’s working on building up a cash stash, it’s fine to hold off on student loan repayment.
Ultimately, this is his decision. You can talk over the numbers, his motivations and your joint goals, but he’s the one who’s paying the bill each month.
But keep talking about this! It’s not something you can only discuss once and then have to put in a box and pop onto the top shelf of your closet. Continue to approach money discussions as a point of collaboration, and it’ll be easier to face whatever inevitable challenges lie ahead for you as a couple.
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