The Student Loan Strategy Nobody Wants to Talk About

We have $350,000 in student loans...and we're not paying them off early.

 When I posted about this on Instagram, the comments were a lot. 

So I decided to break down exactly what our strategy is, why we made this decision, and the math behind it.

This isn't about getting a handout. It's about being intentional with debt instead of reactive.

In this video I cover:

• Why we chose an income-driven repayment plan over aggressive payoff
• How the 20-year forgiveness program actually works
• The tax bill that comes with forgiveness (and how we're saving for it)
• Why compounding investments beat a 6% linear return on debt payoff
• What this means for YOU — whether you have student loans or any other kind of debt

xoxo,
Rachel

Where to find me:
Instagram: @heyrachelcoons

Join me for my free training to learn the 5-step RESET Framework: Register HERE

Transcript

Why We Are Not Paying Fast

SPEAKER_00 0:00

My husband and I have over$350,000 in student loans. This week on Instagram, I posted about that number and how my husband and I don't plan to pay off our those student loans fully until our 20-year forgiveness is up. And the comments were a lot. And honestly, I get it. I get how misunderstood student loans can be and different payoff programs. There are so many things out there. So in this video today, I want to share with you some of our strategies and what they have been for paying off our student loans, just so you can make an informed decision and maybe get some more background information on why people choose to do what they do with their loans. I want to take a step back and kind of fill people in on why student loans are where they're at today in the United States. What has happened in the past 20 years to create a situation where people owe hundreds of thousands of dollars to their degrees? Federal loans were created as an opportunity to give more people access to education. And that is genuinely a beautiful thing. The idea was that if you can't afford to go to school, the federal government will step in and help you pay for your schooling. Access, opportunity. That was the intention. But here's what actually happened when it came to practice is that universities then were able to charge whatever the heck they wanted for school because the federal government would pay for it. And that's exactly what happened. Tuition costs exploded. Not because education suddenly got way more expensive, but because there was an unlimited amount of money in the pool to pay for school. Now, truthfully, that's a whole separate conversation that we're not going to get into today. What we're going to get into is the facts around student loans. And I want you to understand that the system was created to create massive amounts of student debt. Maybe not intentionally, but that is what's happened. It's just an economic reality of where we're at. And truthfully, millions of people are trying to navigate this situation. And that context really does matter because it shapes how we approach the problem and how we look at the solution. We need to look at it strategic, not emotional, and not reactive. So let me give you some background to our situation. My husband and I went to undergrad programs at a very cost-effective school and came out of that schooling with literally zero dollars of debt because we knew that the future was for us to go to professional school. My husband had wanted to be a dentist ever since he started his undergrad career, and that was the goal the whole time. And because of that, we knew that dental school was going to cost an exorbitant amount of money, like it does. And we didn't want to take out any loans in undergrad so that we could get ready for the debt that we were going to take on in professional school. His education to be in the career that he's in and have the income that he does was a strategic move on our part. And we knew that school would be expensive, but we knew that it was an investment in our future and our long-term wealth. And I'm grateful that we were able to take out the loans that we did. It was worth it for us. I don't see those loans as a crisis. I see them as an investment. So the question isn't whether we should have taken the loans out or not. I know a lot of people were like, well, that was stupid. You did that to yourself. That's not the question. We are here in this situation right now with the loans that we have. And so the question we ask ourselves now is what is the smartest way to handle this moving forward? And we believe that there are people that know better than us how to handle our money. So we've hired financial advisors to come in and look at our financial landscape and see what our goals are for long-term wealth and have advised us to not pay off the full amount of the loan because of the different styles of payback options that the federal government has offered. And I 100% want to say this is that the program was created in a legal fashion. It was approved by everyone. And the federal government knew that people would do the things that we are doing with our money with it. It's not like we're going behind the federal government's back. We're not doing anything out of the ordinary. So when I say that we're not planning to pay off the$350,000 of debt in one fail swoop, what we are planning to do is make minimum monthly payments, the littlest amount as possible. And then at the end of the 20 years, we are in a debt forgiveness program where if we make those minimum monthly payments every single month, at the end of the 20-year loan, whatever the loan amount is at that point, and because of interest, it will probably be closer to$700,000. At that 20-year mark, whatever the loan amount is will be considered income if it gets forgiven. So if we have a$700,000 loan that is then forgiven by the government, they're basically saying we gave you a$700,000 pay raise this year. So at that point, we will then owe taxes as if we had made$700,000 of income that year. And so we're planning, we're saving$600 every single month into a retirement account on top of the minimum monthly payment that we are making. So that way we can pay off that tax forgiveness bill that we're gonna get on year 20. So here's the math broken down for you. We owe$3,500,000 of principal in our loan. In the space of the 20 years, we will have paid back the principal of that loan with our minimum monthly payments. And then, and because of interest, at the end of the 20 years, whatever the remaining balance is, we will then pay a tax bill for that remaining balance. So this is not a bailout by any means. It is a strategic way of paying back the loans. No one is paying off our loan debt except us. Now, this is where the area does get nuanced a little bit because when I posted this on social media, I had a lot of people coming at me angry that now it's the taxpayers' burden to pay off the loans. And I get that, I understand how the loan amount that is forgiven at the end, the government did expect to make that as income. And they do have to true up the budgets at some point. And so it does put more pressure on the fiscal responsibility of the government, which then does trickle down to the taxpayers. So it doesn't mean that the taxpayers aren't gonna feel this burden at some point or another. And two things can be true that can affect taxpayers 100%. And the system was also set up and designed for people to fail when it came to their student loans. And so the government stepped in to fix that problem and in turn created a whole new problem where the government is lending out money that they're not gonna get interest on and they're not gonna make money from that loan. So I hope that makes sense that I understand the frustration that people have when it comes to student loans and how some people think that we're gaming the system. But just like you would pay off your taxes and you would try to qualify for whatever tax breaks you can qualify for in the tax system. It's the same situation for someone with a massive amount of student loans. They're doing exactly what the system was designed to do. So why do we do this instead of just aggressively paying it off? And I know a lot of people who have decided we're just gonna aggressively pay it off. We don't want to be in debt, it causes us too much stress. We're gonna get rid of it 100%. If that's you, that's fine. But for us, we are okay holding on to the debt. Because the thing is, is if we wanted to pay off that debt 100% and accrue interest on it, we would be paying five to six thousand dollars a month on our student loan debt. That's five to six thousand dollars that we then wouldn't be investing. We wouldn't have been able to buy a house. We wouldn't have been able to do anything to move our financial wealth forward. So we wanted to be able to have that discretionary income along the way. The other thing about the student loans is yes, we have a 6% interest rate on that student loan. So when we pay off the loan, we are technically getting a 6% return on our investment for the money that we're putting in. But the problem is that investment is linear. It's not compounding. If we take that five to$6,000 and we put it in a compounding investment strategy, the amount of money that will accrue over those 20 years is far greater than what would happen if we just paid off the$700,000 loan. I want you to, this is us being very intentional, not reckless. And we've thought this through. And we've thought of a lot of different solutions and ways that we want to approach this problem, trying to be as morally correct as possible, trying to do the best thing for our family and the system in general. So I hope you understand that. But I do want to shift gears a little bit as well, because I noticed something in the comments, some of the really intense comments that we got along the way, calling us names, saying that we are stealing from taxpayer dollars, that we are horrible people because of what we're doing. Um, and I want to hold space for that. I understand the frustration that can come. And I also understand that money creates a lot of emotions in people. But one of the problems in this situation, and one of the reasons why I am a money coach and why I help coach people through scarcity mindset and feeling like money is so triggering to them, is this exact reason. The fact that I post something about our debt and how we are leveraging it to build wealth triggered a lot of people. And I don't blame you for that, but that may say a little bit more about your relationship with money than it does about mine. And I understand that money can make people really angry. And I understand that my views might be a little polarizing. But at what point are you going to acknowledge that just because we are doing something to build wealth doesn't take away from your opportunity to do the same. In fact, I hope you find ways to build wealth that works for you. Whether that means leveraging debt or being smart about student loan payoffs or going out and building a business so you can get tax breaks, whatever it means for you, don't take your own anger and put it on somebody else. Because again, that says more about you than it does about me. And I can take the heat, I can take the anger, I can take the frustration all day long. But I really think if you understand the situation, you understand the massive amount of energy it takes to figure out debt and be smart about it, you might have a little bit more sympathy and understanding of that. And if it means that you're really triggered by somebody else making a lot of money, maybe I'm not the person for you because, girl, I am here to get my bag and I'm here to get you to get your bag. And I truly believe that there is an infinite number of wealth that is available to us, that money is abundant, and it will come to you if you stop resisting it and create all these money blocks. Truthfully, scarcity thinking will cost you more than any student loan ever will. So, to recap, yes, we have a lot of loan debt, and we've been very smart about that situation. And the debt doesn't scare me, not because I'm in denial, but because we have a clear, actionable plan for our money. And that's exactly what I help women do is create that plan so that they can feel good about it, so that it doesn't keep them up at night and they feel strong and confident about the decisions that they're making around their money. I'm gonna leave a link to a free training in the comments below if you want to learn more about this process and my frameworks that go along with it. But for now, if you have any questions or you wanna chat about this in the comments, you want to get triggered and leave me some mean, angry comments, I can handle that too. But let me know what you think and I'll see you in the next video.