I hate echo chambers. While I generally believe long-term relationships are more functional when you share similar values, I also believe you learn more about the perspective of others, AND your own perspective, when you take time to understand and work through difference. For this reason, for almost every belief I hold, including with respect to my finances, I have sought out others with different opinions or perspectives. One of those different perspectives belongs to an incredible person who blogs under the pseudonym “single gal” or “MERJ.” Their blog* documents their journey towards FIRE (financial independence, retire early).

Their “About Me,” authored in 2018, states:

Today is Feb 20, 2018 and as of today, I am a single 30-something, openly Christian human woman. I love watching TV while eating takeout, and I want to retire early. I currently work as a consultant in a tele-health call center making around $40/hr.** I started my professional life in 2015 at the ripe ole age of 31 after a few false starts. I spent 2016 paying off about $10,000 worth of credit card debt. I spent 2017 paying off about $20,000 in private student loans; I still have about $300,000 in federal student loans for which I am currently on an income-based repayment plan for the next 25 years, give or take.  I started really getting into savings and investing late 2017 when I stumbled upon the FIRE (financial independence, retire early) community.  In 2018, I made the decision to try to save for a sabbatical and maybe if all goes well continue the journey to early retirement.

** As of 2021, MERJ makes considerably more.

If you’ve read Stupidity. Reason. Qualified stupidity. The post where I explain how I got here., then you certainly understand why their journey resonates with me. We definitely have some pieces in common and are about the same age. However, there is significant divergence in terms of our plans to pay off our debt. In a post entitled “Why I’m Not Paying off My $300k Student Loan Debt,” MERJ lays out four reasons for their perspective:

1) “I can’t afford it.” – They argue that the standard repayment, of ten years, would be more than $3,000.00 a month.
2) “The Federal Government is okay with it.” – The argument is essentially, if the federal government is okay with it, then why shouldn’t they be okay with it?
3) “Have I ever mentioned how much I don’t enjoy working.” – They summarize this argument pretty well in one sentence: “I would literally have to put retirement savings on hold for 10 years when my single most consistent goal of late is leaving the workforce…as early as possible.”
4) “But what if…” – In this point they essentially address the arguments others have presented to them about possible changes to Public Service Loan Forgiveness (PSLF) or Income-Based Repayment (IBR). They bring up a friend who they state would be eligible for the PSLF program but who is choosing to pay down their loan. They also note that this other person does not contribute the max to their 403b and is working with a financial planner.

Okay. I think personal finance is personal so I am going to refrain from commenting on what MERJ should do or what I would do if I were MERJ. Instead, I am going to look at MERJ’s arguments (an argument is an assertion, supported by a warrant (reason), and evidence) and evaluate what they mean for my own situation. However, I will admit upfront that in some instances I think MERJ was a bit uncharitable to the argumentation presented by others and kinda played the straw-man. Perhaps this was fair because others made poor arguments. I hope to do better.

1) “I can’t afford it.” – I think this was the first instance of the straw-man argument for me. MERJ sets up a dichotomy between the IBR Plan and the 10-year Standard Repayment Plan. If you have a considerable amount of federal student loan debt, the 10-year Standard Repayment Plan can certainly be unmanageable. Evaluating this for myself, I felt it was also incumbent for me to consider all of the federal income-driven repayment plans, including: Revised Pay As You Earn Repayment Plan (REPAYE Plan), Pay As You Earn Repayment Plan (PAYE Plan), Income-Based Repayment Plan (IBR Plan), and Income-Contingent Repayment Plan (ICR Plan). After 20 or 25 years of credited monthly payments on either of these plans, the remaining loan amount is forgiven. However, the forgiven amount is then taxed as earned income for the tax year in which the amount was forgiven.

Having looked at all four plans, I decided that IBR plan was the best choice for me. For pre-2014 borrowers, it caps payment at 15% of your discretionary income but not more than what your payment would be on the 10-year Standard Repayment Plan. Additionally, months where your payment amount is “zero” based on your income still count towards the “credited monthly payments.” This plan was the right choice for me, even as I plan to pay off my federal student loans, because it reduces the amount I have to pay while my income is relatively small (I currently do not have a payment) and allows me to direct more of my income towards my less flexible, and more expensive, private loans.

2) “The Federal Government is okay with it.” – This isn’t really an argument but more of a perspective and I certainly understand it. That being said, I disagree. I think the reason the Federal Government is “okay” with it is because the fixed interest rates they set for most of their student loans are so high (6.8% for my last unsubsized undergraduate student loans taken out in 2008) that for most borrowers, the government is still making a profit (however, there are extremes, such as in MERJ’s case, or an instance where a person’s low income never increases and they never owe a payment under the income-based plans).

I think MERJ’s example is useful to illustrate this point:

Current income based monthly payment:  $570/ mon x 12 mon/ yr x 25 years =  $171,000 repaid
Standard Repayment (2018 values): $3,642/ mon x 12 mon/yr x 10 years =  $437,040 repaid
Difference: $437,040 – $171,000 = $266,040

While I could be wrong, I’d be willing to bet that MERJ’s originating aggregate loan amounts were probably closer to $171,000.00 than the current balance. Which means, by the time MERJ, or most folks, finish making payments under the income-based plans, the federal government has already made back the initial principal lent and some of the interest. Again, I think the reason the U.S. federal government is “okay” with these plans is because they aren’t losing money. They are also make an additional amount on the taxed amount that is forgiven.

3) “Have I ever mentioned how much I don’t enjoy working.” – The logic here seems sound, and again, this is just a difference of perspective as opposed to “evidence-based.” For me, my work/labor has always been about trying to find a balance between my interests, financial security, intellectual challenge, and service to my community. I hope to achieve that with medicine. I think attitude and approach towards work/labor looks different for everyone and I generally don’t slight the approaches of others. When I began paying off my student loan debt, my plan assumed I would continue to work full-time out of necessity until 45. I would then pursue part-time or lower earning income of my choice that allowed me to serve the community, only needing to provide for my basic subsistence. The pursuit of medicine obviously changes that equation a bit.

4) “But what if…” – Ahhh…of all of MERJ’s arguments, this one is the least fleshed out for me. I think there are two major points of contention in our perspectives: A) the efficacy of federal loan forgiveness plans and B) “At the end, the remaining balance is forgiven (and taxed). If I retire early and my income is zero, then guess what: I pay nothing!  Where is bad?”

A) I think that MERJ wasn’t very charitable to the perspective of their educator friend… First, Teacher Loan Forgiveness and Public Service Loan Forgiveness (PSFL) are very distinct from the income-based repayment plans. Unlike the income-based repayment plans, the federal loan forgiveness programs requires: 1) an approved application; 2) consolidation of loans with a private lender (FedLoanServicing) often resulting in a higher interest rate; 3) 120 CONSECUTIVE payments on the consolidated loan amount (NOTE: This is not the same as the credited monthly payments under the income-based plans); 4) the ten years of service required under this plan don’t accrue until AFTER your loan consolidation, not when you begin teaching/service; 5) the private lender requires that teachers certify that their employment qualifies for the program each year and can challenge school certification.

According to the U.S. Government Accountability Office, as of 2018 there were more than 53,749 unique applicants requesting forgiveness of their student loan debt after 10 years in the program, with only 661 being approved. That’s less than 1%. As of 2019, the Department of Education disclosed that the PSLF program has a 99% rejection rate.

B) If someone retires prior to the balance being forgiven, then their income is “zero” which means they owe nothing. – The flaw in the logic here for me is that the idea of “income” seems reliant upon the idea that income is “W-2” based. The U.S federal government defines income very broadly and this includes distributions from retirement vehicles (except Roth), capital gains, alimony, etc. Additionally, for less financially secure borrowers, once the forgiven amount is assessed as “tax,” the federal government has many more avenues for recouping tax debt including property liens, levies, social security garnishment, etc.

Again, my argument IS NOT that MERJ isn’t making the right choice for themselves, but simply how I arrived at a different conclusion, given the same set of facts, and why my choice is the right choice for me…and maybe their educator friend.

Further, the evaluation I perform above doesn’t even touch upon the very real and emotional nature of debt for so many people. I have readily admitted in the past that the sensation that features most for me with respect to my student loan debt is shame…followed closely by anxiety in its many forms. Managing them with respect to my debt has often been emotionally exhausting. Aggressively paying off my student loan debt, at a sacrifice to investing or saving, may not be the best decision according to the math. However, each payment and payoff helps me discharge a bit of shame and anxiety, and helps me feel more like the person I suspect I am without debt.

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*“Single gal” or “MERJ” is an incredible writer and in addition to sharing their journey towards FIRE, they also document a great deal about their life and career. As they write very openly about emotionally intense thoughts (i.e. reflecting on the reasons and steps necessary to end their life), I wanted to create a layer of awareness for people who might visit their blog via this post. I do not know in what state, or with what experiences of trauma, folks arrive at my site. Reading about emotionally intense thoughts can be difficult, even for humans in a relatively healthy mental state, and this layer of awareness allows readers to make an informed choice.

Single gal’s/MERJ comprehensive post, on why they are not aggressively paying back $300K in federal student loans, can be found here.