Penny Tells Rich What She Thinks of His 3 Year Plan to Pay Off $173,000 in Student Loans

Dear Rich,

Okay, here’s what I think of your 3 Year Plan for us to pay back our student loans:

Let’s start with your first scenario…

Slow and Steady + Increase Your Income. Well, duh. If we wanted to do this, we would be doing it already. Ultimately, we value me staying at home with the kids more than we value having money and paying down student loans. But, as my husband’s chiropractic business continues to grow every year, we will hopefully be able to put more money toward the student loans every year. So, yes, this plan makes sense, and we will implement it when we can.

Here’s a graph on how the net income of my husband’s chiropractic practice has grown since it opened:

​So, ideally (and presumably), it will continue to grow and we will be able to throw money at that great wall of student loans that much more.

Now, onto your second scenario…

Go For Broke! Literally. You’ve already acknowledge that this is a risky and bad idea, so let’s just move on.

Your third, and favorite, scenario…

Drastic Action → Debt Free in 2020. You talk about us selling our home and cashing out our IRAs and putting all that money toward our student loan debt. I don’t know what to think of this. I can’t deny that I haven’t given this some thought after seeing what our house is now worth (we bought it as a foreclosure, and it is now worth a lot more). Here’s the thing though… if we sold the house, we would still have to live somewhere, right? And, legally, since we are a 6 person family, we would have to rent an apartment or a house with at least 3 bedrooms… and those type of rentals come at quite the cost. A quick search on Craigslist tells me that we’re looking at an average rental price of $2,000 for places in our neighborhood. Compare that with the $853 that we currently pay each month on our mortgage, and you can see that it’s quite a difference.

Secondly, after the student loan debt is paid off in three years and we’re looking to buy a house again, we will be more in debt (considering costs of homes are around $250,000) than we are now. So, we’ll be right back to where we started. I know you’re saying that having mortgage debt is better than having student loan debt, but debt is debt, and I don’t see how your plan succeeds in getting us out of it any sooner. You’re just sticking us with more mortgage debt in the future.

And thirdly, we like our house. We like where we live. We don’t need that extra $20,000 that we’re putting toward the student loan debt every year anyway. We have enough. We’re doing alright. We’re happy. I like my 13 Year Plan, and I’m going to stick with it.

That being said, do you think that we should still cash out our IRAs and make a little headway there? Unlike selling our home, I don’t necessarily object to cashing those out.

The research says that $75,000 is the amount of money people need to earn each year to be happy. That amount seems extraordinary to me because we’re already happy at $40,000 a year. I don’t get it. And it makes me wonder why you want more when you’re earning much more than that amount already.

Your cousin,


2 Replies to “Penny Tells Rich What She Thinks of His 3 Year Plan to Pay Off $173,000 in Student Loans”

  1. I didn’t realize your house payment was so low compared to local rents … that does change the equation a bit. I’ll have to think about this some more! –Rich

  2. Yes, and please tell me if I should cash in our IRAs or not. I have $35,000 in mine and my husband has $7,000 in his (he already cashed most of his out when starting his business).

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