Penny’s 13 Year Plan to Repay $173,000 in Student Loans

Dear Rich,

I find it amusing to think that in 13 years you will have amassed close to your 2 million dollars in savings and I will just be breaking even. Ah, life! Crazy, isn’t it?

I think your plan looks great. But, then again, what do I know? We have $173,000 in student loan debt! Ha ha. Anyway, so here is my plan to pay back pay our $173,000 in student loans in 13 years. My handy dandy spreadsheet with yearly numbers is at the top of the post.


We are currently putting $20,000 a year toward our student loans. Right now, it feels like we’re throwing money at a wall, like it’s doing nothing. So much of it is going toward the interest. We have to pay $918 a month just to keep the loan from growing any bigger. Which sucks. At the end of the 13 years, we will have paid over $86,000 on the interest alone (which is 49% of where the loan is at now), but what can you do? (Seriously, what can you do? Do you know of a better way???)

We’ve tried to refinance the loans with SoFi, which is where all the really cool, fiscally responsible people are going, but they won’t have us given the fact that we are only making $40,000 a year (which, I guess, makes sense on their end)…

Here’s another thing:

We are on a Income-Driven Repayment Plan. This means that we make payments in accordance with our income. Right now, in accordance with our income, they are requiring us to pay:


And they will forgive any loan balance remaining after 25 years.

Sounds like a pretty sweet deal, right?

So, why are we putting $20,000 a year toward student loans when we technically don’t have to pay anything and the remaining balance will be forgiven anyway?

Well, let me tell you, because here’s the catch: We would have to pay taxes on the amount forgiven.

So, let’s say we continue to remain at this income level ($40,000), or thereabouts, for the next 25 years, and let’s say we pay $0 the whole time. By the end of 25 years, due to the constant growth of that friggin’ interest, the loan will have amassed to:


​Thanks to this little handy Tax Calculator, I can calculate that we would owe $247,668 in taxes on that amount, which is $11,617 more than what we would pay doing my little 13 Year Repayment Plan thingy.

Plus, we’re the ones who took out the loans, we’re responsible for paying them, and we really do want to be able to pay them back. Thus, the plan.

Now, how do we put $20,000 toward the student loans when we have an income of only $40,000 (and four kids to boot)? Well, that’s a story for another day, my friend. As for you, congrats on your plan to amass your Scrooge McDuck-like fortune. A couple of questions: What do you plan to DO with all that money anyway? I mean, what’s the point? Why is it so important for you to have all that money? I don’t get it.

With love,


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