We’ve been together for 10 years. There have been ups and downs throughout the years. There were times when we separated for a while, but would then get back together. Throughout all of that time though, we were always together. Even during the tough times, we were never really apart. There were some fond memories, and we were good together for a while. But for me, things have changed. I no longer see things the same way anymore, and we no longer see eye-to-eye. Before posting this, I struggled with the decision as far as what to do. I asked for advice, but at the end of the day, I finally realized that my life will be happier if we were no longer married. As difficult as it is for me to say, I’ve decided that I’m getting a divorce from my Student loans!!! Here are the reasons why!

Student Loan Debt is Debt

Sometimes financial advisers will say that there are good debt and bad debt. Invariably, student loan would be characterized as good debt. But truth be told, even if student loans are good debt, they still are debt. I’ve determined that I want to be debt free.  I got rid of my consumer debt (ok, I know my credit card balance is $2000 at the moment, but that’s very temporary). So, now I need to get rid of my student loan debt.

Imagine a life with no debt. No payments to anyone. That means that 100% of the income you receive, minus what is needed for living expenses, can be used to build your future. That’s the kind of life I want. I’ve had debt throughout most of my twenties into my thirties. I’m not quite yet 40, but getting close. I’m determined that I will not have any debt by age 40 (except for mortgages), but if all goes as planned, I’ll be able to take care of this debt within a year.

There are those much smarter than me that uses debt as leverage to increase their net worth and income opportunities. For example, they may borrow money at very low interest rates, and invest that money to receive higher income from the market. I could risk it, but I’d rather not. Failure could mean even more debt.

Invest Vs Pay Off Student Loan

The biggest struggle I had wasn’t so much the ability to pay off my student loan, but whether paying off the student loan was the right choice for me. The interest rate on my student loan is 2.625%.  Undoubtedly, the chances are high that with proper investing, I could achieve more than that investing in the stock market or maybe real estate. In fact, because my monthly payment on the student loan is currently at $97.61 and will only increase to a maximum of $129 in 2018, it’s not really a burden on my current income to maintain that level of expenditure on my student loan. So, one thought I had was to keep paying the minimum and invest extra money I had into my dividend portfolio.

Well, although I was VERY tempted to go that route, I chose otherwise. My job is stable right now, and even if I were to be fired, I’m confident in my ability to find another job in my career field. However, there are no guarantees. If I were to lose my job, it would be nice not having to worry about paying that $97.61 or $129 per month. I don’t have to worry about any negative reporting on my credit report or anything. So, it takes the worry off things.

Mathematically, it might have made more sense to keep paying the minimum payments, but emotionally, I feel better not having the debt.

Why Not Take The $20k And Pay Off Student Loan

If you’ve followed my blog, you know that I’m about to receive a $20k bonus from work. See my post on How To Invest $20000 for more information. I could essentially wipe out my student loan debt in about a couple of months. However, I’m not going to do that. The reason is also emotional/psychological.

I actually have two student loans at the time of this writing. I’ve brought the first student loan to a balance of $1000 because I’ve essentially been paying $2000 a month on that loan. Well, I will pay off that student loan next month in July.  That same $2000 that I’ve been using to pay off that student loan will be applied to the instant student loan which has a balance of $21721.72. By doing so, I maintain the discipline in how I utilize the income from my paycheck.

Here’s the beautiful part. Once my student loan is paid off, I’m going to take that $2000 that I was using towards paying off the loan to invest in my dividend portfolio. So, in about 10-12 months from August 2017, my monthly contributions to my dividend portfolio will be significantly increased.

New Debt Tracker

To help keep me honest, I’ve added a debt tracker to my blog. I get paid twice a month and will be recording each payment on the site. Now, I know this method works for me because that’s how I got rid of my consumer loans. A friend of mine and I made separate New Years Resolution last year (or two years ago). We tracked our progress using Google Sheets. I actually had fun logging in and updating the results. Also, I made sure I did because he would check up on me to ensure that I was still working towards my goal. I did the same for his goal. So now, I’m doing the same thing, but tracking it on the blog.

The new tracker can be found at the new page. It’s not fancy or anything, but it will get the job done. Let me know what you think of tracker.

CONCLUSION

I’ve been married to my student loans for way too long. Dave Ramsey says that some people keep their student loans around long so long they start thinking it’s a pet. I think there’s some truth to that. Well, for me, no more! It’s time for the student loan to go!  It’s time to kick Sally Mae out the house.

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