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> Pay off all your debt and student loans if you have any. Paying back student loans seems like a bad idea, what if the Democrats win and forgive student loan

> Pay off all your debt and student loans if you have any. Paying back student loans seems like a bad idea, what if the Democrats win and forgive student loan debt? You'll be left holding the bag. > For example, you could get an MBA. With another student loan? > If I can do it, so can you. Perhaps, but if I was living paycheck to paycheck, I'd be in "good company" with the federal government, local governments, corporate America and the majority of the general population. That's a pretty big interest group. I have a feeling there's a big debt jubilee coming up...

AnimalMuppet 7y ago
> I have a feeling there's a big debt jubilee coming up... I would recommend not living as if you expect that to happen...
- gridlockd 7y ago
  Perhaps, but I would also recommend not living as if you expect that it won't happen.
bilbo0s 7y ago
>Paying back student loans seems like a bad idea, what if the Democrats win and forgive student loan debt? You'll be left holding the bag.... This is an extremely bad way to think about handling your financial future. I feel like too many people engage in these risky bets not only with student loans, but also with investments. But consider, what if student loans are not forgiven? Here you would sit at, what? 40, or 45, not having paid anything on your loans. That's a horrible idea. With all gambles like that, what's foremost in your mind should be: "The market can stay irrational much longer than you can stay solvent."
- sokoloff 7y ago
  At this point, I think the risk that the student loan giveaway will happen is quite low. Nevertheless, if my kids were older and in or done with college, I’d counsel them to pay the minimum on student loans and save the rest that they might otherwise pay in a taxable account just on the small chance the student loan forgiveness actually happens. There’s nothing inherently better about paying down student debt if the alternative is investing in a broad based equity fund (VTSAX, VTI, etc). There is something better about paying down debt if the alternative is consumption with that money.
  - leetcrew 7y ago
    > There’s nothing inherently better about paying down student debt if the alternative is investing in a broad based equity fund (VTSAX, VTI, etc). it depends on whether you have a subsidized or unsubsidized loan. the interest rate on the unsubsidized stafford loans is only a little less than the average nominal return of the s&p500 over the last ~60 years [0]. the safe bet here is probably just to pay the loan off; you don't know if the next ten years will give above or below average returns. on the other hand, the subsidized stafford loans have only about half the interest of the unsubsidized flavor. if this is you (and you aren't making enough money to lose the subsidy), it seems like there would be a perverse incentive to only pay the minimum and invest whatever is left over. [0] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
    - sokoloff 7y ago
      If there's even a 5% chance that the Democrats will give you $50K if you wait, that juices the expected return of not paying off the loan significantly. I agree with you in general that it's economically nearly a push to invest or pay off the loan under normal political conditions, and that the certainty of paying it off has positive value for most people. I also think there's significant psychological benefit to having no student loans hanging over your head, so absent the possible handout, I'd lean towards paying it off. Waiting two or three years to see if the promise evaporates seems reasonable, given the low average cost of waiting.
      - leetcrew 7y ago
        I see your point, although I don't think I would recommend this strategy to a good friend. there's also an emotional side to it. even if you made the "optimal" economic decision at the time, it would still feel pretty bad to pay off your loans in full over the first 5-10 years of your careeronly to see your peers' debt get wiped out at the end.
        sokoloff 7y ago
- gridlockd 7y ago
  > This is an extremely bad way to think about handling your financial future. I feel like too many people engage in these risky bets not only with student loans, but also with investments. But consider, what if student loans are not forgiven? Here you would sit at, what? 40, or 45, not having paid anything on your loans. That's a horrible idea. I'm not saying you shouldn't pay anything on your student loan debt. This is in reply to the guy telling you to "pay off all your debt as soon as possible", which is common advice from some of these people that are all about financial responsibility. It's not necessarily good financial advice though. Most likely you should be paying off any other form of debt before paying off your student loan debt. Also, sometimes defaulting on overwhelming debt is actually the right thing to do. Sometimes bankruptcy is the best solution (not applicable to student loans, but still). In an environment where almost everyone around you (up to the federal government) is "financially irresponsible", being financially responsible yourself can put you squarely on the losing side. It's happened over and over again in history.

AnimalMuppet 7y ago

> I have a feeling there's a big debt jubilee coming up... I would recommend not living as if you expect that to happen...

gridlockd 7y ago
Perhaps, but I would also recommend not living as if you expect that it won't happen.

bilbo0s 7y ago

>Paying back student loans seems like a bad idea, what if the Democrats win and forgive student loan debt? You'll be left holding the bag.... This is an extremely bad way to think about handling your financial future. I feel like too many people engage in these risky bets not only with student loans, but also with investments. But consider, what if student loans are not forgiven? Here you would sit at, what? 40, or 45, not having paid anything on your loans. That's a horrible idea. With all gambles like that, what's foremost in your mind should be: "The market can stay irrational much longer than you can stay solvent."

sokoloff 7y ago
At this point, I think the risk that the student loan giveaway will happen is quite low. Nevertheless, if my kids were older and in or done with college, I’d counsel them to pay the minimum on student loans and save the rest that they might otherwise pay in a taxable account just on the small chance the student loan forgiveness actually happens. There’s nothing inherently better about paying down student debt if the alternative is investing in a broad based equity fund (VTSAX, VTI, etc). There is something better about paying down debt if the alternative is consumption with that money.
- leetcrew 7y ago
  > There’s nothing inherently better about paying down student debt if the alternative is investing in a broad based equity fund (VTSAX, VTI, etc). it depends on whether you have a subsidized or unsubsidized loan. the interest rate on the unsubsidized stafford loans is only a little less than the average nominal return of the s&p500 over the last ~60 years [0]. the safe bet here is probably just to pay the loan off; you don't know if the next ten years will give above or below average returns. on the other hand, the subsidized stafford loans have only about half the interest of the unsubsidized flavor. if this is you (and you aren't making enough money to lose the subsidy), it seems like there would be a perverse incentive to only pay the minimum and invest whatever is left over. [0] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
  - sokoloff 7y ago
    If there's even a 5% chance that the Democrats will give you $50K if you wait, that juices the expected return of not paying off the loan significantly. I agree with you in general that it's economically nearly a push to invest or pay off the loan under normal political conditions, and that the certainty of paying it off has positive value for most people. I also think there's significant psychological benefit to having no student loans hanging over your head, so absent the possible handout, I'd lean towards paying it off. Waiting two or three years to see if the promise evaporates seems reasonable, given the low average cost of waiting.
    - leetcrew 7y ago
      I see your point, although I don't think I would recommend this strategy to a good friend. there's also an emotional side to it. even if you made the "optimal" economic decision at the time, it would still feel pretty bad to pay off your loans in full over the first 5-10 years of your careeronly to see your peers' debt get wiped out at the end.
      - sokoloff 7y ago
gridlockd 7y ago
> This is an extremely bad way to think about handling your financial future. I feel like too many people engage in these risky bets not only with student loans, but also with investments. But consider, what if student loans are not forgiven? Here you would sit at, what? 40, or 45, not having paid anything on your loans. That's a horrible idea. I'm not saying you shouldn't pay anything on your student loan debt. This is in reply to the guy telling you to "pay off all your debt as soon as possible", which is common advice from some of these people that are all about financial responsibility. It's not necessarily good financial advice though. Most likely you should be paying off any other form of debt before paying off your student loan debt. Also, sometimes defaulting on overwhelming debt is actually the right thing to do. Sometimes bankruptcy is the best solution (not applicable to student loans, but still). In an environment where almost everyone around you (up to the federal government) is "financially irresponsible", being financially responsible yourself can put you squarely on the losing side. It's happened over and over again in history.