I recently had to make a decision about how to pay my student loans. One option was to follow a standard repayment plan, equal payments each month for the life of the loan. Another option was to sign up for a payment plan based off my income. I would make smaller payments each month -which usually means a longer loan- but then after 25 years the loan would be forgiven.
At first I thought the decision would be easy. Lower payments and a debt that would be forgiven? Why wouldn’t I choose the income based plan? I knew there were good financial reasons to pay off debt sooner: less money paid on interest, better cash flow month to month, etc. etc. But as I did the math I found that financially the income based plan was still the best option.
So, I signed up. I felt smart for having more to spend each month and gracious to the government program that was making it all possible.
And yet, something felt off. I knew I wasn’t doing anything illegal, I was choosing a repayment plan that was being offered to me, and honestly reporting my income. But I also knew that I could afford to pay more, but was choosing not to knowing that what I didn’t pay would simply be forgiven later.