The past month or so I have been dealing with a lot of numbers in my head and not in a good way. For the first time in over a year I have gone back into credit card debt and now have to dig my way out because of unforseen expenses. I also admit that I am probably getting a little debt fatigue. It seems like I have been battling this forever (even though it has only been a few years since we got married) and seeing little progress. I know that it is not true, but I have spent the past week with a lack of sleep trying to figure out a way to get out of this mess quicker.
For example, I thought well maybe if I took some of our home equity, paid off my student loans, and then refinanced to a 15-year mortgage then I could get rid of some of the debt. The problem with that is that I would actually INCREASE our expenses each month. Part of the reason for that is that Mrs. ROB’s student loans, under the REPAYE plan, will always be 10% of our discretionary income. Currently, they are 10% of both our student loans combined. If I get rid of mine, I actually don’t reduce the debt because her payment will just increase and replace what I was paying. I would just be moving money around.
Additionally, one of the things that I have been thinking about it what if we don’t make it to PSLF? I mean I have 8 more years to go. That is at least $40,000 in student loan payments. Mrs. ROB has 7 years to go. Financially, continuing with PSLF is the best thing for our family but 8 more years of being in student loan debt while I continue to save for retirement seems like just a never ending slog that I will never get out of. Moreover, what if one of us doesn’t reach it with our job. Currently, Mrs. ROB is an adjunct professor who has cobbled together a nice income with her job, but what if she doesn’t get enough classes? What if she wants to change careers and move to the private sector? What if she wants to stay home, work part-time and take care of the kids we want to have (no luck on that front by the way….more on that later)? The thing I want for Mrs. ROB is to be happy. Having her stay as an adjunct professor and hope she gets classes every semester isn’t necessarily a good life plan. But if she goes to the private sector then what do we do about her student loans? She would lose her PSLF eligibility and it would take over 20 more years to pay those bad boys off (maybe sooner) but 20 with general loan forgiveness?
Enter the Potential Solution
To me it seems the solution to this conundrum is to basically pay down our mortgage a lot earlier. We already have it on a 12 year mortgage at 2.875% (now 11 years) with about $146k left. Our home is worth (I think) about 215-220. My idea is that if we pay down the mortgage substantially like 100k in 5 years or less than we could use that as a possible safety net to pay off the student loans.
What that would mean is that I would have to do a cash-out refinance of the mortgage to get rid rid of Mrs. ROB’s student loans and then just pay down the mortgage from there.
My problem with this strategy (I told you I play monetary mental gymnastics with myself ALL of the time) is that I don’t want to give up saving as much money as I have been already. I might not have a choice because of some upcoming financial difficulties. I don’t want to blog about them quite yet until we know if they will be resolved. Also, a 2.875% mortgage is SUPER cheap. I mean that is a great rate and mathematically I should milk that bad boy for as long as I can.
I guess I want to have some kind of back up plan. What do you think of my potential solution? What might you do in my situation?