I regularly listen to Dave Ramsey’s podcast, who affectionately refers to himself as “Get-out-debt-Dave“. I’m blown away at the number of Millennials who call in with mounds and mounds of student loan debt. Most Millennials have tens of thousands, if not well into the hundred of thousands. Its absolutely absurd.
Student Loan Debt is Not a Pet
Back to Dave Ramsey, who constantly barks are his callers telling them not to treat their student loans like a pet and keep them around for as long as possible. I’m a Millennial and I’m guilty of this as well. For years I never paid more than my monthly requirement. I really had no reasoning for this either. I regret it to this day that it took me as long as it did to payoff my student loan.
The Tax Deduction Is NOT Worth It At All
Like I mentioned, I really had no reasoning for not making extra payments towards my student loan. However, I constantly read and hear Millennials saying that there is no reason to make extra payments because the interest is tax deductible. That is utterly ridiculous.
The average Millennial coming out of college now has $25,000 of student loan debt. To pay that back over a 10-year period at $280/month with a 6.8% interest rate means you end up paying $33,600 or in $8,600 in interest. All of that roughly translate to $900 of interest per year, all of which is tax deductible. However, your actual tax benefit equals $225. Not really worth it to keep paying the minimums on your student loan is it?