# Will my student loan repayment scheme work? Is it the optimal move? **URL:** \ **Category:** Factual Questions\ **Created:** [August 16, 2015, 10:56am UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981 "2015-08-16T10:56:58Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Yllaria](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/yllaria/32/3452_2.png) [@Yllaria](https://boards.straightdope.com/u/Yllaria)\ **Post date:** [August 17, 2015, 6:31pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/21 "2015-08-17T18:31:31Z")
If you’re going to take online classes in order to defer student loans, I think the best plan would be to think of it as a temporary respite AND to take classes that might get you a better job. It sounds like getting a better job (or a job that will let you defer your loans) would help the most in the long run. ---
**Author:** ![engineer\_comp\_geek](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/engineer_comp_geek/32/504_2.png) [@engineer\_comp\_geek](https://boards.straightdope.com/u/engineer_comp_geek)\ **Post date:** [August 17, 2015, 7:51pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/22 "2015-08-17T19:51:50Z")
**Moderator Note** > [@Omar\_Little](#): > > Still haven’t found a [solution](http://boards.straightdope.com/sdmb/showthread.php?t=713502) to [your](http://boards.straightdope.com/sdmb/showthread.php?t=701683) problem? Thanks for pointing those out. If this had been noticed earlier, I would have closed this thread and directed comments to the earlier one, since this is basically a duplicate. Since so many replies have been posted here, and since merging these threads would likely cause confusion, I have closed the earlier threads and will let this one continue. **Habeed** , please do not start any more threads on essentially the same topic. Restrict all future posts on this topic to this thread. ---
**Author:** ![DinoR](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dinor/32/2821_2.png) [@DinoR](https://boards.straightdope.com/u/DinoR)\ **Post date:** [August 17, 2015, 9:02pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/23 "2015-08-17T21:02:42Z")
Ever growing debt can have effects on borrowing for other things later. Being a perpetual student comes with some serious opportunity costs. You can’t do anything else with that time. That includes constraints on your ability to assume more demanding, and presumably higher paying, employment later in life. Those are some serious impacts across your entire life. I wouldn’t off hand say any plan that locks in those costs is optimal. You’re the only one that can truly assess how much you value some of the doors you close through this strategy. ---
**Author:** ![SmellMyWort](https://avatars.discourse-cdn.com/v4/letter/s/ea5d25/32.png) [@SmellMyWort](https://boards.straightdope.com/u/SmellMyWort)\ **Post date:** [August 17, 2015, 9:07pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/24 "2015-08-17T21:07:09Z")
> [@Yllaria](#): > > If you’re going to take online classes in order to defer student loans, I think the best plan would be to think of it as a temporary respite AND to **take classes that might get you a better job**. It sounds like getting a better job (or a job that will let you defer your loans) would help the most in the long run. Yeah, well if he’s close to making $100K a year then he’s actually doing pretty good in the job dept. He just doesn’t want to be on the hook for the money he borrowed and owes. I’d suggest he post his problem over at FatWallet Finance, but I already know the response will be: “Pay your debts, deadbeat.” ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [August 17, 2015, 11:17pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/25 "2015-08-17T23:17:10Z")
> [@PoppaSan](#): > > Would applying for enough credit cards to take the cash advances to pay off your student loan before declaring bankruptcy work? Maybe, but it also opens you up to criminal prosecution. Credit card applications are legal documents in which you agree to make your payments. Signing such a document without intending to do so is fraud. Bankruptcy isn’t automatic. You have to go in front of a judge who might take a very dim view of the “turn my debt that can’t be discharged in a bankruptcy into unsecured debt” plan, and who has broad powers to undo your little scheme. This is not a good idea. ---
**Author:** ![Yllaria](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/yllaria/32/3452_2.png) [@Yllaria](https://boards.straightdope.com/u/Yllaria)\ **Post date:** [August 17, 2015, 11:44pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/26 "2015-08-17T23:44:47Z")
I lost track of that. Has that really been established, though, or is he just saying that even if he made that much he’d still resent paying it back? ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [August 17, 2015, 11:44pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/27 "2015-08-17T23:44:59Z")
The general problem here seems to be a rigidity in your thinking. I mean this in at least two different senses. First, your plan requires that the law stay static. If any of the components fail, your whole scheme is dead, and now you’re on the hook for hundreds of thousands. What if the law changes so that you cannot defer forever? What if the online courses are deemed invalid as course credit? What if the garnishment rules are changed for high earners? And so on. All this is stuff that could easily change over the course of decades. Depending on them is very risky. Conversely, you aren’t seeing advantages in your own future. Why do you think your own income will cap at $100k? You have a degree in computer engineering AFAIK, and around here an experienced worker will make well over that. You aren’t experienced now, but in a decade you will be, and your loan payments will be chump change then. Furthermore, you’re ignoring opportunities for refinancing. I dunno what your rate is now, but if it’s in the 5+% range, then the chances are high that you can reduce that by a good factor at some point. My home equity line is in the 3% range today. If you buy a house, you’ll have access to that as well, depending on how the interest rates go. I suggest that the payments now will not look nearly so bad in 5-10 years. And frankly, you’re probably better off with the engineering degree than you would have been with the law degree. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [August 18, 2015, 2:11am UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/28 "2015-08-18T02:11:25Z")
> [@iamthewalrus\_3](#): > > Maybe, but it also opens you up to criminal prosecution. > > Credit card applications are legal documents in which you agree to make your payments. Signing such a document without intending to do so is fraud. > > Bankruptcy isn’t automatic. You have to go in front of a judge who might take a very dim view of the “turn my debt that can’t be discharged in a bankruptcy into unsecured debt” plan, and who has broad powers to undo your little scheme. > > This is not a good idea. Arguably, you could pay on the unsecured debt for a year or so before declaring bankruptcy, but… - The interest rate will certainly be higher than the student loan rate - The payments would probably be higher because I presume the payback period would be a lot shorter (I don’t know the term of the student loans) - Any assets you accumulate would be seized to pay the debt - You’re highly unlikely to be able to get 100K in unsecured debt anyway with 100K in student loans outstanding. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [August 18, 2015, 3:58pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/29 "2015-08-18T15:58:12Z")
> [@Mama\_Zappa](#): > > Arguably, you could pay on the unsecured debt for a year or so before declaring bankruptcy, but… I don’t think that bankruptcy judges are so easily fooled. It’s not like paying it for a year or even two will make it significantly less obvious that you acquired unsecured debt equal to the student loans you just paid off. You’d have to come up with a good reasonable explanation for this behavior other than “I was trying to defraud the credit card companies.” Obviously, there’s a chance that someone gets away with this. But I wouldn’t gamble on it. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [August 18, 2015, 5:45pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/30 "2015-08-18T17:45:16Z")
> [@Yllaria](#): > > I lost track of that. Has that really been established, though, or is he just saying that even if he made that much he’d still resent paying it back? It looks like he expects to be making that much in the near future. Poor kid. ---
**Author:** ![Blaster\_Master](https://avatars.discourse-cdn.com/v4/letter/b/cab0a1/32.png) [@Blaster\_Master](https://boards.straightdope.com/u/Blaster_Master)\ **Post date:** [August 18, 2015, 6:19pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/31 "2015-08-18T18:19:38Z")
I have an acquaintance who had a plan not unlike what the OP here is talking about. In her case, she graduated from college, couldn’t find a job and couldn’t afford the payments, so she went back and got another degree… and another. Sure, she doesn’t have to pay student loans, but now she’s over-qualified for the job she wants, what she went to school for, and is stuck doing work paying a lot less. So, it saved her paying a bunch of money at the time, but now she has even more debt and is still having issues finding a job. There’s other problems with this sort of plan. It might save you money, but the time invested in taking and passing the courses is not trivial. If it’s only two classes, that’s a bare minimum of 6 hours a week, but more likely in the 9-12 range. Even on the low end of that, if you work 40 hours a week now, well now you’re basically working about 25% more to save 15% of your money. And that’s going off of your numbers which, as pointed out upthread, don’t seem right. Further, since you’re doing this to save money and not gain additional skills or qualifications, you’re basically taking a pay cut to do this. You’d actually end up better off getting a second part time job and just paying down the loans. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [August 18, 2015, 8:03pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/32 "2015-08-18T20:03:59Z")
I am so glad I pay taxes. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 18, 2015, 8:13pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/33 "2015-08-18T20:13:30Z")
> [@aktep](#): > > If you do use it to pay for student loans, though, the interest portion of those payments may be tax deductible - so really that $12k costs you less in taxes if you use it to pay a student loan than if you use it for new shoes. No. Student loan interest is deductible up to $2,500. It’s also only deductible for single filers with a modified adjusted gross income of $80,000 or less ($160,000 for married filers). It’s hard to say for sure whether someone grossing $100,000 would have a MAGI below $80,000 or not. It’s definitely possible if you make significant contributions to your retirement accounts. Someone who came up with a stupid idea like being a student forever might be good at finding tax breaks. Assuming he did get below $80,000 though, he could only deduct all the interest on his $100,000 loan if his interest rate was 2.5% or lower. ---
**Author:** ![aktep](https://avatars.discourse-cdn.com/v4/letter/a/f0a364/32.png) [@aktep](https://boards.straightdope.com/u/aktep)\ **Post date:** [August 18, 2015, 8:23pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/34 "2015-08-18T20:23:23Z")
That’s why I said “may be”. ---
**Author:** ![AlsoNamedBort](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alsonamedbort/32/3213_2.png) [@AlsoNamedBort](https://boards.straightdope.com/u/AlsoNamedBort)\ **Post date:** [August 18, 2015, 8:53pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/35 "2015-08-18T20:53:02Z")
> [@aktep](#): > > Also consider that your loan balance will show on your credit report, even if it is in perpetual deferment. > > This may or may not affect your credit score, but it will give lenders pause when they see that you have half a million in debt you haven’t paid a red cent on yet and they will be in line behind if you default. You may spend your life having trouble getting car loans or mortgages, or have to pay inflated rates for them. Yep, most mortgage programs requirement that you calculate the monthly payment of deferred student loans at 1-2% of the total balance. ---
**Author:** ![boffking](https://avatars.discourse-cdn.com/v4/letter/b/858c86/32.png) [@boffking](https://boards.straightdope.com/u/boffking)\ **Post date:** [August 18, 2015, 9:41pm UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/36 "2015-08-18T21:41:52Z")
> [@Habeed](#): > > Apparently, if you enroll in an accredited college or university at least half time - 2 courses a semester - such as in Georgia Tech’s online master’s in comput\*\*er science - you get to defer your loans. > > Yes, the interest keeps accumulating - but the interest is \*already \*accumulating faster than I can pay and still have money left over to eat and pay rent. Per the student loan IBR calculator, I won’t have to pay my existing balance if I do student loan IBR, so what difference does it make if the balance goes even higher? It’s just monopoly money if there is no practical way for you to pay it or be forced to pay it. > > So my rough plan is : 2 courses a semester, 5 a year, total cost about 2 grand every year. Or I could spend about $12,000 on student loan payments, and the government will make me pay income tax on that $12k, so I actually get more like 18k subtracted from my roughly ~100k income. (I don’t make that right now but things are looking up) That’s a much larger bite. Taking out loans that you know you won’t be able to pay back is fraud. ---
**Author:** ![Habeed](https://avatars.discourse-cdn.com/v4/letter/h/a587f6/32.png) [@Habeed](https://boards.straightdope.com/u/Habeed)\ **Post date:** [August 19, 2015, 1:10am UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/37 "2015-08-19T01:10:43Z")
> [@boffking](#): > > Taking out loans that you know you won’t be able to pay back is fraud. I already have them taken out. I took them out with the expectation that the institution I would attend would follow it’s own rules and reasonable principles of due process. I took them out with the expectation that if the individual school I attended didn’t follow the rules, I would be able to resort to the courts. Well, the government of the country that guarantees my loans has decided to allow state courts to wipe their asses with justice. Hence, I do not feel any moral obligation to pay, as I’m the one defrauded here. With that said, I’ll pay what I am forced to pay if it saves me more later. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 19, 2015, 1:36am UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/38 "2015-08-19T01:36:09Z")
Are you ever going to give us a taste of what the school did that was so out of line? ---
**Author:** ![pool](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pool/32/4152_2.png) [@pool](https://boards.straightdope.com/u/pool)\ **Post date:** [August 19, 2015, 1:42am UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/39 "2015-08-19T01:42:44Z")
I knew people in your situation who joined the military just to pay their student loans as they will pay back up to around $70,000 they will pay all the principle, but not the interest. It actually wouldn’t be a bad idea to consider if you meet the requirements, it would get you out of debt, give you an income , and learn a skill. You could just do one enlistment, just a few years and erase the majority of your debt. ---
**Author:** ![Habeed](https://avatars.discourse-cdn.com/v4/letter/h/a587f6/32.png) [@Habeed](https://boards.straightdope.com/u/Habeed)\ **Post date:** [August 19, 2015, 1:59am UTC](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981/40 "2015-08-19T01:59:39Z")
> [@pool](#): > > I knew people in your situation who joined the military just to pay their student loans as they will pay back up to around $70,000 they will pay all the principle, but not the interest. It actually wouldn’t be a bad idea to consider if you meet the requirements, it would get you out of debt, give you an income , and learn a skill. You could just do one enlistment, just a few years and erase the majority of your debt. I did get a degree already where the median pay is 100k, and the business I work for is taking off, and I get a share of the revenues. I don’t need to “learn a skill”, I need to get better at the skill I already learned. Also I owe a lot more than 70k. [Previous page](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981.md?page=1) [Next page](https://boards.straightdope.com/t/will-my-student-loan-repayment-scheme-work-is-it-the-optimal-move/727981.md?page=3)