Tricking Myself Into Paying My Student Loans : Planet Money About 44 million people owe nearly 1.5 trillion dollars in student loans all together. But for some people — like our producer Darius Rafieyan — paying them requires some mental adjustments.
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Tricking Myself Into Paying My Student Loans

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Tricking Myself Into Paying My Student Loans

Tricking Myself Into Paying My Student Loans

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(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

So a couple of weeks ago, I asked our intrepid producer, Darius Rafieyan, to join me in the studio.

Darius Rafieyan.

DARIUS RAFIEYAN, BYLINE: Hey, Stacey.

VANEK SMITH: And I could sense that he was having a little bit of a crisis.

RAFIEYAN: I don't know if you remember, Stacey, but almost exactly a year ago, we did a story about student loans.

VANEK SMITH: Yeah.

RAFIEYAN: And I remember starting off that piece by saying exactly how much I owed at that moment on my student loans.

VANEK SMITH: And how much was it?

RAFIEYAN: At the time - I went back and relistened - it was $56,744.

VANEK SMITH: OK.

RAFIEYAN: That was a year ago, and I've been making payments since then. And I just checked today to see how much I owe.

VANEK SMITH: OK.

RAFIEYAN: Today, I owe them $57,030.

VANEK SMITH: Oh. So now you owe more money than you did a year ago.

RAFIEYAN: Yeah. And it's just very - it's very demoralizing because, you know, I was feeling really good. I was making all these payments.

VANEK SMITH: Yeah.

RAFIEYAN: And yet somehow I owe them $300 more than a year ago. I not only haven't made progress. I'm behind. And no matter how much I, like, claw away it and chip away at it, I just can't get ahead.

VANEK SMITH: I did not enjoy seeing Darius like this. He looked so stressed out. So I wanted to help in some way, and I decided that the best thing I could do was to call Jill Schlesinger. She's a veteran financial adviser and author of the book "The Dumb Things Smart People Do With Their Money." She's helped a lot of people tackle their unruly debts, including student debt, and I thought, I hoped, she could help Darius out.

I'm Stacey Vanek Smith, and THIS IS THE INDICATOR FROM PLANET MONEY. Everybody has been talking about student debt lately. And today on the show, Darius and Jill take on student debt and give us a kind of comprehensive guide to taking control of your student loans.

(SOUNDBITE OF ALESSANDRO RIZZO, DANIEL HEWSON AND ELLIOT GREENWAY IRELAND'S "JET SET GO")

JILL SCHLESINGER: All right. Here we are.

RAFIEYAN: All right.

SCHLESINGER: All right, D.

RAFIEYAN: Yeah. So I guess the reason we've asked you come in today is because you are our resident student loan commando.

SCHLESINGER: Really?

RAFIEYAN: Financial commando.

SCHLESINGER: I like that.

RAFIEYAN: And I'm having a bit of a existential crisis with my student loans.

SCHLESINGER: OK. So tell me about that.

RAFIEYAN: So one year ago, almost exactly a year ago, I owed $56,744 on my student loans.

SCHLESINGER: One year ago.

RAFIEYAN: One year ago.

SCHLESINGER: All right.

RAFIEYAN: And last week, I checked, and I owed $57,030.

SCHLESINGER: You know what, Darius? Wrong direction.

RAFIEYAN: That is the wrong direction, hence the existential crisis. Somehow, I'm moving backwards, which is very, very demoralizing.

SCHLESINGER: I'm sorry. So when you're looking at all these loans, what is the interest rate?

RAFIEYAN: 5.25%.

SCHLESINGER: Interest is like cockroaches.

RAFIEYAN: Yeah.

SCHLESINGER: Even when you don't see them, they are eating away at your foundation.

RAFIEYAN: You're telling me.

SCHLESINGER: I'm sorry.

RAFIEYAN: (Laughter).

SCHLESINGER: All right. And they've given you a payment amount.

RAFIEYAN: The minimum payment for now is $250 a month.

SCHLESINGER: OK. And so you are making the minimum.

RAFIEYAN: I make more than the minimum payment. I try to do $350 a month.

SCHLESINGER: All right. Now, you pay your rent. You pay your bills. Now, when you add the student loan payment at 350 bucks a month, is that really tight for you? Are you under pressure right now?

RAFIEYAN: I guess no.

SCHLESINGER: Are you right now calculating that you don't want to have to say to me I'm fine because I get to go out to dinner whenever I want and that's fine?

RAFIEYAN: Well, this is the crux of the problem is that I have plenty of money. I just tend to spend it on things, like, going out to dinner or taking a trip somewhere or going to the opera or something. So if I did a little bit less of that...

SCHLESINGER: Listen; you are entitled to have a life. The question is that life seems great. It's a short-term jolt, but the long-term impact of having the debt even just stay kind of as is or whittling down very slowly may be costing you a lot down the line. If you don't mind me asking how old you are.

RAFIEYAN: I'm 26.

SCHLESINGER: So, you know, Darius, in your 36-year-old brain 10 years from now, how do you feel if there's still 35, 40 grand outstanding on that debt?

RAFIEYAN: See; I go back and forth on this.

SCHLESINGER: Tell me.

RAFIEYAN: And I think I need some help in the psychological framing because there's one part of me - and there's - a lot of people have said this to me - who says, oh, well, you should just pay the loans back as slowly as possible.

SCHLESINGER: Who says that?

RAFIEYAN: I've heard that so many times from, like, my parents and my, like, adviser in school and even, like, the person I talked to on the phone at the loan place, which I could see why they would want that to be true.

SCHLESINGER: Yes, that's slightly disincentive to give you the advice that's in your best interest.

RAFIEYAN: But I've - and I've heard it said - I've heard it framed sort of like, oh, well, the loans will - they don't really matter...

SCHLESINGER: Yeah. They do.

RAFIEYAN: ...So just pay the minimum and then just put the money somewhere more productive.

SCHLESINGER: Right. Well - but putting your - what could be more productive than locking in a 5.25% return with no risk? - which is what you would be getting by paying down that student loan. There are no guarantees. Last year, the stock market went down. The last 10 years have been good. The prior 10 years were not so. So all these things taken together, if I told any very fancy financier I can get you a guaranteed 5.25% return, they would say, let me back up the truck and throw all of my money into a guaranteed return. You have that ability right now.

RAFIEYAN: OK. So this is amazing because you have now re-contextualized the interest rate on my loans, which I thought of as my greatest enemy, to, in fact, an asset.

SCHLESINGER: Your best performing asset class will be your debt repayment.

RAFIEYAN: And that's because - just to spell it out, that's because if I - by putting a dollar towards my student loans, that's 5.25% that I won't have to pay on interest as opposed to putting it in the stock market or a CD and getting 2 or 3%.

SCHLESINGER: And I - so what I think we need to try to figure out is what is a reasonable amount of money and slight lifestyle adjustments that we could make that would help you accelerate this debt pay down? But if you feel like you're being deprived and you bail out of this before we get there, then we're screwed. We've upended our plan. I am a simple gal. I'm just a simple certified financial planner. And I like round numbers, so I'm going to guess that we're going to try to figure out how to get you to pay 500 bucks a month every month forever to see how that goes. Where's the $500 going to come from? Well, you're already doing $350.

RAFIEYAN: Right.

SCHLESINGER: Are you actually writing checks or sending checks electronically or is there an automatic draft?

RAFIEYAN: I go to the website and do it.

SCHLESINGER: I want you to do an automatic draft. Set it up right now. Set up that $350 a month. OK. Now here's the thing. Where are we coming up with the extra $150? You must find that 150 bucks a month. And I guess the other piece of this is, are you tracking how you spend your money right now?

RAFIEYAN: No, I'm definitely not, which I think is a problem because the money just - like, I am not good at tracking it. It's just - it's coming and going, and I don't know where it goes. I mean..

SCHLESINGER: I'm going to get you in touch with your money a little bit.

RAFIEYAN: (Laughter).

SCHLESINGER: So what would be interesting is your job is to look through all these categories and say, you know what? I can find $150 in a given month but instead of thinking of it as deprivation, think of it as kind of a fun game. Let's find the money. Let's - Darius, let's find the money. And if you can do that, then you will - next step, once you've found the extra $150, then you're going to bump up from $350 to $500.

RAFIEYAN: It seems like a lot of the through line here is, like, setting up the right sort of psychological framing for things and kind of tricking myself into better behavior.

SCHLESINGER: Well, you know, when I wrote my book, I was very obsessed with this idea that why were smart people not doing the things they knew they should do? And I came to the conclusion after talking to neurologists and psychologists and looking at data that it's really hard to focus on diffuse, long-term risks. So I just wanted you to get into your head of what it would feel like 10 years from now still having 30 or 40 grand in debt. So now, let's use this period of time before you've got tons of other obligations to imagine what would my 36-year-old self feel like with that number? And how can we create a system to allow you to get there without feeling deprived?

RAFIEYAN: Jill Schlesinger, thank you so much for solving my financial existential crisis.

(SOUNDBITE OF ALESSANDRO RIZZO DANIEL HEWSON AND ELLIOT GREENWAY IRELAND'S "JET SET GO")

VANEK SMITH: This episode was produced by Darius Rafieyan, edited by Paddy Hirsch and fact-checked by Emily Lang. THE INDICATOR is a production of NPR.

(SOUNDBITE OF ALESSANDRO RIZZO, DANIEL HEWSON AND ELLIOT GREENWAY IRELAND'S "JET SET GO")

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