It sounds like you are not paying off your debt, because you are putting extra money into investment/retirement funds, with the assumption that you loan will be forgiven before you retire. If you are wrong, then you might retire owing loans (and having your social security garnished to pay those loans, as is sadly happening to people.)
Not quite. I'm planning on loan forgiveness in 8 years, with a back up plan of accelerating payments and paying it off within 5 years if the rare possibility that it is scrapped comes to fruition. I'm making more money than I thought I would, so the amount left at forgiveness time is probably going to be sub-$100k.
That puts me decades before retirement.
I believe paying off debt IS a form of investment/retirement funds, because it frees up whatever retirement money they do have (they won't have the expense of the loans draining their retirement budget)
Even not accounting for loan forgiveness or any income based repayment program (basically, a straight 10 year pay off), delaying retirement savings to pay off debt pushes the date forward when you start to pay yourself.
Assuming a finite amount of money and all you can afford is the loan payment or retirement, at the end of X years paying off the loan, you're debt free, but you also have zero dollars to your name. You can accelerate your retirement savings, but only up to a point. Remember, you can't go beyond the $17,500/yr (2014 figure, adjusted each year) until you hit the catch up period in your 50s. Over the previous 10 years (if you did the 10 yr standard), that's potentially $175,000 in principle alone you can put away in a tax-advantaged way. By ignoring that, you give up 10 years of market gain, any employer matches (free money), and the tax advantages of reducing AGI.
Not to mention if you get hit by a falling anvil and lose your ability to earn a salary, you now have zero dollars to your name. Being debt free won't help you there. Yes, it's an extremely remote chance, but saving for retirement (and possibly total disability) serves as a hedge for uncertainty. Cash is king, debt is merely an instrument.
Reality is, we aren't all Vulcan. Many people aren't faceless/soulless corporations, and if they try to pretend they are, the stress will eat them alive and cause a myriad of health problems (and possibly early death....or worse yet, think of the costs involved if they have a stroke and go on disability or need nursing home care!) Surely your logical mind can acknowledge that in many people (at least some people), the monetary cost of health problems they incur, by acting in a way contrary to their nature, outweighs the monetary gain of maximum investment.
Maybe I am a Vulcan, hahah. Negotiating finances in such a way doesn't stress me out, in fact, it's kind of a lot of fun. If I weren't a pharmacist, I'd probably be a bankruptcy attorney or something. This is why my posts on this are so long, I like typing them, it's fun to me.
I used to consult people who were underwater on their mortgage and many times my advice was to take advantage of state law and purposefully send the home into foreclosure. All the "paying your debts is a moral imperative" people on here might be squirming, but many years later these people have 700+ FICO scores and are able to buy homes again under FHA if they choose to do so. Had they followed their "morality" they'd probably still be underwater and stuck in their homes. Sucks to be those people.
