I May Not Pay Off My Debt Immediately *GASP*

After reading the title, I know what you’re thinking: “This entire website is about paying off debt and you’re deciding you want to keep it around now?!”  Not exactly.

I’ve been working toward paying off my debt (see right side debt payoff on home screen for current debt balances listed) ever since I graduated college, but I’ve more recently become really fired up to get this debt out of my life for good.  I was originally $70K in debt, but I’ve managed to pay off just over $20K of that.

Now that I am really starting to focus on my entrepreneurial endeavors and my career as a whole, I’m realizing there’s only so far I can go without more education.  Namely an MBA.  I’m really interested in applying for business school in the very near future. My current plan is to apply for business school next year, in which case I would be matriculating in 2015 zyban to quit smoking.

Matriculating in 2015 depends on two things: getting a full fellowship or a very significant scholarship, and being debt free.

My dilemma is, if the best case scenario happens and I get a full fellowship to a great business school in 2015, I will have just finished paying off all my debt and I will have no savings set aside for living expenses for those two years where I will have no income.  Two years of living expenses in business school can range from $30,000 up to $60,000 (think apartment, food, gas, school trips, conferences, books, club dues, etc.).  The only way I would be able to afford living expenses would be by taking out more loans!  Obviously this option is completely counterproductive to my goal, not to mention I would be miserable having achieved this great feat and then getting right back into debt a month later.

Luckily there is an alternative I’m considering.  Rather than paying off my federal loans (totaling $40,000) I’ll pay the minimum every month and put the remaining payment amount into a savings account.  This way if I do get into business school I’ll have that $40,000 to use as my living expenses and my loans will be deferred because I’ll be back in school fulltime.  The beautiful thing about this plan is if I don’t get into business school with a full fellowship, I can use that $40k sitting in my savings and pay off all my debt in one lump sum.  This way it’s possible I can still pay off all my debt in three years (if I don’t get accepted to a business school with a full fellowship) and if my plans change and I do end up going to get my MBA, I’ll have a good amount of cash saved to live off of.  Either way, I won’t be taking out more debt, the main objective is to kill the habit of borrowing money.

What do you all think about this plan?  I’m about 85% sold on it myself; the remaining 15% lies in the fact that I really had my mind set on paying off all my debt by 2015!

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