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#706: Q&A: The Case for NOT Paying Off Your Student Loans

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What do student loans, early retirement, and Airbnb have in common?

They’re the three questions we’re tackling in today’s episode, and each one forces you to think about uncertainty, flexibility, and whether the “right” financial move on paper is actually the right move for your life.

Joe and I answer three listener questions. KJ has $90K in student loans at 6.8% and just inherited $25K earning 3.3%—should she pay off the debt or hold cash for uncertain future payments?

Anonymous is retiring in 7 years with $1.9M and wants to know if working part-time mitigates sequence of returns risk. And Anonymouse just bought a second home near grandkids and wants to Airbnb it—LLC or S-corp?

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Listener Questions in This Episode

KJ asks: I have $90K in student loans at 6.8%, currently in forbearance. I inherited $25K earning 3.3%. Should I pay off the debt now, or hold cash since my monthly payments could be thousands when they resume in 2027?

Anonymous (Andrea) asks: We’ll have $1.9M saved in 7 years. Should we work part-time for 3 years to mitigate the sequence of returns risk, or does that just delay the risk?

Anonymous (Andrew Ryan) asks: We bought a second home near grandkids and want to Airbnb it when we’re not there. Should we use an LLC or S-corp? Can we expense furniture purchases?

Key Takeaways
  • Math vs. Insurance: When you’re earning 3.3% on savings but paying 6.8% on debt, the math says pay off the debt—but if uncertain future payment amounts could force you into crisis, holding liquid cash is the insurance policy that lets you sleep at night.
  • The Policy Pivot: Student loan policy changes with every administration create genuine uncertainty—when the rules might fundamentally change in 2-3 years, sometimes the financially suboptimal choice (holding cash) is the psychologically optimal choice because it preserves flexibility.
  • Shifting the Risk: Working part-time during early retirement doesn’t eliminate sequence of returns risk, it just shifts when the risk hits—you’re essentially delaying full retirement, at which point you’ll face the same risk of a market downturn in those critical first years of withdrawals.
  • Airbnb Structure: For Airbnb properties you use less than 180 days/year, you can expense purchases proportional to rental time—most short-term rentals work fine as sole proprietorships or LLCs, while S-corps add complexity that rarely makes sense for smaller operations.
  • Maintaining Optionality: Maintaining optionality (cash reserves, part-time work flexibility, simple business structures) often beats optimizing for the mathematically perfect solution—the biggest risk isn’t the math, it’s building a plan so rigid you can’t adapt when life throws curveballs.
    • Resources
    • Afford Newsletter – https://affordanything.com/newsletter
      • Chapters

      Note: Timestamps are approximate and may vary across listening platforms due to dynamically inserted ads.

      (0:00) Introduction

      (2:13) KJ’s Question: Pay Off Student Loans… or Hold Cash?
      (5:00) The Real Game: Cash Flow vs Interest Rates
      (15:05) The Hidden Lever: Fixed Costs vs Variable Costs
      (27:48) Anonymous Question: Can Part-Time Work Break Your Retirement Plan?
      (35:02) The Truth About “Safe” Withdrawal Rates
      (40:00) Should You Work in Early Retirement? Here’s the Tradeoff
      (44:53) Anonymous Question: Airbnb LLC vs S-Corp — What Actually Saves You Money?
      (50:02) Airbnb Tax Secrets (Most Hosts Miss These)
      (55:00) Don’t Mess This Up: Rental Records & Documentation

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