You're turning away free money. Also, you're interest paid on the loans is tax deductible. But most importantly you're turning down free money.

 

It's not tax deductible if you make over the threshold prescribed by the IRS. I lost that deduction six years ago!

 

To an extent, yes. Say the company gives me a match of $850/year based off 3% invested, and that takes 6 years to become fully vested in that amount as well. Lets say that I also pay $1,000 a year in interest from student loans. I'm still in the red from the free money, vs putting more into the student loans to get the payment down faster. I feel my money is better spent paying down anything that accumulates interest, rather than putting it somewhere that will gain less in the short term. In the long term, will the capitalized interest be higher on the 401k? Yes (well should be depending on the economy), but at what expense for how much extra did I pay out of my own pocket on the interest for my student loans in that time.

Then lets look at this another way. Say in 3-4 years I'm hired into a legacy carrier like Delta. My profit sharing check alone, would be able to max out a 401k account for the year. Far surpassing anything that this company would give me.

 

That seems like a very short-sighted and myopic view of the situation to me. The money you put away now is worth more than the money you put away 10 years from now just by vitrue of the fact that it's been accruing interest that much longer. Now that said and without knowing your situation exactly, I've known plenty of guys who couldn't contribute to their 401k and make ends meet at home, but you should understand that you are borrowing from your future self in order to pay your current self's student loan. In other words, it's worth more long-term to carry your loan an extra year or two and get the free money (plus interest!!) Than it is to just retire the loan asap. Even more so if you are still getting some sort of tax deduction on the interest.

Here's another alarming thought: what if Delta never calls or you lose your medical?

Another thought: most pilots are probably getting more like $2400-4000 year with the match.

 

It's more than just a year or two on the loans. With the setup I'm doing right now with the loans, I'm able to apply 100% of my payments toward principal, thus making the amount of interest that will accrue and have to be paid back much lower in the future. That is another factor into my decision on why I'm doing this. I'm also limited to how any years I can do this, which is why I'd rather bring the total amount of principal down as I can before the interest starts to accrue.

I've already done the number and did the math for the short term vs the long term, , and with this method, I actually come out ahead. When I was doing 3%, there was so very little going into my account with the company match - no where near $2,400 - $4,000. In 2 years, I had only about $2300 in there WITH the company match, which accounted for the full vested amount and not the actual amount. ROI was about 5% as well, which is below the interest amount on my loans.

As far as if Delta never calls, I have other options I'm looking at as well. I could upgrade here, and the additional money I make as a captain vs a first officer would be applied to excess to max out the 401k vs doing 6%. Same thing with going to a LCC or another major carrier; the additional income of just a few years there, would far outweigh the 3-4 years of 401k investments here vs paying down the loans.

And if I lose my medical, my 401k is the least of my worries. Since I'll have payments that are steady on my student loans, that would allow me to more freedom to defer them for longer if I'm not working, or allow me to pay a reduced amount since I'm already so far ahead vs not paying them and investing into a 401k.

 

Actually, your rate of return is 50% on the match. You will make around $65k this year. For a 3% match, that's around $2000 that you are leaving on the table. And that doesn't include the accrued interest you will make on the $6000! I mean, we are talking about $160 per pay check on average. If you can't afford that much each pay check in order to make 100% ROI, then you are doing it wrong.


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so on another note skywest has a very large group of schmoes in new hire class.....can the semantics be done already? I'm just very tired of the constant lectures about performance..................

 

And our most recent position notice shows 4 upgrades.

 

I don't like to agree with you much but, this!

 

Like I said, seems like your current self is borrowing from your future self at a very high rate of interest. WMUpilot, I hope your math is right!