Demolishing My Student Loans
I call it being in loan destruction mode. I started this on 5/1/2015 and decided that I was tired of having student loan debt and though the math is in favor of making only minimum payments, I chose peace of mind over science.
Here is a quick overview of how student loans work. There is also a wealth of information on The White Coat Investor website regarding student loans, when to refinance, companies that he recommends etc, a really good resource to explore.
Since 5/1/2015 I have been sending almost every dollar that comes into my possession to my student loan holding company. I’ve been keeping a detailed spreadsheet to monitor my own progress.
A spreadsheet is tedious but the visual feedback is incredibly powerful to keep you on track even when you feel like giving up.
You can see how much I’ve put towards my payments, how much of it went to paying down the principal balance and how much went towards interest. The starting balance was $72,187.25 on 5/1/2015. However, initially it was closer to $130,000 when I consolidated all the loans which were from undergrad and medical school.
Peace Of Mind vs. Math
I won’t bore you with the math and logic behind this age-old debate. My interest rate was 3.00%… and it was brought down to 2.75% just for me making regular monthly auto-debits from my checking account for my minimum payment of $604.
I highly recommend calling your student loan company and asking them for such deals. Another colleague was able to get a whole 1% knocked off her already über low rate of 2.5% for just making 30 consecutive timely payments. Debt restructuring is something we aren’t taught as consumers but a powerful tool utilized by entrepreneurs.
Current Balance = $29,323.71
If I invested the payments I likely would have benefited financially by increasing my overall net worth. Instead, I wanted the entire balance of $72k destroyed by end of 2016. This way I benefit more mentally.
My spreadsheet has the function set to calculate out what my balance will be based on when and how much I pay towards the balance. Currently I should have it all paid off before 12/1/2015.
Current balance: $29k.
Interest rate is at 2.75%.
Most recent payment was $4k. $25.07 of that went towards interest.
The Eventual Final Payment
After my very last payment on 11/30/2015 I will be completely debt free. No mortgage (don’t own a house), no car payment (don’t own a car), and no credit card debt. I don’t know what that will fee like but I’ll be sure to post about it here.
Will I regret it because I could have invested the money instead and have a higher net worth?
My final payment would be right before December and that would bring my balance to $0.
My Tactics For Being In Loan Destruction Mode
- Send the majority of my paycheck to the loan company as soon as I get paid. Leave only enough for living expenses.
- Send any windfalls (refunds, bonuses, overtime pay) directly to the loan company.
- Keep a daily journal and write down the balance and how I feel about this new number, when I think I will have it paid off, what I will do with the extra money that will get freed up.
- Come up with whatever strategies possible to spend less or make more.