This, falling and getting back up, being tempted, giving in, resisting and progressing, feels like training.
There’s a reason why I just ignored the student loans I had to take out for grad school. It was just too scary to think about. At $1610 per credit and well over $20,000 in other expenses, tuition for business school has gotten me into another six figure debt (besides my mortgage). So far, the grand total is a little bit less than $120,000. And lets not forget the interest, compounded daily. For a long time I just did not want to think about it. But now that I’m only a few thousand dollars away from getting out of consumer debt completely (trust me this is nothing compared to the debt I had), I feel well equipped for taking on my student loans.
Trying to pay off these credit cards has prepared me mentally for the size of debt I’ll be taking on by tackling my student loan debt. People that have more self discipline than me can reach this point earlier by avoiding the debt entirely but I’m a recovering spendaholic and needed to learn the hard way. Just like my credit card debt, I’ll divide the loans into smaller amounts and then pay them off one by one. For reference, here’s a breakdown of my student loans:
- In total, so far, I have about $120,000. I use approximate figures because the balances are going up daily and I want to account for that by rounding up.
- About $23,000 of them are federal loans from college (undergraduate). There are about 5 of them. The loans are relatively small $3500-$5500 per loan and their interest rates are not that high (between 3-4%). These loans are deferred because I’m currently in school and since they’re subsidized, do not start compounding until I graduate.
- The rest, roughly $98,000 of my loans are all from grad school. There are 6 of them. They are larger amounts with high interest rates. Half of them are not federal loans and have interest rates between 5.8 %and 6.84%. They’re currently about $18,000-$23,500. The other half are federal loans with interest rates between 5.3% and 6.31%. Some of these loans are not deferred and accrue interest at a compounded rate daily.
Logic dictates that I tackle the high interest rate, non federal loans first. These loans have a higher balance, a higher interest rate and are currently compounding daily. And in 2017, I plan to do just that. I’m gonna take on the loan that has accrued the most interest in the shortest amount of time and pay it down first. It’s gonna be absolutely miserable, but my future self will thank me.
Where am I getting the money?
Tax return-It’s not much, but it will make a difference.
Tuition reimbursement- Again not much, the maximum amount my job will provide is $5250 annually but that will all go towards paying the loan. Since I plan on finishing school in 2017, I’ll only be eligible for one more reimbursement before I graduate.
Rental income – $1280/month or $15,360/year, this comes from renting out my spare bedroom at $650/month and $630 in profit from another rental property.
Salary-I’m gonna try to put as much of this towards my loans as possible. I’ll try very very hard to average around $2500/month or $30,000/year towards the student loans. I’m planning to put this amount of money towards student loans without factoring in raises/bonuses. I also don’t know how my decision to switch to a high deductible healthcare plan and put more towards my 401K (I discussed this in my previous blog) is going to affect this number. But I suspect it will not alter it very much because the two essentially cancel each other out.
Other- Everything but the kitchen sink, birthday money, bonus money, boyfriend money, parent money, Christmas money…pretty much every disposable dollar I have will go towards this.
The deadline is my 30th birthday, in 2020. The goal is to enter the new decade with absolutely no student loans.