As we approach Christmas 2018 I have the opportunity of answering the question: What am I thankful for? This year, i’m thankful that I continue to have the ability to pay down my massive $170,000 student loan debt. On 11/19/18, a payment of $2002 was posted to my loan servicer — EdFinancial which reduced my total payoff balance to $165,549.15
Let’s break it down
My student loans are currently in grace period until Feb 2019 but i’m still making targeted payments using the ‘snowball method’: paying my smallest loans first. In my last post , loan group C and loan group E were paid in full — each with an original balance of $3,352.11 and $4,148.07.
Note the last column is my ‘payoff rank’, this is how i’ve implemented my student loan debt snowball method. With 1 and 2 PIF (paid in full), group A is next! Here’s how the $2002 November 2018 payment was split:
Group A Paid in Full
First, I executed a manual payment of $1,156.44 to group A. Group A loans originated from wayyyy back in 2005, with interest payments already applied, over 99% of the payment went to principal and like magic, group A is gone!
Group B All Interest Payment
If group A paid in full was the good news, group B was the bad news and serves a reminder to potential student loan borrowers the risk of DEBT! Group B is a single loan of $18,170 with an outstanding balance of $19,387.99. It has an interest rate of 6.319% which accrues from the day of disbursement. This loans accrues approximately $31.46 of interest per day ((.6319/365) * 18,170).
This is also my first loan payment to group B ..ever! So what happens when you make an $845 payment towards an $18,170 loan that has $1217 of interest accruing at a rate of $31 day?
Answer: the entire payment is applied to interest! Painful right?
Recap and What’s Next
With 8 payments and 3 student loan groups paid off (see below), the small loans are all closed. March 2020 is still the goal to be 100% student loan debt free.