The student loan debt journey

Success is a marathon, not a sprint. Sound familiar? This is the wisdom that I echo to myself everytime I hit “make a payment” on my edfinancial student loan dashboard. After making a $3,133.04 payment, my total payoff balance is finally under $160,000. #winning …sort of?

Under my standard repayment plan to pay off $170,000 of student loan debt (I still cringe every time I say this out loud), I’d make a minimum payment of $2,000 for 120 months (10 years). 120 payments of $2,000!!! Shoot me now! That’s a total payoff balance of $240,000 on a principal balance of $158,000. You can check out the original loan history in the post below.

Following the principals of the ‘debt snowball method’ – make minimum payments on all your debts and apply extra to the smallest balance, I made the obligatory minimum payments on loan groups B, D, F, G, H, I as outlined below. This represents the minimum payment of $2002. I then took the excess income I allocated for this payment and applied it as a principal only payment to loan group B. That principal only payment represented a balance reduction to loan group B of approximately $1131.04.

What’s interesting is when we look at the principal to interest allocation across all loan groups for this payment. This is where the brutal reality of my poor financial decisions really start to sink in. I can see that despite loan group B’s payment being ~96% principal, on average the interest payment on all loan groups was 26% and for Group I, it was as high as 50%! This means that for every dollar I pay towards that loan group, 50 cents goes to interest and not principal reduction. That’s sweet sweet profit for the US Department of Education!!

The reason behind this madness is because, across all my loan groups, I pay approximately $27 per day in interest, That’s over $800 a month in interest payments alone. Want to know why your student loan balance never goes down? Want to know why you’re stil broke despite making minimum monthly payments? The answer is interest. The only way to overcome this crippling financial nightmare is to make aggressive monthly payments well in excess of the minimum requirement. I’ve peeled back the onion on “why student loan interest is keeping you broke”, and how to calculate the daily interest rate on your student loans in the article below. If you do not know how much interest your loans accrue, take time to understand! You will be shocked.

What’s next?

Before I project into the next set of payments, I like to take a moment and appreciate the payments which I’ve made to-date. Over 10 months i’ve made 15 payments which in aggregate represent $21,056! This represents a net principal reduction of approximately $12,000! In July 2018 I owed around $170,000 as of April 2019 I owe sligthly over $158,000.

If we look at how this $3,133 payment actually impacted my student loan pay off balance, we can see that loan group B (the group with the smallest principal balance) has been reduced by over $1,200 as a result of my additional principal only payment, with a total payoff balance of $14,274.21! On the opposite end of the spectrum, I can see loan group G hovering at a consistent balance of around $38,000. I am truly losing sleep over this loan group, and honestly, I’m filled with massive regret and incredible motivation to pay off my entire loan balance of $158,000 by the end of March 2020!

With over $158,000 still ahead of me, is there a silver lining with this payment? I’m a glass half full kind of guy, and can take solace knowing that the daily interest amount of my student loans has finally dropped to under $27. It’s now $26.24 🙂 Cheers!

2 thoughts on “The student loan debt journey

  1. I do love the manner in which you have framed this specific concern plus it really does offer us a lot of fodder for thought. However, through what precisely I have personally seen, I really hope as other feedback stack on that people stay on issue and in no way get started on a tirade of the news of the day. Still, thank you for this outstanding piece and although I can not necessarily agree with this in totality, I regard your standpoint.

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