Something that I know has been clearly absent from this personal finance blog is a daily debt ticker, fastidious determination to pay down any and all debt and constant reminders to others that you need to get your debt paid off.
I know I’ve spent far little time even in my own life thinking about student debt.
Earlier in this blog I made a informed decision to forgo throwing piles of money on my student debt this year and have been working at building up savings for a return to school. I was (and am from time to time) conflicted about this choice. At the end of the day for me, it didn’t quite make sense to pay down student debt aggressively and then go back to school and accrue more student debt.
I am currently paying a modest $300/month to my remaining $15000+ student debt from undergrad and saving at least $700/month for possible future tuition.
This was my choice and I know it is not the best choice for everyone, and also it is not the best financial choice for me just in terms of return on investment.
So let’s dig deeper into my weird decision to postpone paying off my student debt and see how much this has cost me so far this year.
|2014-01-15||Payment – Thank You||-$300.00||-$72.95||-$227.05||$15,535.49|
|2014-02-15||Payment – Thank You||-$300.00||-$71.89||-$228.11||$15,307.38|
|2014-03-15||Payment – Thank You||-$300.00||-$63.98||-$236.02||$15,071.36|
The green numbers are my payments, and the red is the interest I have paid this year.
For 2014 so far, I’ve paid $900 towards this debt, with only $691.18 going towards the principle and $208.82 to interest. Yes my interest is going down, which is good.
But I still pay $2.25 a day in interest!
That’s 23.2% of my repayment just gone. That’s a lot of interest!
I do get a tax refund on repaying my student debt, but that is only 15% of how much interest I pay.
My short term plan is to save up for potential school, try to get as little debt as possible in school and then when I graduate just pay down all my student debt as soon as possible, in hopefully 1-5 years (depending on if I go to graduate school or medical school)
I think it’s really important for you to do this with all of your debt, especially your student debt. Student debt is sometimes seen as ‘good debt’ and it’s relatively low interest rate compared to credit card debt I think sometimes lulls people into a false sense of security.
Figure out a debt repayment plan that works for you, for all of your debt. Don’t forget about your student debt!