Tuesday, July 31, 2018

My student loans are now a thing of the past!

Finally... after sixteen years.

Something exciting happened yesterday.  I noticed Bill's latest paycheck hit the bank account.  I told Bill I would be paying off my student loans as soon as possible.  He agreed that the sooner we paid, the less money we'd be paying on interest.  So, yesterday afternoon, when I saw that we had the money, I made the payment.  I am now 100% debt free.  I never thought it would happen and don't expect it to last forever.  But for now, I'm going to enjoy the freedom.

Bill has a little bit of credit card debt to pay off.  Once he does, he will also be debt free.  That's quite an accomplishment, given where we were when we were first married.  He went through bankruptcy and foreclosure with his ex wife.  He endured years of carrying credit cards with oppressive interest rates and having no savings to speak of.  With me, it's been just the opposite.  When Bill went to Iraq, I started making big changes in our finances and, after eleven years, it's finally come to fruition.

What really worked for me was snowballing my payments.  In 2007, I started by paying a mere $20 more a month on my loans.  As time passed, I increased the amount, which had the effect of chipping away at the principal.  As the principal shrunk, so did the interest.  By the end of the loan period, I was way ahead on payments and paying more than $2000 per month voluntarily.  My scheduled payment was about $389.  Not everybody can do what we did, but most people can spare an extra $10 or $20.  If you're paying on a big loan, see if you can do what I did.  You might be surprised by the end effect.  You probably won't miss that extra $10 or $20, either.

Another thing that motivated me was reading horror stories about people who defaulted.  Every time I read a story about someone who was drowning in debt, I added more money to my payment.  It got to the point at which I was getting letters from my lender, telling me payments weren't necessary.  I paid anyway, just to be out from under the debt.  I was especially nervous when Bill retired from the Army, although by that time, I was a few years ahead on my payments.  It was comforting to know that if there was a period of extended unemployment, at least those bills were covered.

Originally, my loans were due to be paid off in 2027.  It's only 2018, so that means we paid them off nine years ahead of time.  Actually, if I recall correctly, July 31, 2002 was the day I consolidated all my student loans, so technically, it took just under sixteen years to pay off a 25 year loan.  In July 2002, I was only two months into my six month grace period, but consolidating meant starting the repayment process immediately.  I remember my payments for the first nine years were $180.06.  That basically covered interest.  It wasn't until I "woke up" in 2007 and started paying more that I realized how expensive loans are, even though my interest rate was not that high (3.75%).  Adding just a little bit to that amount put us ahead and lowered interest, which made paying off the principal easier.

I realize not everyone is in a position to do what we've done.  I just want to be a cheerleader for those who want to try... and to show that it can be done.  Take baby steps.  Then, as you progress, you can take bigger steps to get rid of that debt.  It really is a comfort when you get ahead on loans.  Just be sure to check to see that the extra money goes to the principal of your most expensive loans and doesn't go to interest.  That's the way to chip away at that big debt.

I'll probably be back to write another one of my rants or stories, but I just wanted to share this for anyone who needs a little inspiration to retire debt.  Now, if I could only get motivated to lose weight...

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