Tag: student loan

Back in May I decided I was sick of paying on a 7-year-old consolidated student loan that Elise and I share. I put pen to pad (actually it was more like a spreadsheet) and started a game plan to expedite the repayment of our loan. My first step was to double up on our payments. I also gave myself a goal of paying off the roughly $24,000 balance in less than two years, instead of the scheduled 14 remaining years.

Back in mid-June I sold some shares in Apple, Disney and Salesforce.com and that put a good ding in the principal. I’d also made a couple extra payments that were almost twice the regular monthly amount that is drafted from our checking account each month.

Today I went to the bank and cashed out a money market account (after I’d let it sit there for a few months and draw some interest, of course) and scheduled it to be sent to the good ol’ U.S. Department of Education on September 21st and to be applied to the principal of our loan. Today I also readjusted our extra principal payment to not double, not triple, but to quadruple the amount we pay per month.

I also got a nice referral bonus check today from my employer. I work for a pretty cool company that pays handsomely if you recommend someone for a job and that person is employed after their 90-day probationary period. Every red cent of that referral bonus is going straight to the student loan.

I’m expecting to get a couple hundred bucks from Google this month from the ads that are served on Janicek.com. That’s going to the student loan. I’m also expecting ~$100 from an eBay sale that ends tonight. Yep, that’s going to the student loan, too. Travis, I’m taking you out to lunch next week for that one! ;-)

So, by the end of the month, my current balance on the student loan should be roughly $14,000. That’s $10,000 that I’ve managed to knock out in four months. That was with employing some super aggressive strategies that just happened to align at the opportune time. My full-on assault will have to scale back a little because I’ve thrown a lot of cash at the loan, just to let it know that I mean business. For the next year and a half, I’m just going to be consistent in sending in the quadruple payments. If all goes as planned, the loan should be paid off by January 2010.

My goal at that point will then be to snowball our debt. I’ll take the quadruple payments I was making to the student loan and add it to our car loan. That’ll get the car paid off very early. Then I’ll take the quadruple payment plus the car payment and use that to pay toward the principal on our house.

I say all this now as I’m seeing the glass half full. Invariably “something” will happen that could hinder my repayment insanity… like a princesses birthday party for Maly, the air conditioner breaks, or the cat wrecks the car again.

My strategy has been very simple: a budget. I gave every dollar we have a name. Any extra cash that I could find, I put it toward the student loan. The student loan is our highest interest loan, so it gets knocked out first. I can’t emphasize enough the strength of the budget. To bad I wasn’t more strict on myself and finances earlier on in my adult life.

A month ago I started an action plan to kill our consolidated student loans. In that month, I’ve thrown $2,638.09 at that loan. I sold $2,194.64 worth of Disney and Microsoft shares. I made our standard $218.09 and I’ve since doubled up on that payment by sending an additional $220 that gets applied directly to principal.

And I’m kicking myself in the ass for not doing this months sooner, but I finally opened a United Heritage Credit Union account. UHCU offers 6.01% on their Heritage Checking. The only stipulations are that you have to have direct deposit or an auto ACH (done), sign up for eStatements (I guess so I can get my statements via email versus paper mail. Done.), and we have to make 10 debit card transactions per month. The latter sucks because we don’t use debit cards. We use a MasterCard to make all of our purchases so we can rack up airline miles (not debt — we pay the balance every month). So I’ve got to figure out a trick (PayPal maybe) to make 10 minimal debit card transactions each month. If it means I have to stop at the convenience store on the way to work and buy a $0.05 piece of gum for 10 days, I guess I’ll have to do that. Either way, can’t pass up 6% on checking. That’s hundreds of dollars in interest we’ll earn each month, and that’s going straight toward the student loan.

My goal: shrink that remaining 14 year repayment amortization down to less than 2 years. That would be sweet. Wish me luck!

If you know me, you know that I hate debt. I got into debt pretty bad about 8 years ago. I got a MasterCard when I was in college, racked up a lot of debt and couldn’t pay it off. That was a hard time in my life. I didn’t know what to do, I couldn’t even pay the monthly minimum, I had collectors calling me. I felt like a bad person and a failure. If you haven’t yet seen this movie, definitely rent Maxed Out, a horrific documentary on American consumer debt.

So I went years without having a credit card. Elise and I now have one credit card that we’re very responsible with, and we pay the balance every single month. We have a mortgage that, unfortunately, I don’t have the six-figures worth of cash to pay of its balance, but I’m cool with having a mortgage as our house was a great investment. And now more recently, we have a car payment because our old Expedition was on the verge of needing some serious mechanic love, and I’d rather get rid of it before it became a problem.

And we have our consolidated student loan that we’ve been paying on for six years. And I’m sick of paying that stupid $219.08 a month. I know that number very well. I’ve seen it drafted from our checking account on the 21st of every month for the past six years. So I’m attacking that debt with full force now. That $219.08 could be working for me in some type of investment.

I emailed Direct Loans (which is run by the U.S. Department of Education) and asked, “if I send an extra payment each month, how can I be assured that the extra will be applied to the principal of our loan?” I asked this because I do the same with our mortgage. Every year I send an extra payment or two and it’s applied to the principal of our loan.

The response that I received indicated that any extra payment that is received will first be applied to any outstanding interest, and the remainder will be applied to the principal. I was also told that interest accrues daily.

So in my reply, I asked, “so, if you draft my checking account on the 21st of every month, and if I sent you an extra payment and it got to you on the 22nd, I’d be paying mostly on the principal, right?”

I received an email response that, if I were to hear the person’s voice who was answering my question, I could totally hear that voice, very sheepishly say, “yes, that would be how you could pay down your loan a lot faster.”

So, I’m stupid for having waited so long to take action on getting this loan out of our life. Elise and I both having degrees is great, I wouldn’t want it any other way, but I want to be done with paying for school. I’ve got a kid whose college education I should be focusing on, not mine, not Elise’s. We’re done with school.

So I setup and automatic payment in our account on our bank’s website to double-up on our student loan payment, and to make sure that my extra payment is received shortly after the 21st of each month, and is applied appropriately. I’m sure I’ll have to monitor this for a few months, just to make sure things are handled the way that I want them to be handled.

And, as the one-two punch, I’ve done pretty well in the stock market over the past 5 years. So, thanks go to Apple, Inc., Salesforce.com and Disney. I’m going to be selling some stocks and put a huge dent in our student loan balance.

If I left things they way they were last week, I’d be 46-years-old when we’d be making the last payment on our student loan and we would have paid nearly $15,000 in interest. And that’s not how I want things to be.

So, Student Loan, you’re goin’ down!