Not To Be Trusted With Knives

Student Loan Update

March 4, 2009 by Beth

So, I usually try to ignore the status of my student loan repayment.  Part of my paycheque goes into a separate bank account (at a separate bank¹) and automatic payments are made from that account to my student loans every month.  And I try to not look at that account.  Once in a while I’ll pop into my online banking just to make sure nothing has gone awry, but for the most part, I ignore it.  Basically, I just never see that portion of my income – and so I feel (and spend) like I make less than I do.  It’s much less stressful that way than to see the money show up in – and disappear from – my chequing account.

However, I just got my yearly statement for my student loans (for tax purposes) and so I thought it was a good time to see how much progress I’ve made in paying off these albatrosses around my neck.

My progress:

• amount I owed when I started paying off my student loans in May 2007: $71,000
• amount I owe as of March 2009: $56,500

Another interesting thing I noticed was how much this economic downturn/recession/depression has helped me with respect to paying off my loans.  When I started paying them off, the interest rate was around 7.0-8.5% (depending on which of my three loans² you are talking about).  Now my interest rates are 3.5-5.0%  Since the amount I pay every month stays the same, it means that I’m paying off significantly more principal each month, which will result in me being able to pay off my loans that much quicker³. The government student loan centre’s annual loan statement illustrates how quickly this happened. Every month I pay them $423.74⁴.  In January 2008, $213.44 of that was interest; in December 2008, only $140.09 is interest.  I’m paying off  $73.35 more in principal every month now than I was a year ago.  That seems like a lot to me.  It’s still going to take me forever and ever to pay these damn things off, but every little bit helps.

And I shall now go back to my regularly scheduled ignoring of my student loans.

¹ Part of my loans are through a bank and part are with the government, as they switched loan systems partway through my education. I can’t move my bank student loan accounts from the bank at which I got those loans or they will cease to be “student loans,” and “student loans” come with certain benefits (interest payments are ta- deductible, you have the option to get interest relief should you find yourself out of a job). So I just have this one account at that bank through which I pay both the student loans held by the bank and the ones held by the government.
²Canada Loan through the bank, Ontario Loan through the bank, Integrated Canada-Ontario through the government Student Loan Centre^a.
^aDespite the fact that more than half of my student life was spent in BC, I was ineligible to get BC student loans as the BC government, for the purposes of student loans, does not consider you a “resident” of BC while you are a full-time student. You are a resident of BC for all other purposes – paying taxes, getting your health coverage, having a driver’s license, getting a divorce – but not student loans. Which sucks, because friends and colleagues keep telling me about loan reduction plans that holders of BC student loans can get which holders of Ontario student loans cannot.
³Assuming, of course, that interest rates don’t skyrocket! *knocks on wood*
⁴And that’s only half of what I pay. I pay about that same amount to the bank every month as well. Ugh. You can see why I prefer not to think about this!

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