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Student Loans – Update and a Plan

vipezz 153As you may have seen my complain about from time to time here on NTBTWK, I wracked up a crazy amount of student debt while going through school. $71,504 to be exact. Now, when you consider that I was in post-secondary education for 11 years, it’s not actually that much – a mere $6,500 per year on average1 or $5,500 per letter I get to put after my name. And, as you’ve also seen me talk about here from time to time, I’m paying off my student loans as aggressively as I can, while still trying to have some sort of balance in my life2. I’m making sacrifices – not doing nearly as much travel as I would like, and renting a place in Surrey, where it’s much cheaper than Vancouver – as I’m putting the money I’m not spending on those things towards my student loans instead. The sooner I get them paid off, the sooner I don’t have to make giant student loan payments every month. Short-term pain for long-term gain, right?

Well, I did some number crunching on the weekend and I think I have a plan in place that means that I can have my student loans paid off by the end of next summer! When I first started paying off my loans, the loans were set up such that it would take me 9.5 years to pay off. That was April 2007, which means I was scheduled to have them paid off by October 2016! A combination of falling interest rates and me putting extra money that I have made towards the loans sure looks like it’s paying off!

At the moment, I have $24,000 left to pay. I currently pay $1,400 per month, meaning that I’ll pay $16,800 in a year. This, of course, leaves $7,200, plus all the interest on my balance3, unaccounted for, if I wanted to have my student loans paid off in a year. Fortunately, I have a some contract work that I’m doing and I figure that I can put all of the after-tax amount I make onto my students loans. But even that isn’t quite enough, so I’ve decided to do something drastic.

Ages ago, I started saving for a trip for my 40th birthday. Every two weeks, ~$25 is automatically transferred into a separate account that I’ve been using to save up for this trip. The idea, of course, is that you don’t really even notice $25 missing and then all this money piles up. Well, I can verify that such a system works, as I really have mostly forgotten that that money was sitting there. Until, that is, I realized how close I was to being within a year of my student loan freedom date, and then, all of the sudden, I noticed this $2,700 sitting in my birthday trip account that looked like something that I could really put to better use. I mean, I’m still a good 5.5 years away from my 40th birthday – that’s plenty of time to save! So I made the executive decision that I will take that $2,700 and I will give it to the student loan peeps and I will be that much closer to having this student loan monkey off my back. And then we will party.

Image Credit: Posted by vipez on Flickr.

  1. And that’s pretty much tuition fees and books most years. Jobs and scholarships were added into the mix so I could do things like eat food and not be homeless. []
  2. Some money to student loans, some money for laser eye surgery. Some money to student loans, some money for braces. []
  3. Interest on my student loans is currently 5.5%, except for a small chunk that is 4.5% []

7 Responses to Student Loans – Update and a Plan

  1. Rick says:

    And just think- when it’s time to party, we gonna party real good! Sounds like a great plan. I think I should follow suit and figure out a way to pay off my loans as well. Slowing down on the vacationing may be the only option :S.

  2. Beth says:

    Slowing down on vacationing is so tragic though! This is why I have continued to live like a poverty-stricken student since I finished school – I figured it was easier to continue to live on a small sum of money than it would be to experience the luxuries of life and then be faced with giving them up (even if only temporarily).

    Of course, if some rich benefactor would just pay off our student loans for us, we wouldn’t be facing this dilemma!

  3. Rick says:

    “Find a rich benefactor”- added to the list of 31 before 31 🙂 And you’re right- it’s difficult to slow down the vacations :S…

  4. Beth says:

    I hope your rich benefactor is rich enough to also be *my* rich benefactor!

  5. Sarah says:

    So is the $2700 the reason that they’ll be paid off next August or will it allow you to pay them off even sooner.

    Aside: I can’t wait to hear about the results when you run the ‘RRSP for tax optimization’ numbers. It might free up even MORE cash for you to use, especially next year when you have bonus tax credits. It’s not like you’re not maxing out your TFSA and you have a great pension. It could make a real difference!

  6. Beth says:

    Yeah, the $2700 is what puts the end of next summer into the realm of possibility – contract work on its own isn’t quite enough.

    And I haven’t yet had time to crunch the numbers re: RRSPs, so that could potentially change things even more. w00t!

  7. Pingback: How Much Debt Is Too Much? | Moving On Up a Little Higher

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